Renalytix plc (NASDAQ:RNLX), a medical laboratory services company, has announced the engagement of CohnReznick LLP as its new independent registered public accounting firm for the fiscal year ending June 30, 2024. The decision, effective as of June 19, 2024, was made by the Audit Committee of the Board of Directors as part of the company's efforts to reduce operational costs and optimize services.
The company's previous auditor, Ernst & Young LLP, was dismissed effective June 18, 2024. Ernst & Young's reports on Renalytix's consolidated financial statements for the past three fiscal years did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified, except for an explanatory paragraph regarding the company's ability to continue as a going concern in the report for the year ended June 30, 2023.
Renalytix disclosed that during its most recent fiscal years and the subsequent interim period through the date of the report, there were no disagreements with Ernst & Young on accounting principles or practices, financial statement disclosure, or auditing scope or procedure that would have required reporting. Additionally, the only reportable event was a material weakness in internal control over financial reporting related to stock-based compensation, which was remediated by the end of the fiscal year 2023.
The company has provided Ernst & Young with the disclosures regarding their dismissal and has received a letter from the former auditor, addressed to the United States Securities and Exchange Commission, agreeing with the company's statements. This letter, dated June 24, 2024, has been filed as an exhibit to the company's recent 8-K filing.
In other recent news, Renalytix AI Plc has experienced significant developments, including a change in earnings and revenue, analyst adjustments, and executive shifts. The company reported a decrease in third-quarter revenue to $535,000, down from the previous year's $724,000, despite a 40% reduction in operating expenses to $6.5 million. Analyst firm H.C. Wainwright has revised its price target for Renalytix shares to $3.00, down from $5.00, while maintaining a Buy rating following the update on Medicare coverage for the KidneyIntelX.dkd test.
Additionally, BTIG has also adjusted its price target for Renalytix to $2.00, down from $3.00, but continues to endorse the stock with a Buy rating. This decision reflects the slower than expected commercial progress of the KidneyIntelX product.
In the realm of executive changes, the company has announced the resignation of O. James Sterling as Chief Financial Officer and the appointment of Joel R. Jung as Interim Chief Financial Officer. These developments come as Renalytix continues to expand its market presence in the artificial intelligence diagnostic sector.
InvestingPro Insights
In light of Renalytix plc's recent changes in its accounting firm, a closer examination of the company's financial health through InvestingPro's real-time data may offer investors a clearer picture of its current position. Renalytix has a market capitalization of $71.21 million, which reflects the market's valuation of the company. However, with a negative price-to-earnings (P/E) ratio of -1.2 and an adjusted P/E ratio for the last twelve months as of Q3 2024 at -0.96, the metrics suggest that the company is not currently profitable. The revenue growth has also been on the decline, with a -40.23% change over the last twelve months as of Q3 2024.
InvestingPro Tips highlight some challenges for Renalytix, including a rapid cash burn and anticipation of a sales decline in the current year. Additionally, the company's stock price has been quite volatile, with a significant drop of -77.5% over the past year. Analysts are not optimistic about profitability for this year, and the company's short-term obligations exceed its liquid assets, which could raise concerns about its financial stability in the near term.
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