The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes that appear elsewhere in this report.
Overview
We design, develop, manufacture, ship and support control and sensor technology solutions and a broad line of universal control systems, audio-video ("AV") accessories, and intelligent wireless security and smart home products that are used by the world's leading brands in the video services, consumer electronics, security, home automation, climate control, and home appliance markets. Our product and technology offerings include: •easy-to-use, voice-enabled, automatically-programmed universal remote controls with two-way radio frequency ("RF") as well as infrared ("IR") remote controls, that are sold primarily to video service providers (cable, satellite, Internet Protocol television ("IPTV") and Over the Top ("OTT") services), original equipment manufacturers ("OEMs"), retailers, and private label customers;
•integrated circuits ("ICs"), on which our software and universal device control database is embedded, sold primarily to OEMs, video service providers, and private label customers;
•software, firmware and technology solutions that can enable devices such as TVs, set-top boxes, audio systems, smart speakers, game controllers and other consumer electronic and smart home devices to wirelessly connect and interact with home networks and interactive services to control and deliver home entertainment, smart home services and device or system information; •cloud-services that support our embedded software and hardware solutions (directly or indirectly) enabling software update and device provisioning services, as well as real-time device identification and system control with billions of transactions per year in device and data management;
•intellectual property that we license primarily to OEMs and video service providers;
•proprietary and standards-based RF sensors designed for residential security, safety and home automation applications;
•wall-mount and handheld thermostat controllers and connected accessories for intelligent energy management systems, primarily to OEM customers, as well as hotels and hospitality system integrators; and
•AV accessories sold, directly and indirectly, to consumers including universal remote controls, television wall mounts and stands and digital television antennas.
A key factor in creating products and software for control of entertainment devices is our proprietary device knowledge graph. Since our beginning in 1986, we have compiled an extensive device control knowledge library that includes over 13,000 brands comprising over 1,002,000 device models across AV and smart home platforms, supported by many common smart home protocols, including IR, HDMI-CEC, Zigbee (Rf4CE) Z-Wave, and IP, as well as Home Network and Cloud Control.
This device knowledge graph is backed by our unique device fingerprinting technology, which includes nearly 27.6 million unique device fingerprints across both AV and Smart Home devices.
Our technology also includes other remote controlled home entertainment devices and home automation control modules, as well as wired Consumer Electronics Control ("CEC") and wireless IP control protocols commonly found on many of the latest HDMI and internet connected devices. Our proprietary software automatically detects, identifies and enables the appropriate control commands for many home entertainment and automation devices in the home. Our libraries are continuously updated with device control codes used in newly introduced AV and Internet of Things devices. These control codes are captured directly from original control devices or from the manufacturers' written specifications to ensure the accuracy and integrity of the library. Our proprietary software and know-how permit us to offer a device control code database that is more robust and efficient than similarly priced products of our competitors. We hold a number of patents inthe United States and abroad related to our products and technology, and have filed domestic and foreign applications for other patents that are pending. AtMarch 31, 2022 , we had more than 650 issued and pendingU.S. patents related to remote control, home security, safety and automation as well as hundreds of foreign counterpart patents and applications in various territories around the world. 24 -------------------------------------------------------------------------------- Table of Contents We operate as one business segment. We have two domestic subsidiaries and 25 international subsidiaries located inBrazil ,British Virgin Islands ,Cayman Islands ,France ,Germany ,Hong Kong (3),India ,Italy ,Japan ,Korea ,Mexico (2),the Netherlands ,People's Republic of China (the "PRC") (7),Singapore ,Spain and theUnited Kingdom .
To recap our results for the three months ended
•Net sales decreased 12.0% to
•Our gross margin percentage decreased to 27.4% for the three months ended
•Operating expenses, as a percentage of net sales, increased to 27.8% for the
three months ended
•Our operating loss was$0.6 million for the three months endedMarch 31, 2022 compared to operating income of$8.6 million for the three months endedMarch 31, 2021 . Our operating income (loss) percentage decreased to (0.4)% for the three months endedMarch 31, 2022 from 5.7% for the three months endedMarch 31, 2021 .
•Income tax expense increased to
Our strategic business objectives for 2022 include the following:
•continue to develop and market advanced remote control products and technologies our customer base is adopting; •continue to broaden our home control and home automation product offerings; •continue to expand our software and service offerings to deliver a complete managed service platform; •continue to invest in creating technology differentiation across our global product portfolio; •further penetration of international subscription broadcasting markets; •acquire new customers in historically strong regions; •increase our share with existing customers; •continue to seek acquisitions or strategic partners that complement and strengthen our existing business; and •continue our long-term factory planning strategy of reducing our concentration risk inthe People's Republic of China . We intend for the following discussion of our financial condition and results of operations to provide information that will assist in understanding our consolidated financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our consolidated financial statements.
COVID-19 Pandemic Impact
The global spread of COVID-19 has been and continues to be a complex and rapidly-evolving situation, with governments, public institutions and other organizations imposing or recommending, and businesses and individuals implementing, at various times and to varying degrees, restrictions on various activities or other actions to combat its spread, such as restrictions and bans on travel or transportation, limitations on the size of gatherings, closures of or occupancy or other operating limitations on ports, work facilities, schools, public buildings and businesses, cancellation of events, including sporting events, conferences and meetings, and quarantines and lockdowns. The COVID-19 pandemic and its consequences have and will continue to impact our business, operations, and financial results. The extent to which the COVID-19 pandemic impacts our business, operations, and financial results, including the duration and magnitude of such effects, will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the COVID-19 pandemic (including the location and extent of resurgences of the virus, particularly in light of new variants, and the availability of effective treatments or vaccines); and the negative impact the COVID-19 pandemic has on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates, inflation and consumer discretionary spending. Because the severity, magnitude and duration of the COVID-19 pandemic are uncertain, rapidly changing, and difficult to predict, the pandemic's impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategy and initiatives, remains uncertain. As the COVID-19 pandemic continues, the full extent of this outbreak and the related governmental, business and travel restrictions in order to contain the COVID-19 pandemic are continuing to evolve globally. Our COVID-19 task force, which includes a cross-functional group of senior-level executives, continues to manage and respond to the ever-changing health and safety requirements across the globe and communicate our responses and recommended course of action to our global factory and office leaders. 25
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We continue to maintain safety measures for all our employees across the globe as pandemic conditions require, including implementing work-from-home arrangements, restricting travel except where essential and approved in advance, frequent office and factory sanitation, temperature scans upon entry, hand sanitizer stations located throughout our facilities and offices, mask wearing, social distancing measures in gathering places and restricting visitor access. Further, we continue to monitor and follow suggested guidelines by theCenters for Disease Control and Prevention , theWorld Health Organization , and local governmental orders and recommendations. The continued safety and welfare of our employees will remain at the forefront of all decision-making. Local lockdowns near our southernChina factory during the last two weeks of the first quarter of 2022 temporarily caused labor shortages that negatively affected our ability to manufacture at full capacity and to meet customer demand. As of the issuance of this report, our southernChina factory and our other factories are operating at or near labor capacity. We anticipate that the global health crisis caused by the COVID-19 pandemic will continue to negatively impact business activity across the globe, including our business. We expect our sales demand to continue to be negatively impacted into, at least, the first half of 2022 given the global reach and economic impact of the COVID-19 pandemic and the various quarantine and social distancing measures put in place to contain the spread of the COVID-19 pandemic. A closure of one of our factories and/or a local lockdown that negatively affects our factory staffing levels for a sustained period of time have impacted and may continue to impact our ability to meet customer demand, in the short run, and would negatively impact our results. We have also seen disruptions in our supply chain, due to difficulty in obtaining ICs and substantial delays in the transportation and the onloading and offloading of our product due to significant congestion and shutdowns at ports throughout the world. This, in turn, causes significant congestion in other downstream transportation, such as via trucks and rail. As such, these congestions have caused and continue to cause difficulty and delays in our ability to fulfill customer orders and have resulted in increased logistics costs. We will continue to actively monitor these situations and may take further actions altering our business operations as necessary or as required by federal, state, or local authorities. The potential effects of any such alterations or modifications may have a material adverse impact on our business during 2022. Even after the COVID-19 pandemic subsides or effective treatments or vaccines become available, our business, markets, growth prospects and business model could be materially impacted or altered.
Global Integrated Circuit Shortage Impact
We continue experiencing difficulty in ordering ICs for future use and that difficulty is expected to continue through at least mid to late 2022. The global shortage of ICs is affecting a multitude of industries and we expect it to continue to affect our business. While we are identifying other sources of ICs and taking other production and inventory control steps in order to mitigate the effects caused by this shortage, we cannot guarantee that we will find alternative sources to meet our short- and longer-term IC needs and/or without experiencing increases in the prices we pay for these components. If we are not able to find alternative sources of ICs or are not able to purchase sufficient quantities of ICs from our current and alternative suppliers, we may not be able to produce sufficient quantities of products to meet our customers' demands. This, in turn, may affect our ability to meet our quarterly revenue targets. Further, we may incur additional freight costs to meet the delivery demands of our customers. In addition, many of our products are paired with certain of our customers' products, like set-top boxes or televisions. If those customers are not able to obtain sufficient quantities of ICs for their products, their demand for our products may decrease.
Inflation Impact
Inflation has adversely affected our business and we expect this to continue through the end of 2022. We have been and expect to continue to be negatively impacted by increased component and logistics costs. While we have been able to increase prices of our products to customers, we may not be able to fully offset the impact of increased material costs which would negatively impact our gross profit. In addition, our cost of labor, materials and borrowing may increase which would negatively impact our business and financial results. Alternatively, deflation may cause a deterioration of global and regional economic conditions which could impact unemployment rates and consumer discretionary spending. These, and other factors that may increase the risk of significant deflation, could negatively impact our business and results of operations. 26 -------------------------------------------------------------------------------- Table of Contents Qinzhou, China Facility InOctober 2021 , Reuters published an article indicating that individuals fromChina's Uyghur minority, originally resident in the PRC region ofXinjiang , were working in a facility in Qinzhou,Guangxi operated by our Chinese subsidiary,Gemstar Technology (Qinzhou) Co. Ltd. ("Gemstar"). The article alleged that the presence of these workers inGuangxi was indicative of "a transfer program described by some rights groups as forced labor." Shortly after publication of the Reuters article, threeU.S. Senators heading theU.S. Senate Foreign Affairs Committee (the "Committee") jointly wrote to us seeking information regarding these workers and the terms of their work at our Gemstar factory. We have reviewed and confirmed that Gemstar compensated these individuals for their work at the same rates as workers of other ethnicitieswho had comparable skills and roles, and at a level that was above the local minimum wage. Although our review did not identify any instances in which individuals were obliged or in any other way forced to work at the Qinzhou facility or were paid less than their promised wage, Gemstar, which engaged these workers through a third-party labor agency, terminated its relationship with that agency, ended its arrangement with these workers, and paid all outstanding wages and severance directly and individually to each of the workers in question. Nonetheless, the perception that we or an entity affiliated with us might have had associations with a program described by some as involving forced labor could result in reputational damage as well as lost revenue. To date, as a result of this perception, one customer has put further business with us on hold. Should additional customers cease doing business with us, the loss of revenue could become material, which would have an adverse effect on our business, results of operations and financial condition. We take all allegations regarding working conditions seriously, and took a cooperative approach to responding to the Committee's letter, cooperated fully with the Committee's inquiry and provided the Committee with timely and complete responses to all of its questions.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity withU.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory valuation, impairment of long-lived assets, intangible assets and goodwill and income taxes. Actual results may differ from these judgments and estimates, and they may be adjusted as more information becomes available. Any adjustment may be significant and may have a material impact on our consolidated financial statements. An accounting estimate is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably may have been used, or if changes in the estimate that are reasonably likely to occur may materially impact the financial statements. We do not believe that there have been any significant changes during the three months endedMarch 31, 2022 to the items that we disclosed as our critical accounting policies and estimates in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report on Form 10-K for our fiscal year endedDecember 31, 2021 .
Recent Accounting Pronouncements
See Note 1 contained in the "Notes to Consolidated Financial Statements" for a discussion of recent accounting pronouncements.
27 -------------------------------------------------------------------------------- Table of Contents Results of Operations
The following table sets forth our reported results of operations expressed as a percentage of net sales for the periods indicated.
Three Months Ended March 31, 2022 2021 Net sales 100.0 % 100.0 % Cost of sales 72.6 69.2 Gross profit 27.4 30.8 Research and development expenses 5.9 5.3 Selling, general and administrative expenses 21.9 19.8 Operating income (loss) (0.4) 5.7 Interest income (expense), net (0.2) (0.1) Other income (expense), net 0.3 0.0 Income (loss) before provision for income taxes (0.3) 5.6 Provision for income taxes 1.8 1.0 Net income (loss) (2.1) % 4.6 % Three Months EndedMarch 31, 2022 versus Three Months EndedMarch 31, 2021 Net sales. Net sales for the three months endedMarch 31, 2022 were$132.4 million , a decrease compared to$150.5 million for the three months endedMarch 31, 2021 . Sales in our subscription broadcast channel were lower than the prior year period due primarily to component shortages and lower customer demand. Sales in our HVAC and consumer electronics channels were lower than the prior year period, due to component shortages and COVID-19 related lockdowns inChina , which impacted our ability to both manufacture and deliver product. Sales in our retail channel were lower than the prior year period due to the loss of a customer inNorth America . Gross profit. Gross profit for the three months endedMarch 31, 2022 was$36.3 million compared to$46.4 million for the three months endedMarch 31, 2021 . Gross profit as a percentage of sales decreased to 27.4% for the three months endedMarch 31, 2022 from 30.8% for the three months endedMarch 31, 2021 . Gross profit as a percentage of sales was unfavorably impacted by higher material and freight costs and the weakening of theU.S. Dollar versus the Chinese Yuan Renminbi and Mexican Peso. Partially offsetting these unfavorable impacts were price increases and a favorable mix shift toward higher margin revenue streams such as royalties, as a few of the largest consumer electronic companies in the world are embedding our technology in their devices. Research and development ("R&D") expenses. R&D expenses remained consistent at$7.8 million for the three months endedMarch 31, 2022 and$7.9 million in the prior year period. Selling, general and administrative ("SG&A") expenses. SG&A expenses decreased to$29.0 million for the three months endedMarch 31, 2022 from$29.8 million for the three months endedMarch 31, 2021 , primarily due to a decrease in incentive compensation. Interest income (expense), net. Interest expense, net increased to$0.3 million for the three months endedMarch 31, 2022 from$0.1 million for the three months endedMarch 31, 2021 , as a result of a higher average loan balance and a higher interest rate.
Other income (expense), net. Other income, net was
Provision for income taxes. Income tax expense was$2.4 million for the three months endedMarch 31, 2022 , relative to pre-tax loss of$0.5 million compared to income tax expense of$1.5 million for the three months endedMarch 31, 2021 , representing an effective tax rate of 18.0%. We expect theU.S. to be in a pre-tax loss position without benefit for the full year 2022. In addition, recent legislative changes for research and experimentation costs and creditability of certain foreign income taxes have resulted in a higher than normal effective tax rate. 28 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources
Sources of Cash
Historically, we have utilized cash provided from operations as our primary source of liquidity, as internally generated cash flows have been sufficient to support our business operations, capital expenditures and discretionary share repurchases. In addition, we have utilized our revolving line of credit to fund an increased level of share repurchases and acquisitions. We anticipate that we will continue to utilize both cash flows from operations and our revolving line of credit to support ongoing business operations, capital expenditures, expenses associated with our long-term factory planning strategy, future discretionary share repurchases and potential future acquisitions. We believe our current cash balances, anticipated cash flow to be generated from operations and available borrowing resources will be sufficient to cover expected cash outlays for at least the next twelve months and for the foreseeable future thereafter; however, because our cash is located in various jurisdictions throughout the world, we may at times need to increase borrowing from our revolving line of credit or take on additional debt until we are able to transfer cash among our various entities.
Our liquidity is subject to various risks including the risks discussed under "Item 3. Quantitative and Qualitative Disclosures about Market Risk."
(In thousands) March 31, 2022 December 31, 2021 Cash and cash equivalents$ 53,628 $ 60,813 Available borrowing resources 37,300 66,300 Cash, cash equivalents and term deposit - OnMarch 31, 2022 , we had$4.9 million ,$17.7 million ,$10.4 million ,$18.0 million and$2.7 million of cash and cash equivalents inNorth America , the PRC,Asia (excluding the PRC),Europe , andSouth America , respectively. In addition, atMarch 31, 2022 , we had a one-year term deposit of$8.6 million , which will mature onJanuary 25, 2023 . We attempt to mitigate our exposure to liquidity, credit and other relevant risks by placing our cash, cash equivalents, and term deposits with financial institutions we believe are high quality. Our cash balances are held in numerous locations throughout the world. The majority of our cash is held outside ofthe United States and may be repatriated tothe United States but, under current law, may be subject to state income and foreign withholding taxes. Additionally, repatriation of some foreign balances is restricted by local laws. We have provided for the state income tax and the foreign withholding tax liabilities on these amounts for financial statement purposes. Available Borrowing Resources - Our Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") withU.S. Bank National Association ("U.S. Bank ") provides for a$125.0 million revolving line of credit ("Credit Line") that expires onNovember 1, 2023 . The Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures. Amounts available for borrowing under the Credit Line are reduced by the balance of any outstanding letters of credit, of which there were$2.7 million atMarch 31, 2022 . AtMarch 31, 2022 , we had an outstanding balance of$85.0 million on our Credit Line and$37.3 million of availability.
See Note 8 contained in the "Notes to Consolidated Financial Statements" for further information regarding our Credit Line.
Uses of Cash
Our cash flows were as follows:
Three Months Ended March 31, Increase Three Months Ended (In thousands) 2022 (Decrease) March 31, 2021 Cash used for operating activities$ (17,969) $ (11,240) $ (6,729) Cash used for investing activities (11,621) (6,817) (4,804) Cash provided by financing activities 21,646 11,606 10,040 Effect of foreign currency exchange rates on cash and cash equivalents 759 1,056 (297) Net increase (decrease) in cash and cash equivalents$ (7,185) $ (5,395) $ (1,790) 29
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Table of Contents Increase March 31, 2022 (Decrease) December 31, 2021 Cash and cash equivalents$ 53,628 $ (7,185) $ 60,813 Working capital 115,241 (5,118) 120,359 Net cash used for operating activities was$18.0 million during the three months endedMarch 31, 2022 compared to$6.7 million during the three months endedMarch 31, 2021 . Net loss was$2.9 million for the three months endedMarch 31, 2022 compared to net income of$7.0 million for the three months endedMarch 31, 2021 . Changes in accounts receivable and contract assets resulted in cash outflows of$5.1 million during the three months endedMarch 31, 2022 largely as a result of a increase in days sales outstanding compared to the fourth quarter 2021 offset partially by a decrease in sales. Changes in accounts receivable and contract assets resulted in cash outflows of$10.1 million during the three months endedMarch 31, 2021 largely as a result of an increase in days sales outstanding compared to the fourth quarter 2020. Days sales outstanding were 88 days atMarch 31, 2022 compared to 79 days atMarch 31, 2021 . Inventories increased by$4.6 million during the three months endedMarch 31, 2022 due to efforts to mitigate supply chain issues relating to component shortages and logistics delays compared to a decrease of$1.3 million during the three months endedMarch 31, 2021 . Our inventory turns decreased to 2.8 turns atMarch 31, 2022 compared to 3.5 turns atMarch 31, 2021 . Future cash flows from operations are expected to be affected by the impacts of the COVID-19 pandemic, specifically relating to logistical issues. For the first half of 2022, we expect component shortages will continue to have an adverse effect on cash flows with some relief beginning to occur in the second half of the year. In addition, we expect to commence manufacturing operations in a new factory inVietnam in the third quarter of 2022 which, in the short run, may result in manufacturing inefficiencies. Net cash used for investing activities during the three months endedMarch 31, 2022 was$11.6 million , of which$7.5 million ,$0.9 million ,$1.8 million and$1.4 million was used for our term deposit investment, acquisition ofQterics Inc. , capital expenditures, and the development of patents, respectively. Net cash used for investing activities during the three months endedMarch 31, 2021 was$4.8 million of which$3.7 million and$1.1 million was used for capital expenditures and the development of patents, respectively.
Future cash flows used for investing activities are largely dependent on the
timing and amount of capital expenditures. We estimate that we will incur
between
Net cash provided by financing activities was$21.6 million during the three months endedMarch 31, 2022 compared to$10.0 million during the three months endedMarch 31, 2021 . The increase in cash provided by financing activities was driven primarily by borrowing and repayment activity on our line of credit. During the three months endedMarch 31, 2022 , we had net borrowings of$29.0 million compared to net borrowings of$20.0 million during the three months endedMarch 31, 2021 . During the three months endedMarch 31, 2022 , we repurchased 224,638 shares of our common stock at a cost of$7.4 million compared to our repurchase of 190,523 shares at a cost of$11.0 million during the three months endedMarch 31, 2021 . Future cash flows used for financing activities are affected by our financing needs which are largely dependent on the level of cash provided by or used in operations and the level of cash used in investing activities. Additionally, potential future repurchases of shares of our common stock will impact our cash flows used for financing activities. See Note 13 contained in "Notes to Consolidated Financial Statements" for further information regarding our share repurchase programs. 30 -------------------------------------------------------------------------------- Table of Contents Material Cash Commitments - The following table summarizes our material cash commitments and the effect these commitments are expected to have on our cash flows in future periods: Payments Due by Period Less than 1 - 3 4 - 5 After (In thousands) Total 1 year years years 5 years Operating lease obligations$ 28,339 $ 7,213 $ 10,504 $ 6,065 $ 4,557 Property, plant, and equipment purchases 3,167 3,167 - - - Inventory purchases 18,761 18,761 - - - Software license 3,519 105 341 788 2,285 Total material cash commitments$ 53,786 $ 29,246 $
10,845
We anticipate meeting our material cash commitments with our cash generated from operations and available borrowing resources, including our Credit Line.
Factors That May Affect Financial Condition and Future Results
Forward-Looking Statements
We caution that the following important factors, among others (including but not limited to factors discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as those discussed in our 2021 Annual Report on Form 10-K, or in our other reports filed from time to time with theSecurities and Exchange Commission ("SEC")), may affect our actual results and may contribute to or cause our actual consolidated results to differ materially from those expressed in any of our forward-looking statements. The factors included here are not exhaustive. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Therefore, forward-looking statements should not be relied upon as a prediction of actual future results. While we believe that the forward-looking statements made in this report are based on reasonable assumptions, the actual outcome of such statements is subject to a number of risks and uncertainties, including the impact of the COVID-19 pandemic on our business, results of operations, financial position and liquidity; the impact to our quarterly revenue, margins and operating profits due to our inability to continue to obtain adequate quantities of component parts, including ICs; potential inability to timely deliver products to our customers due to the substantial delays in the transportation and the onloading and offloading of our product resulting from the significant congestion at ports throughout the world and other downstream transportation, such as via trucks and rail; the significant percentage of our revenue attributable to a limited number of customers; the failure of our markets to continue growing and expanding in the manner we anticipated; the loss of market share due to competition; the delay by or failure of our customers to order products from us due to delays by them of their new product rollouts, their decision to purchase their products from an alternative or second source supplier, their efforts to refocus their operations to broadband and OTT versus traditional linear video, their failure to grow as we anticipated, their internal inventory control measures, or their loss of market share; the effects of natural or other events beyond our control, including the effects of political unrest, war (including the conflict betweenRussia andUkraine ) or terrorist activities may have on us or the economy; the economic environment's effect on us or our customers; the effects of doing business internationally, including the effects that changes in laws, regulations and policies may have on our business including the impact of new or additional tariffs and surcharges; the growth of, acceptance of and the demand for our products and technologies in various markets and geographical regions, including cable, satellite, consumer electronics, retail, and digital media and interactive technology; our inability to add profitable complementary products which are accepted by the marketplace; our inability to attract and retain a quality workforce at adequate levels in all regions of the world, and particularly those jurisdictions where we are moving our operations; our inability to continue to maintain our operating costs at acceptable levels through our cost containment efforts including moving our operations and manufacturing facilities to lower cost jurisdictions; an unfavorable ruling in any or all of the litigation matters to which we are party; our inability to continue selling our products or licensing our technologies at higher or profitable margins; our inability to obtain orders or maintain our order volume with new and existing customers; our inability to develop new and innovative technologies and products that are accepted by our customers; the possible dilutive effect our stock incentive programs may have on our earnings per share and stock price; the continued ability to identify and execute on opportunities that maximize stockholder value, including the effects repurchasing the Company's shares have on the Company's 31
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Table of Contents stock value; and other factors listed from time to time in our press releases and filings with theSecurities and Exchange Commission .
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