Thoughtworks(TWKS) - 2024 Q3 - Quarterly Report

Forward-Looking Statements Forward-Looking Statements Summary This section details the inherent risks and uncertainties of forward-looking statements, including the proposed Apax Funds acquisition and operational challenges - Forward-looking statements are not historical facts and involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from expectations[4][5] - Key risk factors include the proposed acquisition by Apax Funds (satisfaction of conditions, costs, integration risks), economic conditions leading to client delays and pricing pressure, challenges in attracting/retaining clients and innovating, foreign currency fluctuations, and regulatory compliance[6][8] Part I. Financial Information Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and notes, providing a detailed financial overview for the specified periods Condensed Consolidated Balance Sheets Balance Sheet Highlights (in thousands): | Metric | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $46,956 | $100,305 | | Total current assets | $377,903 | $428,358 | | Total assets | $1,269,610 | $1,327,236 | | Total current liabilities | $155,217 | $159,280 | | Total liabilities | $534,767 | $554,106 | | Total stockholders' equity | $734,843 | $773,130 | Condensed Consolidated Statements of Loss and Comprehensive Loss Loss and Comprehensive Loss Highlights (in thousands, except per share): | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | $261,393 | $280,159 | $761,657 | $874,430 | | Loss from operations | $(5,956) | $(9,229) | $(42,619) | $(5,200) | | Net realized and unrealized foreign currency gain (loss) | $11,062 | $(8,813) | $(5,251) | $(7,658) | | Net loss | $(6,055) | $(25,852) | $(73,427) | $(46,231) | | Basic loss per common share | $(0.02) | $(0.08) | $(0.23) | $(0.15) | - Revenues decreased by 6.7% for the three months and 12.9% for the nine months ended September 30, 2024, compared to the prior year[16] - Net loss significantly decreased by $19.8 million (76.6%) for the three months ended September 30, 2024, but increased by $27.2 million (58.8%) for the nine months, compared to the prior year[16] Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' Equity Changes (in thousands): | Metric | Dec 31, 2023 | Sep 30, 2024 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Common Stock Amount | $373 | $374 | $1 | | Treasury Stock Amount | $(622,988) | $(622,576) | $412 | | Additional Paid-In Capital | $1,627,491 | $1,656,937 | $29,446 | | Accumulated Other Comprehensive Loss | $(38,166) | $(32,548) | $5,618 | | Retained Deficit | $(193,580) | $(267,344) | $(73,764) | | Total Stockholders' Equity | $773,130 | $734,843 | $(38,287) | - For the nine months ended September 30, 2024, key activities included a net loss of $(73.4) million, other comprehensive income of $5.6 million, and stock-based compensation expense of $26.9 million[20] Condensed Consolidated Statements of Cash Flows Cash Flow Summary (in thousands): | Activity | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :---------------------------------------------------- | :-------------------------- | :-------------------------- | | Net cash (used in) provided by operating activities | $(31,889) | $36,598 | | Net cash used in investing activities | $(11,711) | $(22,013) | | Net cash used in financing activities | $(7,245) | $(118,008) | | Net decrease in cash, cash equivalents and restricted cash | $(52,994) | $(106,818) | | Cash, cash equivalents and restricted cash at end of period | $48,666 | $88,746 | - Net cash used in operating activities for the nine months ended September 30, 2024, was $31.9 million, a significant decrease from $36.6 million provided in the prior year, primarily due to net loss and deferred income tax benefit, partially offset by stock-based compensation and depreciation[23][154] - Net cash used in investing activities was $11.7 million, driven by property and equipment purchases and a technology asset acquisition[23][156] - Net cash used in financing activities was $7.2 million, mainly due to withholding taxes on equity awards and debt repayment[23][157] Notes to the Condensed Consolidated Financial Statements (Unaudited) Note 1 – Business and Summary of Significant Accounting Policies - Thoughtworks is a global technology consultancy operating in 19 countries, specializing in enterprise application software and business technology consulting[25] - A definitive merger agreement was announced on August 5, 2024, for Apax Funds to acquire all outstanding shares for $4.40 per share, expected to close in Q4 2024, leading to delisting from Nasdaq[26] - Merger transaction costs were $10.2 million for Q3 2024 and $11.5 million for the nine months ended September 30, 2024[27] Allowance for Credit Losses (in thousands): | Metric | September 30, 2024 | | :-------------------------------- | :------------------- | | Allowance for credit losses, beginning balance | $(9,550) | | Current period provision | $(4,167) | | Write-offs charged against allowance | $1,602 | | Allowance for credit losses, ending balance | $(12,149) | - Revenue from operations outside the United States accounted for 67.5% for both the three and nine months ended September 30, 2024[39] Note 2 – Revenue Recognition - In Q1 2024, the company updated its revenue disaggregation by customer location to reflect the geographical market based on contracting location, consistent with client ownership[42][106] Revenues by Customer Location (in thousands): | Region | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | North America | $92,039 | $105,241 | $269,094 | $327,871 | | APAC | $91,185 | $97,247 | $266,993 | $293,411 | | Europe | $66,149 | $63,228 | $191,415 | $207,775 | | LATAM | $12,020 | $14,443 | $34,155 | $45,373 | | Total revenues | $261,393 | $280,159 | $761,657 | $874,430 | Revenues by Industry Vertical (in thousands): | Industry Vertical | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Technology and business services | $67,203 | $70,612 | $196,692 | $214,440 | | Energy, public and health services | $67,059 | $71,662 | $193,611 | $231,014 | | Retail and consumer | $44,663 | $44,663 | $126,281 | $137,060 | | Financial services and insurance | $35,603 | $46,447 | $111,686 | $154,380 | | Automotive, travel and transportation | $46,865 | $46,775 | $133,387 | $137,536 | | Total revenues | $261,393 | $280,159 | $761,657 | $874,430 | Revenues by Contract Type (in thousands): | Contract Type | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :----------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Time-and-materials | $182,292 | $215,779 | $537,100 | $708,148 | | Fixed-price | $79,101 | $64,380 | $224,557 | $166,282 | | Total revenues | $261,393 | $280,159 | $761,657 | $874,430 | - Remaining performance obligations were approximately $9.1 million as of September 30, 2024, expected to be recognized as revenue over the next 18 months[52] Note 3 – Income Taxes Effective Tax Rate: | Period | 2024 | 2023 | | :-------------------------- | :----------- | :----------- | | 3 Months Ended Sep 30 | (219.7)% | (4.9)% | | 9 Months Ended Sep 30 | (8.6)% | (39.8)% | - The effective tax rate differed from the U.S. statutory rate of 21% primarily due to U.S. corporate state income taxation, foreign operations, valuation allowances, unrecognized tax benefits, capitalized R&E costs, non-deductibility of China SAFE RSUs, and excess tax deficiencies on stock-based compensation, offset by IRC §41 research credits[55] Note 4 – Loss Per Share Loss Per Common Share: | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic loss per common share | $(0.02) | $(0.08) | $(0.23) | $(0.15) | | Diluted loss per common share | $(0.02) | $(0.08) | $(0.23) | $(0.15) | Note 5 – Stock-Based Compensation Total Stock-Based Compensation Expense (in thousands): | Period | 2024 | 2023 | | :-------------------------- | :----------- | :----------- | | 3 Months Ended Sep 30 | $6,904 | $12,806 | | 9 Months Ended Sep 30 | $26,861 | $48,091 | - Unrecognized compensation cost for time vesting options was $0.9 million (0.5 years weighted-average period), for RSUs was $56.9 million (2.1 years), and for PSUs was $2.9 million (1.7 years)[61][63][66] Note 6 – Credit Agreements Outstanding Debt and Borrowing Capacity (in thousands, except percentages): | Metric | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------------- | :----------- | :----------- | | Availability under Revolver | $300,000 | $300,000 | | Borrowings under Revolver | $0 | $0 | | Long-term debt (including current portion) | $288,176 | $293,185 | | Interest rate | 7.7% | 8.0% | - As of September 30, 2024, the company was in compliance with its debt covenants[152] Note 7 – Accrued Expenses and Other Current Liabilities Accrued Expenses and Other Current Liabilities (in thousands): | Metric | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------------- | :----------- | :----------- | | Professional fees | $16,984 | $4,948 | | Value-added tax and sales tax payable | $5,041 | $4,821 | | Income taxes payable | $1,200 | $5,106 | | Restructuring | $4,393 | $3,503 | | Other accrued expenses | $9,448 | $8,882 | | Total | $37,066 | $27,260 | - The increase in professional fees includes $11.0 million related to the proposed Merger[72] Note 8 – Restructuring Actions - The company initiated a structural reorganization in August 2023, with additional opportunities identified in May and August 2024 to drive further cost savings, bringing total expected savings to $185-210 million[73][74][75] - Total expected pre-tax charges for the reorganization are approximately $56.5 million to $68.0 million, including wage-related and non-wage related expenses[75] Restructuring Costs Incurred (in thousands): | Expense Type | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2024 | Total Costs Incurred to Date (Sep 30, 2024) | | :---------------------- | :-------------------------- | :-------------------------- | :------------------------------------------ | | Wage-related expenses | $21,091 | $28,330 | $45,574 | | Non-wage related expenses | $1,513 | $3,601 | $5,301 | | Total restructuring costs | $22,604 | $31,931 | $50,875 | - The Reorganization was completed in October 2024[75] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, including business overview, key metrics, and critical accounting policies Overview - Thoughtworks is a global technology consultancy with 10,491 employees across 48 offices in 19 countries, specializing in digital innovation through strategy, design, and engineering[80] - Revenues are generated from professional services across domains including enterprise modernization, customer experience, data & AI, and digital transformation[81] Recent Developments - On August 5, 2024, the company announced a definitive merger agreement with Apax Funds to acquire all outstanding shares for $4.40 per share, with the transaction expected to close in Q4 2024[82] - Transaction costs related to the merger were $10.2 million for the three months and $11.5 million for the nine months ended September 30, 2024[83] Key Operational and Business Metrics Key Metrics (in thousands, except percentages): | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | $261,393 | $280,159 | $761,657 | $874,430 | | Revenue Growth Rate (reported) | (6.7)% | (15.7)% | (12.9)% | (11.3)% | | Revenue Growth Rate (constant currency) | (6.9)% | (16.6)% | (12.6)% | (10.2)% | | Net loss | $(6,055) | $(25,852) | $(73,427) | $(46,231) | | Net loss margin | (2.3)% | (9.2)% | (9.6)% | (5.3)% | | Adjusted Net Income (Loss) | $9,669 | $11,525 | $(6,284) | $31,697 | | Adjusted EBITDA | $30,659 | $33,563 | $43,154 | $97,763 | | Adjusted EBITDA Margin | 11.7% | 12.0% | 5.7% | 11.2% | - The decrease in revenue was attributed to a cautionary macroeconomic environment, client budget caution, lower headcount, and reduced bill rates due to offshore/onshore mix[86] - Adjusted EBITDA decreased by 8.7% for the three months and 55.9% for the nine months ended September 30, 2024, primarily due to decreased revenue, partially offset by lower payroll and lease expenses[93][94] Results of Operations Revenues Client Metrics: | Metric | Sep 30, 2024 | Trailing 12 Months Ended Sep 30, 2023 | | :-------------------------------- | :----------- | :------------------------------------ | | Number of clients | 513 | 466 | | Clients generating > $10M revenue | 28 | 34 | | Net dollar retention rate | 84% | 94% | Revenue Change by Industry Vertical (YoY % Change): | Industry Vertical | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Technology and business services | (4.8)% | (8.3)% | | Energy, public and health services | (6.4)% | (16.2)% | | Retail and consumer | 0% | (7.9)% | | Financial services and insurance | (23.3)% | (27.7)% | | Automotive, travel and transportation | 0.2% | (3.0)% | | Total revenues | (6.7)% | (12.9)% | Revenue Change by Customer Location (YoY % Change): | Region | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2024 | | :------------- | :-------------------------- | :-------------------------- | | North America | (12.5)% | (17.9)% | | APAC | (6.2)% | (9.0)% | | Europe | 4.6% | (7.9)% | | LATAM | (16.8)% | (24.7)% | | Total revenues | (6.7)% | (12.9)% | - Bookings for the trailing twelve months ended September 30, 2024, decreased by 7.1% to $1.3 billion, primarily due to reduced client budgets, macroeconomic caution, and smaller contract sizes reflecting a shift to offshore services and pricing adjustments[114] Cost of Revenues Cost of Revenues (in thousands): | Period | 2024 | 2023 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :------- | | 3 Months Ended Sep 30 | $169,456 | $185,985 | $(16,529) | (8.9)% | | 9 Months Ended Sep 30 | $529,713 | $591,845 | $(62,132) | (10.5)% | - The decrease in cost of revenues was driven by lower payroll expense, stock-based compensation expense, and depreciation and amortization expense[116] Gross Profit and Gross Margin Gross Profit and Margin (in thousands, except percentages): | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :----------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Gross profit | $91,937 | $94,174 | $231,944 | $282,585 | | Gross margin | 35.2% | 33.6% | 30.5% | 32.3% | - Gross margin increased by 1.6 percentage points for the three months ended September 30, 2024, primarily due to stock-based compensation expense as a percentage of revenues, but decreased by 1.8 percentage points for the nine months due to payroll expense[117] SG&A Expenses and SG&A Margin SG&A Expenses and Margin (in thousands, except percentages): | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | SG&A expenses | $69,701 | $81,840 | $225,747 | $254,806 | | SG&A margin | 26.7% | 29.2% | 29.6% | 29.1% | - SG&A expenses decreased by 14.8% for the three months and 11.4% for the nine months, driven by reductions in professional fees, payroll, stock-based compensation, lease, and office expenses[118][119] Depreciation and Amortization Depreciation and Amortization (in thousands): | Period | 2024 | 2023 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :------- | | 3 Months Ended Sep 30 | $5,588 | $5,997 | $(409) | (6.8)% | | 9 Months Ended Sep 30 | $16,885 | $17,413 | $(528) | (3.0)% | - Depreciation and amortization expenses showed non-material changes for both the three and nine months ended September 30, 2024[121] Restructuring Restructuring Expenses (in thousands): | Period | 2024 | 2023 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :------- | | 3 Months Ended Sep 30 | $22,604 | $15,566 | $7,038 | 45.2% | | 9 Months Ended Sep 30 | $31,931 | $15,566 | $16,365 | 105.1% | - Restructuring expenses significantly increased due to higher wage-related and non-wage related expenses from the ongoing reorganization[122] Loss from Operations and Loss from Operations Margin Loss from Operations and Margin (in thousands, except percentages): | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Loss from operations | $(5,956) | $(9,229) | $(42,619) | $(5,200) | | Loss from operations margin | (2.3)% | (3.3)% | (5.6)% | (0.6)% | - Loss from operations decreased for the three months but significantly increased for the nine months, driven by decreased revenues and increased restructuring expenses, partially offset by reductions in payroll and stock-based compensation[123][125] Interest Expense Interest Expense (in thousands): | Period | 2024 | 2023 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :------- | | 3 Months Ended Sep 30 | $7,059 | $6,649 | $410 | 6.2% | | 9 Months Ended Sep 30 | $20,282 | $19,661 | $621 | 3.2% | - Interest expense showed a non-material increase for both periods, primarily related to the Term Loan and Revolver[126] Net realized and unrealized foreign currency gain (loss) Net Realized and Unrealized Foreign Currency Gain (Loss) (in thousands): | Period | 2024 | 2023 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :------- | | 3 Months Ended Sep 30 | $11,062 | $(8,813) | $19,875 | (225.5)% | | 9 Months Ended Sep 30 | $(5,251) | $(7,658) | $2,407 | (31.4)% | - A significant foreign currency gain of $11.1 million was reported for the three months ended September 30, 2024, primarily due to favorable exchange rates in the UK, Brazil, India, Thailand, Germany, and China[128] Other Expense (Income), Net Other Expense (Income), Net (in thousands): | Period | 2024 | 2023 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :--------- | :------- | | 3 Months Ended Sep 30 | $(59) | $(43) | $(16) | 37.2% | | 9 Months Ended Sep 30 | $(552) | $545 | $(1,097) | (201.3)% | - The change for the nine months ended September 30, 2024, was primarily due to the write-off of deferred financing fees related to voluntary debt prepayment in 2023[131] Income Tax Expense and Effective Tax Rate Income Tax Expense and Effective Tax Rate (in thousands, except percentages): | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :----------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income tax expense | $4,161 | $1,204 | $5,827 | $13,167 | | Effective tax rate | (219.7)% | (4.9)% | (8.6)% | (39.8)% | - Income tax expense increased for the three months but decreased for the nine months, primarily due to changes in loss before income taxes[133] - The effective tax rates remained negative and varied significantly from the U.S. statutory rate due to various factors[134] Non-GAAP Financial Measures Adjusted Net Income (Loss) (in thousands): | Period | 2024 | 2023 | | :-------------------------- | :----------- | :----------- | | 3 Months Ended Sep 30 | $9,669 | $11,525 | | 9 Months Ended Sep 30 | $(6,284) | $31,697 | Adjusted EBITDA and Margin (in thousands, except percentages): | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | | :----------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Adjusted EBITDA | $30,659 | $33,563 | $43,154 | $97,763 | | Adjusted EBITDA Margin | 11.7% | 12.0% | 5.7% | 11.2% | - Non-GAAP measures like Adjusted Net Income (Loss), Adjusted EBITDA, and Adjusted EBITDA Margin are used by management and investors to evaluate operating performance and business strategy, while acknowledging their limitations such as not reflecting cash capital expenditures or working capital needs[139][140] Liquidity and Capital Resources Liquidity and Capital Resources (in thousands): | Metric | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $46,956 | $100,305 | | Availability under Revolver | $300,000 | $300,000 | | Borrowings under Revolver | $0 | $0 | | Long-term debt (including current portion) | $288,176 | $293,185 | - The company's primary liquidity sources are cash and cash equivalents ($47.0 million) and available borrowings under its Revolver ($300.0 million) as of September 30, 2024[149] - The company believes existing cash and expected operating cash flow will be sufficient for the next twelve months, but future funding may be sought for acquisitions or investments, subject to market conditions and debt covenants[150][161][162] Critical Accounting Policies and Estimates - Stock-based compensation is no longer considered a critical accounting estimate due to an immaterial amount of unvested awards related to pre-IPO grants[168] - Goodwill is reviewed for impairment annually or when circumstances indicate the carrying amount may not be recoverable, with impairment tests performed in the fourth quarter of each fiscal year[171] Item 3. Quantitative and Qualitative Disclosure About Market Risk The company is exposed to market risks from credit concentration, interest rates, and foreign currency exchange rates, as well as risks related to international operations - The company is exposed to market risks primarily from changes in concentration of credit, interest rates, and foreign currency exchange rates[172] - International operations are subject to risks related to differing economic conditions, civil unrest, political instability, military activities, sanctions, tax structures, and other regulations[172] - There were no material changes to the market risk disclosure from the 2023 Annual Report[173] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2024, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2024[175] - No material changes in internal control over financial reporting occurred during the period covered by this Quarterly Report[176] - Management acknowledges that any control system provides only reasonable, not absolute, assurance of achieving desired control objectives due to inherent limitations and resource constraints[177] Part II. Other Information Item 1. Legal Proceedings The company faces various litigation matters, including stockholder demands related to the proposed Merger, with no material adverse effects currently anticipated - The company is involved in various litigation matters, but currently believes no claims will have a material adverse effect on its business, financial condition, results of operations, or cash flows[180] - Demand letters have been received from purported stockholders seeking to inspect books and records related to the Merger, appraisal demands, and requests for additional disclosures, which remain unresolved[181] Item 1A. Risk Factors This section updates risk factors, primarily focusing on the potential for the proposed Apax Funds Merger to fail, incur costs, or negatively impact business - No material changes to general risk factors since the 2023 Annual Report, except for those specifically related to the proposed Merger[182] - Risks related to the Merger include failure to consummate the transaction, delays, significant costs, diversion of management attention, potential negative impacts on business relationships, and adverse effects on the stock price[185][187][188][191][192][193][194][196] - The company also faces the risk of negative financial impact if required to write down goodwill and other intangible assets due to impairment[197] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of the company's equity securities during the third quarter of 2024 - No unregistered sales of the company's equity securities occurred during the third quarter of 2024[198] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported - No defaults upon senior securities were reported[198] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[198] Item 5. Other Information This section states that no directors or executive officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2024 - No directors or executive officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2024[199] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Merger Agreement, employment amendments, and certifications - Key exhibits include the Agreement and Plan of Merger, Amendment to Employment Agreement, Rollover Agreements, CEO/CFO Certifications, and Inline XBRL documents[201] Signatures Signatures Summary The report was signed by Michael Sutcliff, Chief Executive Officer and Director, and Erin Cummins, Chief Financial Officer, on November 12, 2024 - The report was signed by Michael Sutcliff (Chief Executive Officer and Director) and Erin Cummins (Chief Financial Officer) on November 12, 2024[203]