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Item 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under Part I, Item 1A. Risk Factors in the Companys 2023 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results. Other than the risk factors below, there have been no material changes in our risk factors from those described in the 2023 Annual Report on Form 10-K.
The proposed ssale of our Digital Banking business may not achieve some or all of the expected benefits and may adversely affect our business.
On August 6, 2024, the Company entered into a definitive agreement with an affiliate of The Veritas Capital Fund VIII, L.P. (the Buyer) pursuant to which the Buyer agreed to purchase the Companys Digital Banking segment businesses (the Digital Banking Sale). The Digital Banking Sale is expected to close by the end of fiscal year 2024, subject to receipt of necessary regulatory approvals and other customary closing conditions. We may not be able to achieve the full strategic, financial, operational, and other benefits that are expected to result from the Digital Banking Sale, including any expected optimization of operations, cost savings, and other business opportunities that may be facilitated by the Digital Banking Sale. In addition, such benefits may be delayed or less significant than anticipated. We cannot predict with certainty when the benefits expected from the Digital Banking Sale will occur or the extent to which they will be achieved, or when they will be achieved, if at all. A failure to realize these and other anticipated benefits of the Digital Banking Sale or effectively utilize the proceeds from the Digital Banking Sale could have an adverse impact our business, financial condition and results of operations. See also Item 1A. Risk FactorsOur acquisitions, divestitures and other strategic transactions may not produce anticipated results, which could have a material adverse effect on our business, financial condition or results of operations in our 2023 Annual Report on Form 10-K.
The Company may be held liable to the Buyer iof its Digital Banking Business if it fails to perform under its agreements with the Buyer, and the performance of such services may negatively affect the Companys business and operations.
In connection with the Digital Banking Sale, the Company and the Buyer will entered into certain agreements, including a transition services agreement, providing for the performance of certain services by the Company for the benefit of the Buyer for a period of time after the Digital Banking Sale. If the Company does not satisfactorily perform its obligations under these agreements, it may be held liable for certain losses incurred by the Buyer. In addition, during the transition services period, the Companys management and employees may be required to divert their attention away from its business in order to provide services to the Buyer, which could adversely impact the Companys business.
Further, as a result of these transition services, our counterparty will have access to certain of the Companys information technology systems during the transition services period, as well as shared information technology infrastructure. Any disruption, degradation, destruction or manipulation of the Companys information technology systems as a result of such access following the Digital Banking Sale, whether accidental or intentional, may cause cybersecurity, data protection or privacy incidents or failures, which could in turn interrupt or adversely impact our operations.
Our inability to successfully complete the Digital Banking Sale may havWe may not realize the a material adverse impact on our business.
The Digital Banknticipated cost saving Sale is subject to customary closing conditions and regus or other benefits relatory approvals. If any conditioned to the closing of the Digital Banking Sale is not satisfied or, if permissible, waived, or if we fail to obtain any necessary regulatory approval, the Digital Banking Sale may not be completed. In addition, satisfying the closing conditions to the Digital Banking Sale may occur on a longer or shorter timeframe than we expect. All of the conditions to closing may not satisfiedtransition of our Hardware Business to an outsourced design and manufacturing (ODM) model on a timely basis or waived, and we may not successfully obtain requisite regulatory approvals. Further, other events may intervene to delay or resultat all.
On August 6, 2024, we announced our entry in a failure to consummate the Digita commercial Banking Sale.
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If thagree Digital Banking Sale is not completed for any reason, investor confidence could decline, and we would fail ment with Ennoconn Corp. (Ennoconn) to receive the benefits of the ttransacition. In addition, we have expended, our point-of-sale and continue to expend, significant resourcself-checkout hardware businesses into an effort to complete the Digital Banking Sale. Managements attention may be diverted away from outsourced design and manufacturing model (the day-to-day operations of our buHardware Business and execuTransition of our existing business plan in an effort to c). While the Complete the Digital Banking Sale, whichany and its could disrupt operations and have an adverse effect on our operanterparty are targeting results and business.
We may not realize the anticipated cost savings or other benefits related to tJanuary 1, 2025 to implement the transition of our Hardware Business toTransition an outsourced design and manufacturing (ODM) d the new hardware revenue model.
On August 6, 2024, we announced our entry, this date is dependent upon various factors, into a commercial agreement with Ennoconn Corp. (Ennoconn) to transitioncluding the migration of aspects of our point-of-sale and self-checkouternational hardware businesses to an outsourced design and manufacturing model (Ennoconn that are not yet complete. As a result, the Hardware Business Tre can be no guaransition). Thty that the Hardware Business Transition is expected to will be implemented starting in uccessfully or within the first quarter of 2025anticipated timeline. The Company anticipates that, once the Hardware Business Transition is implemented, it will record revenue from point-of-sale and self-checkout hardware sales on a net basis, excluding the costs paid to Ennoconn. Prior to the implementation of the Hardware Business Transition, the substantial majority of the revenues from our hardware business are attributable to point-of-sale and self-checkout hardware. Under our new business model following the Hardware Business Transition, a substantial majority of the revenue related to the sale of hardware will no longer be recognized by the Company, and will instead be recognized by the
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hardware provider. This will result in a substantial decrease to our hardware-related revenues and could have an adverse impact on our business and results of operations.
The Company also expects to reduce hardware-related costs in connection with the Hardware Business Transition. If the Company is unable to reduce costs in connection with the Hardware Business Transition or if the Hardware Business Transition has an adverse impact on the Companys hardware sales or customer relationships, this could have a material adverse impact on our future operating results and financial condition.
In addition, as a result of the Hardware Business Transition, our counterparty will design, manufacture, warrant, supply, and ship self-checkout and point-of sale hardware directly to the Companys customers. Third parties may fail to deliver on their commitments or otherwise breach obligations to our customers, which may in turn damage our reputation and relationship with our customers. As such, a failure of third parties to adequately serve our customers may materially adversely impact our results of operations and financial condition.
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