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Venture Global, Inc. Class A (VG)
:VG
Risk Overview Q1, 2022
Risk Distribution
32% Finance & Corporate
20% Legal & Regulatory
18% Ability to Sell
11% Tech & Innovation
11% Production
7% Macro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Venture Global, Inc. Class A Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q1, 2022
Main Risk Category
Finance & Corporate
With 14 Risks
Finance & Corporate
With 14 Risks
Number of Disclosed Risks
44
No changes from last report
S&P 500 Average: 31
44
No changes from last report
S&P 500 Average: 31
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since Mar 2022
0Risks added
0Risks removed
0Risks changed
Since Mar 2022
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 3
0
No changes from last report
S&P 500 Average: 3
See the risk highlights of Venture Global, Inc. Class A in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 44
Finance & Corporate
Total Risks: 14/44 (32%)Above Sector Average
Share Price & Shareholder Rights2 | 4.5%
Share Price & Shareholder Rights - Risk 1
Actions of activist stockholders could cause us to incur substantial costs, divert management's attention and resources, and have an adverse effect on our business.Share Price & Shareholder Rights - Risk 2
Our certificate of incorporation and bylaws and the agreements governing our indebtedness contain provisions that could delay or discourage a takeover attempt, which could prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then-current market price for their shares.Certain provisions of our Restated Certificate of Incorporation and our Amended and Restated By-laws may make it more difficult for, or have the effect of discouraging, a third party from acquiring control of us or changing our board of directors and management. These provisions permit our board of directors to issue additional shares of common stock and preferred stock and to establish the number of shares, series designation, voting powers if any, preferences, other special rights, qualifications, limitations or restrictions of any series of preferred stock; limit the ability of stockholders to amend our Restated Certificate of incorporation and Amended and Restated By-laws, including supermajority requirements; allow only our board of directors, Chairman of the board of directors or Chief Executive Officer to call special meetings of our stockholders; eliminate the ability of stockholders to act by written consent; require advance notice for stockholder proposals and director nominations; and limit the removal of directors and the filling of director vacancies.
Such provisions could have the effect of depriving stockholders of an opportunity to sell their shares at a premium over prevailing market prices. Any delay or prevention of, or significant payments required to be made upon, a change of control transaction or changes in our board of directors or management could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then-current market price for their shares.
Accounting & Financial Operations2 | 4.5%
Accounting & Financial Operations - Risk 1
We have incurred cumulative losses since our inception and may not achieve consistent profitability in the future.Accounting & Financial Operations - Risk 2
We may be unable to fully realize the benefits of our net operating loss, or NOL, carry forwards if an ownership change occurs.If we were to experience a "change in ownership" under Section 382 of the Internal Revenue Code, or Section 382, the NOL carryforward limitations under Section 382 would impose an annual limit on the amount of the future taxable income that may be offset by our NOL generated prior to the change in ownership. If a change in ownership were to occur, we may be unable to use a significant portion of our NOL to offset future taxable income. In general, a change in ownership occurs when, as of any testing date, there has been a cumulative change in the stock ownership of the corporation held by 5% stockholders of more than 50 percentage points over an applicable three-year period. For these purposes, a 5% stockholder is generally any person or group of persons that at any time during an applicable three-year period has owned 5% or more of our outstanding common stock. In addition, persons who own less than 5% of the outstanding common stock are grouped together as one or more "public group" 5% stockholders. Under Section 382, stock ownership would be determined under complex attribution rules and generally includes shares held directly, indirectly through intervening entities, and constructively by certain related parties and certain unrelated parties acting as a group. We have implemented a Tax Benefits Preservation Plan intended to provide a meaningful deterrent effect against acquisitions that could cause a change in ownership, however this is not a guarantee against such a change in ownership.
Debt & Financing6 | 13.6%
Debt & Financing - Risk 1
The debt agreements governing our financing contain restrictions that may limit our flexibility in operating our business or executing on our acquisition strategy.Debt & Financing - Risk 2
If we require additional capital, we may not be able to obtain additional financing on favorable terms or at all.We may need to pursue additional financing to respond to new competitive pressures, pay extraordinary expenses such as litigation settlements or judgments or fund growth, including through acquisitions. Because of our past significant losses and our limited tangible assets, we do not fit traditional credit lending criteria, which, in particular, could make it difficult for us to obtain loans or to access the capital markets. In addition, the credit documentation for our recent financing contains affirmative and negative covenants that affect, and in many respects may significantly limit or prohibit, among other things, our and certain of our subsidiaries' ability to incur, refinance or modify indebtedness and create liens. Our credit card processors have the ability to impose significant holdbacks in certain circumstances. The reinstatement of such holdbacks likely would have a material adverse effect on our liquidity. Under our credit card processing agreements with our Visa, MasterCard, American Express, and Discover credit card processors, the credit card processor has the right, in certain circumstances, including adverse events affecting our business, to impose a holdback of our advanced payments purchased using a Visa, MasterCard, American Express, or Discover credit card, as applicable, or demand additional reserves or other security. If circumstances were to occur that would allow any of these processors to reinstate a holdback, the negative impact on our liquidity likely would be significant. In addition, our Visa and MasterCard credit card processing agreement may be terminated by the credit card processor at its discretion if we are deemed to be financially insecure. As a significant portion of payments to us are made through Visa and MasterCard credit cards, if the credit card processor does not assist in transitioning our business to another credit card processor, the negative impact on our liquidity likely would be significant. There were no cash reserves and cash-collateralized letters of credit with any credit card processors as of December 31, 2021.
Debt & Financing - Risk 3
We may not have the ability to raise the funds necessary to settle conversions of the convertible senior notes due 2024 in cash or to repurchase the notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the notes.Holders of our 1.75% convertible senior notes due 2024 (the "Convertible Senior Notes") have the right to require us to repurchase their Convertible Senior Notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the aggregate principal amount of the Convertible Senior Notes to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the Convertible Senior Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Convertible Senior Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Convertible Senior Notes surrendered therefor or Convertible Senior Notes being converted. In addition, our ability to repurchase the Convertible Senior Notes or to pay cash upon conversions of the Convertible Senior Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase Convertible Senior Notes at a time when the repurchase is required by the indenture setting forth the terms of the Convertible Senior Notes or to pay any cash payable on future conversions of the Convertible Senior Notes as required by the indenture would constitute a default under the indenture. A default under the indenture setting forth the terms of the Convertible Senior Notes or the occurrence of the fundamental change itself may lead to a default under our 2018 Credit Facility or other agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Convertible Senior Notes or make cash payments upon conversions thereof. The increase in the conversion rate for Convertible Senior Notes converted in connection with a make-whole fundamental change or notice of redemption may not adequately compensate holders for any lost value of such holders' Convertible Senior Notes as a result of such transaction.
If a make-whole fundamental change occurs prior to the maturity date or if we issue a notice of redemption with respect to the Convertible Senior Notes, under certain circumstances, we will increase the conversion rate by a number of additional shares of our common stock for Convertible Senior Notes converted in connection with such make-whole fundamental change or notice of redemption, as the case may be. The increase in the conversion rate will be determined based on the date on which the specified corporate transaction becomes effective, or the date of the notice of redemption, as the case may be and the price paid (or deemed to be paid) per share of our common stock in such transaction or with respect to such redemption, as the case may be. The increase in the conversion rate for Convertible Senior Notes converted in connection with a make-whole fundamental change or notice of redemption may not adequately compensate holders for any lost value of such holders' Convertible Senior Notes as a result of such transaction or redemption. In addition, if the price per share of our common stock paid (or deemed paid) in the transaction is greater than $60.00 per share or less than $11.73 per share (in each case, subject to adjustment), no additional shares will be added to the conversion rate. Moreover, in no event will the conversion rate per $1,000 aggregate principal amount of Convertible Senior Notes as a result of this adjustment exceed 85.2514 shares of common stock, subject to adjustment in the same manner as the conversion rate.
Our obligation to increase the conversion rate for Convertible Senior Notes converted in connection with a make-whole fundamental change or notice of redemption could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.
Debt & Financing - Risk 4
The conditional conversion feature of the Convertible Senior Notes, if triggered, may adversely affect our financial condition and operating results.In the event the conditional conversion feature of the Convertible Senior Notes is triggered, holders of Convertible Senior Notes will be entitled to convert the Convertible Senior Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Senior Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders of Convertible Senior Notes do not elect to convert their Convertible Senior Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Senior Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Debt & Financing - Risk 5
Convertible debt securities that may be settled in cash, such as the Convertible Senior Notes, could have a material effect on our reported financial results.Under certain circumstances, convertible debt instruments (such as the Convertible Senior Notes) that may be settled entirely or partly in cash may be accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of such Convertible Senior Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of such Convertible Senior Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable or otherwise elect not to use the treasury stock method in accounting for the shares issuable upon conversion of the Convertible Senior Notes, then our diluted earnings per share could be adversely affected.
Debt & Financing - Risk 6
The capped call transactions entered into in connection with the pricing of the Convertible Senior Notes may affect the value of the Convertible Senior Notes and our common stock.In connection with the pricing of the Convertible Senior Notes and subsequently in connection with the exercise of the initial purchasers' exercise of their option to purchase additional Convertible Senior Notes, we entered into capped call transactions (the "Capped Calls") with certain option counterparties. The Capped Calls are expected generally to reduce the potential dilution upon conversion of the Convertible Senior Notes and/or offset any cash payments we are required to make in excess of the aggregate principal amount of converted Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap.
In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the Convertible Senior Notes and prior to the maturity of the Convertible Senior Notes (and are likely to do so during any observation period related to a conversion of the Convertible Senior Notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Senior Notes, which could affect holders' ability to convert the Convertible Senior Notes and, to the extent the activity occurs during any observation period related to a conversion of Convertible Senior Notes, it could affect the number of shares and value of the consideration that holders will receive upon conversion of the Convertible Senior Notes.
In addition, if any such Capped Call fails to become effective, the option counterparty party thereto may unwind its hedge positions with respect to our common stock, which could adversely affect the value of our common stock and, if the Convertible Senior Notes have been issued, the value of the Convertible Senior Notes.
Corporate Activity and Growth4 | 9.1%
Corporate Activity and Growth - Risk 1
Our Vonage Communications Platform segment is growing rapidly, and any inability to scale our business and grow efficiently could materially and adversely harm our business and results of operations.Corporate Activity and Growth - Risk 2
We may face difficulties related to the acquisition or integration of businesses, which could harm our growth or operating results.In August 2018, we acquired TokBox with the intention of integrating and adding video to our VCP offerings in voice, SMS, and IP messaging. In October 2018, we completed the acquisition of NewVoiceMedia as a contact center provider, with the intention of combining our UC, CC and API solutions to provide an end-to-end communications experience for a company's employees and customers. In August 2019, we acquired intellectual property assets from Over.ai in order to integrate conversational artificial intelligence into our VCP product offerings. In October 2021, we acquired Jumper.ai to integrate omnichannel conversational commerce solutions into our VCP product offerings. In addition, we have made several acquisitions over the past several years to build our business services and continue to periodically review acquisition opportunities.
Acquisition and integration activities require substantial management time and resources. Acquisitions of existing businesses involve substantial risks, including the risk that we may not be able to integrate the operations, personnel, services, or technologies, the potential disruption of our ongoing businesses, the diversion of management attention, the maximization of financial and strategic opportunities, the difficulty in developing or maintaining controls and procedures, and the dilution to our existing stockholders from the issuance of additional shares of common stock. We may elect to acquire additional businesses or assets in the future. However, we cannot predict or guarantee that we will be able to identify suitable acquisition candidates or consummate any acquisition. As a result of these and other risks, we may not produce anticipated revenue, profitability, or synergies.
Acquisitions may require us to issue debt or equity securities, use our cash resources, incur debt or contingent liabilities, amortize intangibles, or write-off acquisition-related expenses. If we are unable to successfully integrate any acquired businesses or assets we may not receive the intended benefits of such acquisition. In addition, we cannot predict market reactions to any acquisitions we may make or to any failure to announce any future acquisitions.
Further, there may be risks or liabilities that such due diligence efforts fail to discover, are not disclosed to us, or that we inadequately assess. The discovery of material liabilities associated with acquisitions or joint venture opportunities, economic risks faced by joint venture partners, or any failure of joint venture partners to perform their obligations could adversely affect our business, results of operations, and financial condition.
Corporate Activity and Growth - Risk 3
We may not fully realize the expected benefits of our business optimization plans or other cost-saving initiatives, which may negatively impact our results of operations and financial condition.Since the third quarter of 2020, the Company has been implementing a business optimization and alignment project to focus the use of Company resources and drive operational execution. The Company may pursue similar cost-saving initiatives in the future. We may not achieve the operational improvements and efficiencies that we have targeted in this project.
Implementing any restructuring, optimization, or cost-savings plan presents significant potential risks that may impair our ability to achieve anticipated operating improvements and/or cost reductions. These risks include (but are not limited to) higher than anticipated costs in implementing these plans, management distraction from ongoing business activities, failure to maintain adequate controls and procedures while executing these plans, damage to our reputation, brand image, and workforce attrition beyond our planned reductions, and our ability to provide optimal service to our customers. Any of these risks could have a negative impact on our profitability and on our results of operations and financial condition.
Corporate Activity and Growth - Risk 4
Our pending merger with Telefonaktiebolaget LM Ericsson (publ) ("Ericsson") creates incremental business, regulatory and reputational risks and failure to close the merger could negatively impact the share price and the future business and financial results of the Company.On November 22, 2021, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Ericsson and Ericsson Muon Holding Inc.. The proposed transaction with Ericsson entails important risks, including, among others: the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; the inability to complete the proposed merger due to the failure to satisfy conditions to completion of the proposed merger, including obtaining the requisite Committee on Foreign Investment in the U.S. clearance; risks related to disruption of management's attention from the Company's ongoing business operations due to the proposed merger; the risk that we will not be able to attract, retain, and motivate qualified personnel; the effect of the announcement of the proposed merger on the Company's relationships with its customers, operating results and business generally; the risk that litigation associated with the proposed merger affects the merger or the business otherwise; and the risk that the proposed merger will not be consummated in a timely manner.
Legal & Regulatory
Total Risks: 9/44 (20%)Above Sector Average
Regulation4 | 9.1%
Regulation - Risk 1
The regulatory framework for API services continues to develop, as many existing regulations may not fully contemplate this type of service or business model; future legislative, regulatory or judicial actions impacting API could adversely affect our business and financial results of operations, increase the cost and complexity of compliance, and expose us to liability.Regulation - Risk 2
Our VoIP services are subject to regulation in the United States, United Kingdom, and Canada, and in additional countries as we expand globally. Future legislative, regulatory or judicial actions could adversely affect our business and expose us to liability and limit our growth potential.The United States, United Kingdom, and Canada have applied some traditional telephone company regulations to VoIP and continue to evaluate how VoIP should be regulated, as are other countries as we expand globally. The effects of future regulatory developments are uncertain. At the federal level in the U.S., the Federal Communications Commission has imposed certain telecommunications regulations on VoIP services including, but not limited to; requirements to provide E-911 service; communications Assistance for Law Enforcement Act obligations; obligation to support Universal Service; customer Proprietary Network Information, or CPNI, requirements; disability access obligations; local Number Portability requirements; and consumer protection, including protection from unwanted telemarketing and other calls. As we expand globally, these types of regulations are likely to be similarly enacted and enforced by local regulatory authorities.
In general, the focus of interconnected VoIP telecommunications regulation is at the federal level. On November 12, 2004, the FCC issued a declaratory ruling providing that our service is subject to federal regulation and preempted the Minnesota Public Utilities Commission from imposing certain of its regulations on us. While this ruling does not exempt us from all state oversight of our service, it effectively prevents state telecommunications regulators from imposing certain burdensome and inconsistent market entry requirements and certain other state utility rules and regulations on our service. Despite this, Vonage may be subject to state and local regulatory requirements including: payment of state and local E-911 fees; and State Universal Service support obligations.
In Canada, the Canadian Radio-Television and Telecommunications Commission, or CRTC, regulates VOIP Service. In the UK, the Office of Communications, or OFCOM, regulates voice services. Other regulatory bodies in various jurisdictions regulate services Vonage offers its customers. These regulated services are similar to those regulated in the United States discussed above. Future legislative, judicial or other regulatory actions could have a negative effect on our business. If we become subject to the rules and regulations applicable to telecommunications providers in individual states or other foreign jurisdictions, we may incur significant litigation and compliance costs, and we may have to restructure our service offerings, exit certain markets, or raise the price of our services, any of which could cause our services to be less attractive to customers. In addition, future regulatory developments could increase our cost of doing business and limit our growth.
Regulation - Risk 3
Customer misuse of our API products in violation of the Telephone Consumer Protection Act may cause us to face litigation risk.The Telephone Consumer Protection Act of 1991 restricts telemarketing and the use of automatic SMS text messages without proper consent. The scope and interpretation of the laws that are or may be applicable to the delivery of text messages are continuously evolving and developing. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper consent, we could face liability.
Regulation - Risk 4
We may be exposed to liabilities under anti-corruption, export control and economic sanction regulations, and similar laws and regulations, and any determination that we violated any of these laws or regulations could have a material adverse effect on our business.We are subject to the Foreign Corrupt Practice Act, or FCPA, the UK Bribery Act and other laws that prohibit improper payments or offers of payments to foreign governments and their officials, political parties, and/or private parties by persons and entities for the purpose of obtaining or retaining business. We have operations, agreements with third parties, and make sales internationally. In addition, we plan to expand our international operations through potential joint ventures with local partners. Our international activities create the risk of unauthorized payments or offers of payments by one of our employees, consultants, partners, sales agents or distributors, even though these parties are not always subject to our control. It is our policy to prohibit these practices by our employees, consultants, partners, sales agents or distributors, however, our existing safeguards and any future improvements may prove to be less than effective, and our employees, consultants, partners, sales agents or distributors may engage in conduct for which we might be held responsible. Violations of the FCPA, the UK Bribery Act or other laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results, and financial condition.
Our products and services may be subject to export control and economic sanctions regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department's Office of Foreign Assets Controls. Our products and services must be offered and sold in compliance with these laws and regulations. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper consent, we could face liability. In addition, changes in our products or services, changes in applicable regulations, or change in the target of such regulations, could also result in decreased use of our products and services, or in our decreased ability to sell our products or provide our services to existing or prospective customers with international operations. Any decreased use of our products and services or limitation on our ability to export our products and provide our services could adversely affect our business, results of operations and financial condition.
Litigation & Legal Liabilities2 | 4.5%
Litigation & Legal Liabilities - Risk 1
Our API offerings may be subject to liability for historic and future sales, use and similar taxes, that may increase our costs or impact our product offerings.Litigation & Legal Liabilities - Risk 2
Unfavorable litigation or governmental investigation results could require us to pay significant amounts or lead to onerous operating procedures.We are subject from time to time to lawsuits both in the United States and in foreign countries, including claims and investigations relating to competition, intellectual property rights (including patents), employment and labor matters, personal injury and property damage, customer privacy, regulatory requirements, advertising, marketing and selling practices, and credit and collection issues. Greater constraints on the use of arbitration to resolve certain of these disputes could adversely affect our business. We also spend substantial resources complying with various regulatory and government standards, including any related investigations and litigation. We may incur significant expenses defending any such suit or government investigation and may be required to pay amounts or otherwise change our operations in ways that could adversely impact our businesses, results of operations or financial condition.
Taxation & Government Incentives2 | 4.5%
Taxation & Government Incentives - Risk 1
The global scope of our operations may subject us to potentially adverse tax consequences.Taxation & Government Incentives - Risk 2
Our VoIP services are subject to country-specific governmental regulation and related actions and taxes that may increase our costs or impact our product offerings.In many countries, we are not a regulated telecommunications business subject primarily to regulations surrounding provision of emergency services and payment into universal service type funds. In some countries, providing VoIP services is or may be illegal. We may need to change our service offerings to avoid regulation as a telecommunications business in a jurisdiction, or if we are treated as a fully regulated telecommunications business, we may be required to incur additional expenses. In addition, if governments believe that we are providing unauthorized service in their countries, they may pursue fines, penalties, or other governmental action, including criminal action, that may damage our brand and reputation. If we use a local partner to provide services in a country and the local partner does not comply with applicable governmental regulations, we may face additional regulation, liabilities, penalties or other governmental action, and our brand and reputation may be harmed.
In addition to the risk of being directly subjected to regulation, decisions by foreign regulators to increase the charge for terminating international calls into their countries could cause increased costs, impact margin, and impact churn. These regulatory actions may be taken without notice and cause us to react quickly to changing market conditions. These efforts could divert management's efforts and attention from ordinary business operations which could materially and adversely affect our results of operations.
As a United States-based company, any foreign subsidiary or joint venture that we use for international operations may be subject to a variety of governmental regulations in the countries where we market our products, including tariffs, taxes and employment regulations different from those in the U.S. For example, distributions of earnings and other payments, including interest, received from our foreign subsidiaries may be subject to withholding taxes imposed by the jurisdiction in which such entities are formed or operating, which will reduce the amount of after-tax cash we can receive. In general, as a United States corporation, we may claim a foreign tax credit against our federal income tax expense for such foreign withholding taxes and for foreign income taxes paid directly by foreign corporate entities in which we own 10% or more of the voting stock. The ability to claim such foreign tax credits and to utilize net foreign losses is, however, subject to numerous limitations, and we may incur incremental tax costs as a result of these limitations or because we are not currently in a tax-paying position in the United States. We may also be required to include in our income for United States federal income tax purposes our proportionate share of certain earnings of those foreign subsidiaries that are classified as "controlled foreign corporations" without regard to whether distributions have been actually received from such subsidiaries.
Environmental / Social1 | 2.3%
Environmental / Social - Risk 1
The storage, processing, and use of personal information and other confidential information subjects us to evolving governmental laws and regulation, commercial standards, contractual obligations, and other legal obligations related to consumer and data privacy, which may have a material impact on our costs, use of our products and services, or expose us to increased liability.Ability to Sell
Total Risks: 8/44 (18%)Above Sector Average
Competition2 | 4.5%
Competition - Risk 1
As the cloud communications services market evolves, and the convergence of voice, video, messaging, mobility, artificial intelligence and data networking technologies accelerates, we may face competition in the future from companies that do not currently compete in the cloud communications services market.Competition - Risk 2
If we are unable to compete successfully, we could lose market share and revenue.The business cloud communications markets and consumer services markets in which we participate are highly competitive. We face intense competition from a broad set of companies, including: software as a service companies, contact center as a service companies, other alternative communication providers, and other providers of cloud communications services; and traditional telephone, wireless service providers, cable companies and alternative communications providers with consumer offerings
Many of these providers are substantially larger and better capitalized than us and have the advantage of greater name and brand name recognition, and have a large existing customer base. These service providers may have the ability to devote greater resources to their communications services and may be able to respond more quickly and effectively than we can to new or changing opportunities. Our competitors' financial resources may allow them to offer services at prices below cost or even for free in order to maintain and gain market share or otherwise improve their competitive positions. Some of our competitors also could use their greater financial resources to develop and market services with more attractive features and more robust customer service. To the extent that these or other companies strengthen their offerings, we may have to reduce our prices, increase promotions, or offer additional features, which may adversely impact our revenues and profitability.
Demand2 | 4.5%
Demand - Risk 1
The market for our API products and platform is relatively nascent and may not experience the growth that we anticipate.Demand - Risk 2
If we fail to adapt to rapid changes in the market for cloud communications services, then our products and services could become obsolete.The market for our products and services is constantly and rapidly evolving as we and our competitors introduce new and enhanced products and services and react to changes in the cloud communications services industry and customer demands. We may not be able to develop or acquire new products and plans or product and plan enhancements that compete effectively with present or emerging cloud communications services technologies or differentiate our products and plans based on functionality and performance. In addition, we may not be able to establish or maintain strategic alliances that will permit enhancement opportunities or innovative distribution methods for our products and plans.
To address these issues, we are targeting revenue growth in large, existing markets, which require us to enhance our current products and plans, and develop new products and plans on a timely basis to keep pace with market needs and satisfy the increasingly sophisticated requirements of customers. If we are unable to attract users of these services our net revenues may fail to grow as we expect.
Cloud communications services are complex, and new products and plans and enhancements to existing products and plans can require long development and testing periods. Any delays in developing and releasing new or enhanced products and plans could cause us to lose revenue opportunities and customers. Any technical flaws in products we release could diminish the innovative impact of the products and have a negative effect on customer adoption and our reputation.
We also are subject to the risk of future disruptive technologies. New products based on new technologies or new industry standards could render our existing products obsolete and unmarketable. If new technologies develop that are able to deliver competing voice and messaging services at lower prices, better or more conveniently, it could have a material adverse effect on us.
Sales & Marketing3 | 6.8%
Sales & Marketing - Risk 1
If we are unsuccessful at retaining customers or attracting new customers, we may experience a reduction in revenue or may be required to spend more money or alter our marketing approaches to grow our customer base.Sales & Marketing - Risk 2
Sales of our UC and CC business services to medium-sized and enterprise customers involve significant risks which, if not managed effectively, could materially and adversely affect our business and results of operations.As we continue to expand our sales efforts to medium-sized and larger businesses, we may incur higher selling expense and longer, more complex, sales cycles. Customers in this market segment may also require bespoke features and integration services, increasing the complexity and expense related to the sales and delivery process, and requiring highly skilled sales and support personnel. As a result, we may devote greater sales and support to these customers, which may result in increased costs and a strain on our support resources. In addition, the rollout of our products with medium-sized and enterprise customers can take longer periods of time compared to smaller customers, which can result in longer lead times in realizing revenues. These factors could materially and adversely affect our results of operations and our overall ability to grow our customer base.
Sales & Marketing - Risk 3
Third parties may be capable of fraudulently using our name to obtain access to customer accounts and other personal information, use our services to commit fraud or steal our services or equipment, which could damage our reputation, limit our growth, and cause us to incur additional expenses.Our customers have been subject to "phishing," which occurs when a third party calls or sends an email or pop-up message to a customer that claims to be from a business or organization that provides services to the customer. The purpose of the inquiry is typically to encourage the customer to visit a bogus website designed to look like a website operated by the legitimate business or organization or provide information to the operator. At the bogus website, the operator attempts to trick the customer into divulging customer account or other personal information such as credit card information or to introduce viruses through "Trojan horse" programs to the customers' computers. This has resulted in identity theft from our customers and the unauthorized use of Vonage services. Third parties have also used our communications services to commit fraud. Although we have engaged a third party to assist in the shutdown of purported phishing sites, if we are unable to detect and prevent "phishing," use of our services for fraud, and similar activities, our brand reputation and growth may suffer and we may incur additional costs, including costs to increase security, or be required to credit significant amounts to customers.
Third parties also have used our communications services and obtained delivery of our equipment without paying, including by submitting fraudulent credit card information. This has resulted in our incurring the cost of providing the services, including incurring call termination fees, or providing the equipment without any corresponding revenues. We have implemented anti-fraud procedures in order to limit the expenses resulting from theft of service or equipment. If our procedures are not effective, theft of service or equipment could significantly increase our expenses and negatively impact our profitability.
Brand / Reputation1 | 2.3%
Brand / Reputation - Risk 1
Growth of our business will depend on market awareness and a strong brand, and any failure to develop, maintain, protect and enhance our brand would hurt our ability to retain or attract subscribers.Tech & Innovation
Total Risks: 5/44 (11%)Above Sector Average
Innovation / R&D1 | 2.3%
Innovation / R&D - Risk 1
Our success in the cloud communications market for our business services depends in part on developing and maintaining effective distribution channels. The failure to develop and maintain these channels could materially and adversely affect our business.Trade Secrets2 | 4.5%
Trade Secrets - Risk 1
If we fail to protect unique aspects of our internally developed systems, technology, products, and software and our trademarks, we may become involved in costly litigation or our business or brand may be harmed.Trade Secrets - Risk 2
We may be subject to damaging and disruptive intellectual property disputes that could materially and adversely affect our business, results of operations, and financial condition, as well as the continued viability of our company.There has been substantial litigation in the cloud communications, VoIP, telecommunications, hosted services, and related industries regarding intellectual property rights and, given the rapid technological change in our industry, expansion into new technological and geographical markets, and our continual development of new products and services, we and/or our commercial partners may be subject to infringement claims from time to time. For example, we may be unaware of filed patent applications and issued patents that could include claims that might be interpreted to cover our products and services. We have been subject to patent infringement claims in the past, and from time to time we receive letters from third parties offering an opportunity for us to obtain licenses to patents that may be relevant to our business or alleging that our services infringe upon third party patents or other intellectual property. We may seek to obtain rights to third party technology in the future, but may not be able to agree upon commercially reasonable terms or at all with respect to obtaining such rights. If we are unable to extend existing licenses or are unable to obtain rights to other technology that may be commercially advantageous or necessary for our product and service offerings, we may experience a decrease in the quality of our products or services or we may lose the ability to provide our products and services on a non-infringing basis until alternative technology or suitable alternative products and services can be developed, identified, obtained either through acquisition, license or other grants of rights, and integrated.
Cyber Security1 | 2.3%
Cyber Security - Risk 1
Security breaches and other cybersecurity or technological risks could compromise our information systems and network and expose us to liability, which could cause our business and reputation to suffer and which could have a material adverse effect on our business, financial condition, and operating results.Technology1 | 2.3%
Technology - Risk 1
Flaws in our technology and systems or our failure to adapt our systems to any new Internet Protocol could cause delays or interruptions of service, which could damage our reputation, cause us to lose customers, and limit our growth.Production
Total Risks: 5/44 (11%)Above Sector Average
Employment / Personnel1 | 2.3%
Employment / Personnel - Risk 1
We depend on the continued services of our senior management and other key employees, the loss of any of whom could adversely affect our business, results of operations and financial condition.Supply Chain4 | 9.1%
Supply Chain - Risk 1
We rely on third parties to provide a portion of our customer service representatives, provide aspects of our E-911 service, which differs from traditional 911 service, and initiate local number portability for our customers. If these third parties do not provide our customers with reliable, high-quality service, our reputation will be harmed and we may lose customers.Supply Chain - Risk 2
We depend on third-party vendors to supply, configure and deliver the phones that we sell. Any delays in delivery, or failure to operate effectively with our own servers and systems, may result in delay or failure of our services, which could harm our business, financial condition and results of operations.We rely on Yealink Inc. and Polycom, Inc. to provide, and a single fulfillment agent to configure and deliver, the phones that we offer for sale to our customers that use our UC and CC services. If these third parties are unable to deliver phones of acceptable quality or quantity, or in a timely manner, we may be forced to offer replacements at a higher cost than what is currently contracted. In addition, these phones must interoperate with our servers and systems. If either of our providers changes the operation of their phones, we may be required to engage in development efforts to ensure that the new phones interoperate with our system. The failure of our vendor-supplied phones to operate effectively with our system could impact our customers' ability to use our services and could cause customers to cancel our services, which may cause material harm to our business or results of operations.
Supply Chain - Risk 3
We rely on third-party vendors that may be difficult to replace or may not perform adequately.It is vital to our customers that there be a minimum of disruption to the performance of our API, UC and CC services. We are therefore vulnerable to service interruptions of our third-party data center providers, such as IBM Softlayer and Amazon Web Services, or AWS; and of third-party hosted services. We also rely on third-party vendors that support our internal operations, including Genpact, which provides certain accounting transaction-processing activities. We may experience interruptions, delays and outages in third-party service and availability due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints caused by technical failures, natural disasters, fraud or security attacks. To the extent that we do not effectively address interruptions, delays and outages in our data center providers' and other hosted providers' service and availability or capacity constraints, our business, results of operations and financial condition may be adversely affected.
In some cases we rely on purchased or leased hardware and software licensed from third parties in order to provide our services. For example, Broadsoft, Inc. provides us with infrastructure, call termination and origination services, and other hardware and software in connection with certain of our Enterprise offerings. We also integrate third-party licensed software components into our platform. This hardware and software may not continue to be available on commercially reasonable terms or pricing or may fail to continue to be updated to remain competitive. The loss of the right to use this third party hardware or software may increase our expenses or impact the provisioning of our services. The failure of this third party hardware or software could materially impact the performance of our services and may cause material harm to our business or results of operations.
Supply Chain - Risk 4
Our ability to provide our telephony service and manage related customer accounts is dependent upon third-party facilities, equipment, and systems, the failure of which could cause delays of or interruptions to our service, damage our reputation, cause us to lose customers, limit our growth, and affect our financial condition.Our success depends on our ability to provide quality and reliable telephony service, which is in part dependent upon the proper functioning of facilities and equipment owned and operated by third parties and is, therefore, beyond our control. Unlike traditional wireline telephone service or wireless service, our telephony service typically requires our customers to have an operative broadband Internet connection and an electrical power supply, which are provided by the customer's Internet service provider and electric utility company, respectively, and not by us. The quality of some broadband Internet connections may be too poor for customers to use our telephony services properly. In addition, if there is any interruption to a customer's broadband Internet service or electrical power supply, that customer will be unable to make or receive calls, including emergency calls, using our telephony service.
We outsource several of our network functions to third-party providers. For example, we outsource the maintenance of our regional data connection points, which are the facilities at which our network interconnects with the public switched telephone network. If our third-party service providers fail to maintain these facilities properly, or fail to respond quickly to problems, our customers may experience service interruptions. Interruptions in our service caused by third-party facilities have in the past caused and may in the future cause us to lose customers or cause us to offer substantial customer credits, which could adversely affect our revenue and profitability. If interruptions adversely affect the perceived reliability of our service, we may have difficulty attracting new customers, and our brand, reputation, and growth will be negatively impacted.
There can be no guarantee that these third party providers will be able or willing to supply services to us in the future on commercially reasonable terms, or that we will be able to engage alternative or additional providers. Our ability to provide our services may be impacted during any transition, which could have an adverse effect on our business, financial condition or results of operations.
Macro & Political
Total Risks: 3/44 (7%)Above Sector Average
Economy & Political Environment1 | 2.3%
Economy & Political Environment - Risk 1
We market our products and services to small and medium-sized businesses, which may be disproportionately impacted by fluctuations in economic conditions.Natural and Human Disruptions1 | 2.3%
Natural and Human Disruptions - Risk 1
The recent coronavirus (COVID-19) pandemic and the global attempt to contain it has impacted and may continue to impact our business and results of operations.Capital Markets1 | 2.3%
Capital Markets - Risk 1
Significant foreign currency exchange rate fluctuations could adversely affect our financial results.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.