What changed in this filing

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Item 1A. Risk Factors

2023-08-01 compared with 2023-05-02 · 34 added, 38 removed, 707 unchanged (9% of the section changed)

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• We sell our products and services to a limited number of original equipment manufacturer (“OEM”) customers, many of which are also our competitors, and a reduction in or loss of business of one or more of these customers may materially reduce our sales.

• We may not be able to accurately predict customer demand or delivery schedules for our products.

• We may not be able to accurately predict the demand or delivery schedules for our products.

• We compete in highly competitive markets, and we may lose business to our customers or other companies with greater resources or with greater abilities to develop more effective technologies, or we could be forced to reduce our prices.

• Our success depends on the successful acquisition, development, introduction, and commercialization of new lines of business, new technologies, new generations of products and enhancements to or simplifications of existing product lines.

• Our success depends on the successful development, introduction, and commercialization of new generations of products and enhancements to or simplifications of existing product lines.

• More than half of our revenue is generated from customers located outside the United States and is subject to global, regional, and country-specific economic instability, shifting political environments, changing tax treatment, and other risks associated with international operations and sales that could materially and adversely impact our business and financial results.

• COVID-19 has adversely impacted our operations, cash flow, and financial position, and in the future we could continue to be adversely impacted by the COVID-19 pandemic and continuing economic disruptions.

• It has become more difficult to attract and retain employees, which has impacted, and is likely to continue to impact, our ability to develop and manufacture products and operate our business.

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• Changes in import/export regulatory regimes, tariffs, and national policies could continue to negatively impact our business.

• Compliance with laws, regulations, certifications and registrations across the globe applicable to our operations, and to the marketing, manufacturing, sale, and distribution of our products, may be costly, and failure to comply may result in our inability to sell products, unfavorable legal proceedings, significant penalties and other harm to our business.

• Compliance with foreign laws and regulations applicable to the marketing, manufacturing, and distribution of our products may be costly, and failure to comply may result in unfavorable legal proceedings, in significant penalties and other harm to our business.

• Compliance with United States laws and regulations applicable to the marketing, manufacturing, and distribution of our products may be costly, and failure or delays in obtaining regulatory clearances or approvals or failure to comply with

applicable laws and regulations could prevent us from distributing our products, require us to recall our products, or result in unfavorable legal proceedings, significant penalties or other harm to our business.

• Initiation of legal proceedings, defense against legal proceedings and unfavorable results of legal proceedings could materially and adversely affect our financial results.

• We have significant debt obligations and could incur additional debt that could adversely affect our business, profitability, liquidity, credit rating, and ability to meet our obligations.

• The ABL Facility and the indenture governing our Senior Secured Notes impose significant operating and financial restrictions that may limit current and future operating flexibility, particularly our ability to respond to changes in the economy or our industry or to take certain actions, which could harm our long-term interests and may limit our ability to make payments on the notes.

• Conversion of our outstanding Convertible Notes may dilute the ownership interest of our stockholders, may otherwise depress the market price of our common stock, or may adversely affect our financial condition and operating results, and certain hedging positions we entered may affect the value of the Convertible Notes and the volatility and value of our common stock.

• The ABL Facility and the indenture governing our Senior Secured Notes impose significant operating and financial restrictions that may limit our current and future operating flexibility, particularly our ability to respond to changes in the economy or our industry or to take certain actions, which could harm our long-term interests and may limit our ability to make payments on the notes.

• Conversion of the Convertible Notes may dilute the ownership interest of our stockholders or may otherwise depress the market price of our common stock.

• Liabilities related to our operations when we were part of Varian Medical Systems, Inc., a Siemens Healthineers Company ("Varian"), or liabilities associated with the spin-off from Varian, could materially and adversely affect our business, financial condition, results of operations, and cash flows.

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Further, our competitors with greater financial resources may be better able to restructure their manufacturing and supply chains in response to geopolitical and economic trends and thereby have a competitive advantage over us.

In addition to material shortages, our ability to move unfinished goods and finished products around the world has been, and in some cases continues to be, impacted by the decreased availability of global transportation networks.

We have been and, in some cases, continue to be subject to price increases on both the components used to make our products, and for transportation of unfinished goods and finished products across the globe.

We have been and, in some cases, continue to be subject to price increases on the components used to make our products.

If we are not able to mitigate these price increases and/or adequately increase prices for our products, our operations, cash flow, and financial position could continue to be adversely impacted.

See Part I, Item 2 " Management’s Discussion and Analysis of Financial Condition and Results of Operations " for more information regarding the risks related to supply chain disruptions and logistical challenges, and economic pressures on our business.

Inflation has the potential to increase our overall cost structure.

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We sell our products to a limited number of OEM customers, many of which are also our competitors with in-house X-ray component manufacturing operations.

We had one customer during the three months ended March 31, 2023 that accounted for 18.3% of our revenue.

Our ten largest customers as a group accounted for approximately 53% and 51% of our revenue for the three months ended March 31, 2023 and April 1, 2022, respectively.

Our ten largest customers as a group accounted for approximately 51% and 50% of our revenue for the six months ended March 31, 2023 and April 1, 2022, respectively.

We had one customer during the three months ended June 30, 2023 that accounted for 14.8% of our revenue.

Our ten largest customers as a group accounted for approximately 52% and 51% of our revenue for the three months ended June 30, 2023 and July 1, 2022, respectively.

Our ten largest customers as a group accounted for approximately 51% and 50% of our revenue for the nine months ended June 30, 2023 and July 1, 2022, respectively.

We will continue to depend on sales to a relatively small number of major customers.

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Furthermore, we generate significant accounts receivables from the sale of our products and the provision of services directly to our major customers.

We had one customer that accounted for 12.7% of our accounts receivables as of March 31, 2023.

We had one customer that accounted for 12.9% of our accounts receivables as of June 30, 2023.

If one or more of these customers were to cancel a product order or service contract (whether in accordance with its terms or otherwise), become insolvent, or otherwise be unable or fail to pay for our products and/or services, our operating results and financial condition could be materially and adversely affected.

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Reductions in purchasing patterns have in the past, and may in the future, materially and adversely affect our operating results.

In the past, decreased economic activity associated with the COVID-19 pandemic had a significant negative impact on the demand for our industrial products and a similar impact could occur again.

We compete in highly competitive markets, and we may lose business to our customers or other companies with greater resources or with greater abilities to develop more effective technologies, or we could be forced to reduce our prices.

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We conduct business globally.

Revenues generated from customers located outside the United States accounted for approximately 71% and 69% of our total revenues for the three months ended March 31, 2023 and April 1, 2022, respectively and approximately 70% and 70% of our total revenues for the six months ended March 31, 2023 and April 1, 2022, respectively.

Revenues generated from customers located outside the United States accounted for approximately 69% and 71% of our total revenues for the three months ended June 30, 2023 and July 1, 2022, respectively and approximately 69% and 70% of our total revenues for the nine months ended June 30, 2023 and July 1, 2022, respectively.

As a result, we must provide significant service and support globally.

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The more we depend on international sales, the more vulnerable we become to these factors.

COVID-19 has adversely impacted our operations, cash flow, and financial position, and in the future we could continue to be adversely impacted by the COVID-19 pandemic and continuing economic disruptions.

The pandemic caused by the spread of COVID-19 created significant volatility, uncertainty and economic disruption that has adversely impacted our operations, cash flow, and financial position.

Additionally, local government lockdowns and prohibitions on travel have at times in the past adversely affected our ability to manufacture and sell our products;

provide services to our customers;

or meet and build relationships with customers, suppliers, and other third parties.

For example, the Chinese government has in the past closed our factory in China for extended periods of time to combat COVID-19 infection rates.

A resurgence of COVID-19 or other infectious diseases could result in future governmental restrictions and shutdowns, which would have an adverse impact on our operating results, cash flows and financial condition.

It has become more difficult to attract and retain employees, which has impacted, and is likely to continue to impact, our ability to develop and manufacture products and operate our business.

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If we are unable to hire and train qualified personnel, we may not be able to maintain or expand our business.

Additionally, our United States-based employees, including our senior management team, work for us on an at-will basis and there is no assurance that any such employee will remain with us.

Additionally, our United States-based employees, including our senior management team, work for us on an at-will basis and there is no assurance that any such employees will remain with us.

Replacing key employees, including our executive officers, and management personnel may be difficult or costly and may take an extended period of time because of the limited number of individuals in our industry and where we are located with the breadth of skills and experience that we require.

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If these companies do not succeed, we could lose some or all of our investment in these companies.

In addition, we may incur significant costs and management resources to enforce our rights, protect our intellectual property and other assets, address disputes that have arisen or may arise, and/or unwind, dispose of or terminate our arrangements with respect to these investments.

In addition, we may incur significant costs and management resources to enforce our rights, protect our intellectual property and other assets, address disputes that have arisen, are ongoing, or may arise in the future, and/or unwind, dispose of or terminate our arrangements with respect to these investments.

There is no guarantee that the time and money invested by us in these projects, or jointly developed intellectual property or product or product enhancements will yield the expected returns.

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If we lose any of these limited- or sole-source suppliers, if their operations are substantially interrupted, or if any of them fail to meet performance or quality specifications or delivery deadlines, we may be required to obtain and qualify one or more replacement suppliers or to manufacture the components internally.

Such an event (1) may then also require us to redesign or modify our products to incorporate new parts and/or further require us to obtain clearance, qualification, or certification of these products, including by the FDA, or obtain other applicable regulatory approvals in other countries, (2) could significantly increase costs for the affected products and cause material delays in delivery of those and other related products, or (3) could prevent us from meeting our delivery obligations to our customers.

Such an event (1) may then also require us to redesign or modify our products to incorporate new parts and/or further require us to obtain clearance, qualification, or certification of these products, including by the FDA, or obtain other applicable regulatory approvals in other countries, (2) could significantly increase costs for the affected products, (3) cause material delays in delivery of affected and other related products, or (4) could prevent us from meeting our delivery obligations to our customers.

In addition, manufacturing capacity limitations of any of our suppliers or other inability of these suppliers to meet increasing demand or delivery deadlines could limit growth opportunities for the affected product lines and damage customer relationships.

Shortage of, and greater demand for, components and subassemblies could also increase manufacturing costs if the supply/demand imbalance increases the price of the components and subassemblies.

Shortages of, and greater demand for, components and subassemblies could also increase manufacturing costs if the supply/demand imbalance increases the price of the components and subassemblies.

Any of these events could materially and adversely affect our business and financial results.

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The risks from operating internationally that could increase our operating expenses and materially and adversely affect our operating results, financial condition, and ability to deliver our products and grow our business include, among others:

• difficulties in staffing and managing employee relations and foreign operations, particularly in attracting and retaining personnel qualified to design, sell, test, and support our products;

• difficulties in staffing and managing employee relations and foreign operations, particularly in attracting and retaining personnel qualified to design, test, sell, and support our products;

• fluctuations in currency exchange rates;

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Further, our products are typically shipped from a limited number of ports, and any disaster, strike, or other event blocking shipment from these ports could delay or prevent shipments and harm our business.

In addition, concerns about terrorism, the effects of a terrorist attack, political turmoil, or an outbreak of epidemic diseases could have a negative effect on our business operations, those of our suppliers and customers, and the ability to travel, resulting in adverse consequences on our revenues and financial performance.

In addition, concerns about terrorism, the effects of a terrorist attack, political turmoil, or an outbreak of epidemic diseases have in the past had, and could in the future have, a negative effect on our business operations, those of our suppliers and customers, and the ability to travel, resulting in adverse consequences on our revenues and financial performance.

Risks Relating to our Intellectual Property and Information Systems

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Information technology (including technology from third party providers) helps us operate efficiently, interface with and support our customers, maintain financial accuracy and efficiency, and produce our financial statements.

In the ordinary course of our business, we collect, process and store sensitive data, including intellectual property, proprietary business information and that of customers, suppliers and business partners, third parties accessing our website, patient data and personally identifiable information of customers and employees, in our data centers and on our networks, as well as in third party off-site data centers.

In the ordinary course of our business, we collect, process and store sensitive data, including intellectual property, proprietary business information and information of customers, suppliers and business partners, third parties accessing our website, patient data and personally identifiable information of customers and employees, in our data centers and on our networks, as well as in third party off-site data centers.

Despite security measures, there is an increasing threat of information security attacks, including from computer viruses or other malicious codes, unauthorized access attempts, and cyber-attacks that pose risks to companies, including us.

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The imposition of additional tariffs by the United States could result in the adoption of additional tariffs by China and other countries, as well as further retaliatory actions by any affected country, which could negatively impact the global market for imaging equipment and could have a significant adverse effect on our business.

Both the governments of the United States and China have granted tariff exclusions that temporarily eliminate duties payable for specific commodities, providing partial relief from such tariffs.

These exclusions are temporary and/or must be solicited and approved on a shipment-by-shipment basis.

There is no guarantee that such exclusions will be granted or extended by either government, and the U.S.

tariff exclusions are set to expire on September 30, 2023, unless extended.

In addition to tariffs, China’s stated policy of reducing its dependence on foreign manufacturers and technology companies may result in reduced demand for our products in China.

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Increasing tensions between China and Taiwan may cause the United States and/or China to impose higher tariffs, commence trade wars, move more quickly to reduce their dependence on each other’s goods, or enact boycotts against each other’s goods, this could cause significant disruptions in the markets and industries we serve, our supply chain, decrease demand from customers for the ultimate products using our solutions, and would materially harm our business, financial condition and results of operations.

In response to Russia's ongoing aggression against Ukraine, as substantially enabled by Belarus, the Department of Commerce strengthened its existing sanctions under the Export Administration Regulations against Russia and Belarus.

The enhanced sanctions would require Bureau of Industry export licenses in order to export our products, even products for medical, health and safety, or humanitarian purposes, to Russia and Belarus.

Applications for the export of products to Russia or Belarus will be reviewed under a policy of denial and reviewed on a case-by-case basis.

If licenses for the export of our product are denied, it could adversely affect our business and results of operations.

A change in the percentage of our total earnings from international sales or additional changes in tax laws could increase our effective tax rate.

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Failure to comply with these tracking and reporting laws could subject us to significant civil monetary penalties.

From time to time, new laws or regulations may be adopted and compliance with these laws or regulations could be costly or time consuming.

For example, in July 2021, the United States government passed the Uyghur Forced Labor Prevention Act (the “UFLPA”), which imposes importation limits on goods produced using forced labor in China, especially the Xinjiang Uyghur Autonomous Region, and imposes related sanctions.

Guidance related to compliance with the UFLPA has not yet been issued, and we cannot yet evaluate the impact that compliance with the UFLPA will have on our business or financial condition.

We are subject to other laws in foreign countries where we conduct business.

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We assess this indemnification obligation quarterly with Varian and make accruals accordingly.

These accruals can sometimes fluctuate significantly from period to period.

These accruals have historically been small, but can sometimes fluctuate significantly from period to period.

For example, during the second quarter of fiscal year 2023, Varian informed us of an adjustment to their estimate of their liability, which resulted in an increase in our liability of approximately $2.9 million, net of expected insurance proceeds.

Future changes in environmental laws could also increase our costs of doing business, perhaps significantly.

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We have significant debt obligations that could adversely affect our business, profitability, liquidity, and ability to meet our obligations.

As of March 31, 2023, our total combined indebtedness was approximately $449.4 million.

As of June 30, 2023, our total combined indebtedness was approximately $448.7 million.

The borrowings under our Convertible Senior Unsecured Notes due 2025 (the “Convertible Notes”) bear interest at a fixed rate of 4.00% and borrowings under our Senior Secured Notes due 2027 (the “Senior Secured Notes”) bear interest at a fixed rate of 7.875%.

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We and our subsidiaries may be able to incur substantial indebtedness in the future.

As of March 31, 2023, after adjustment to our available borrowing base under the $100 million revolving credit agreement we entered into on September 30, 2020 (the “Asset-Based Loan,” or "ABL Facility"), we had approximately $90 million of additional available borrowing capacity.

As of June 30, 2023, after adjustment to our available borrowing base under the $100 million revolving credit agreement we entered into on September 30, 2020 (the “Asset-Based Loan,” or "ABL Facility"), we had approximately $88 million of additional available borrowing capacity.

In addition to any amounts that might be available to us for borrowing under the ABL Facility, subject to certain conditions, we will have the right to request an increase of aggregate commitments under the ABL Facility by an aggregate amount of up to $75 million by obtaining additional commitments either from one or more of the lenders under the ABL Facility or other lending institutions.

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compliance with a fixed charge coverage ratio that is included in our ABL Facility;

interest rate fluctuations and the lingering impact of the COVID-19 outbreak on the United States.

and world-wide economies and on our business.

and interest rate fluctuations.

We cannot predict the future level of interest rates or the effect of any increase in interest rates on the availability or aggregate cost of our borrowings.

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The trading price of our common stock may decline or fluctuate significantly and fluctuations in our operating results, including quarterly revenues, and margins, may cause our stock price to be volatile, which could cause losses for our stockholders.

During the year ended March 31, 2023, our stock price has ranged from a low of $17.22 to a high of $23.78.

During the year ended June 30, 2023, our stock price has ranged from a low of $17.11 to a high of $23.90.

We cannot guarantee that an active trading market will be sustained for our common stock.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors