Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
The risk factor presented below supplement the risk factors previously disclosed in Item 1A. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2019, our quarterly report on Form 10-Q for the quarter ended March 31, 2020 and our quarterly report on Form 10-Q for the quarter ended June 30, 2020.
The impact of the spread of COVID-19 continues to create significant uncertainty for our business, financial condition and results of operations.
We provide services in 47 countries, most located in regions significantly impacted by COVID-19. The extent of the impact of the COVID-19 pandemic on our business and financial results will continue to depend on numerous evolving factors that we are not able to accurately predict and which will vary by market. Such future uncertain and unpredictable developments include the duration and scope of the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic, and global economic conditions during and after the pandemic.
Approximately 67% of our revenue is from our corporate customers. Corporate customers are located in multi-tenant office buildings, almost exclusively in the United States and Canada. Authorities in many of these markets have implemented numerous measures to stall the spread and ameliorate the impact of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter in place and stay-at-home orders, business shutdowns and closures, and have also implemented multi-step polices with the goal of re-opening these markets. These measures have impacted and continue to impact us and our employees, customers, suppliers and other third parties with whom we do business. The areas in which we operate are in varying stages of restrictions or re-opening. Some jurisdictions have re-opened while other jurisdictions have begun re-opening only to return to restrictions in the face of increases in new COVID-19 cases. Considerable uncertainty exists regarding how current and future health and safety measures implemented in response to the pandemic will impact our business, including whether such measures will result in further changes in demand for our services, impair our ability to access buildings to install our services or maintain our network or impact our supply chain. The continuing impact of existing or new mandates, restrictions, laws or regulations could have a material adverse impact on our operations and the operations of our customers or others with which we do business.
Moreover, even as authorities have relaxed restrictions, a significant number of our corporate customers have continued remote work policies instituted at the beginning of the COVID-19 pandemic, slowed the pace of opening new offices and closed offices due to global economic conditions. As a result, during the three months ended September 30, 2020, we saw corporate customers take a cautious approach to new configurations and upgrades as well as a continued reduction in demand for connecting smaller satellite offices as a result of the challenges and uncertainties of the COVID-19 pandemic. We witnessed a deteriorating real estate market in and around the buildings we service with rising vacancy levels and falling lease initiations or renewals. Rising vacancy levels and falling lease initiations or renewals meant fewer sales opportunities for our salesforce. As a result, we experienced a slowdown in new sales to our corporate customers which negatively impacted our corporate revenue growth. In the future we may experience increased customer turnover, fewer upgrades of existing customer configurations and fewer new tenant opportunities. These trends may negatively impact our revenue growth, cash flows and profitability.
Protective measures we have implemented to protect for our workforce from the COVID-19 virus may not be effective and may expose us to additional risks.
We have taken measures to protect our workforce and minimize their exposure to the COVID-19 virus, such as requiring our entire workforce to work remotely whenever possible, establishing safety procedures for our on-site technical personnel and severely curtailing all business travel. As a result, we have incurred increased costs as a result of COVID-19, such as one-time costs associated with the provision of laptops to all employees as well as the recurring costs of obtaining and maintaining adequate supplies and other sanitizing equipment for our offices, should future conditions permit a return to the office.
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If a significant percentage of our workforce is unable to work, including because of illness, facility closures, quarantine, curfews, shelter in place orders, travel restrictions, social distancing requirements or other governmental restrictions or voluntarily adopted practices, our operations will be negatively impacted. As we consider a future return to our offices, even on a strictly voluntary basis, compliance with governmental measures imposed in response to COVID-19 has caused and will continue to cause us to incur additional costs, and any inability to comply with such measures may subject us to restrictions on our business activities, fines, and other penalties, any of which can adversely affect our business.
In addition, the shift to our workforce working remotely has amplified certain risks to our business, including increased demand on our information technology resources and systems, increased phishing and other cybersecurity attacks as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic, and an increase in the number of points of potential attack, such as laptops and mobile devices (both of which are now being used in increased numbers), to be secured, and any failure to effectively manage these risks, including to timely identify and appropriately respond to any cyberattacks, may adversely affect our business.
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