The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q (the "Report"). The following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements involve substantial risks and uncertainties. When used in this Report, the words "anticipate," "believe," "estimate," "expect," "will," "seeks," "should," "could," "would," "may," and similar expressions, as they relate to our management or us, are intended to identify such forward-looking statements. Our actual results, performance, or achievements could differ materially from those expressed in or implied by these forward-looking statements as a result of a variety of factors, including those set forth under "Risk Factors" in our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2022 , as well as those described elsewhere in this Report and in our other public filings. The risks included are not exhaustive and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time-to-time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Historical operating results are not necessarily indicative of the trends in operating results for any future period. We do not undertake any obligation to update any forward-looking statements made in this Report. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends. This Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
All numbers are in thousands, except share and per share amounts.
Company Overview
Digital Turbine, Inc. , through its subsidiaries (collectively "Digital Turbine" or the "Company"), is a leading, independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and device original equipment manufacturers ("OEMs"). The Company offers end-to-end products and solutions leveraging proprietary technology to all participants in the mobile application ecosystem, enabling brand discovery and advertising, user acquisition and engagement, and operational efficiency for advertisers. In addition, our products and solutions provide monetization opportunities for OEMs, carriers, and application ("app" or "apps") publishers and developers. Recent Developments Credit Agreement OnFebruary 3, 2021 , the Company entered into a credit agreement (the "Credit Agreement") withBank of America, N.A . ("BoA"), which provides for a revolving line of credit (the "Revolver") of up to$100,000 with an accordion feature enabling the Company to increase the total amount up to$200,000 . Funds are to be used for acquisitions, working capital, and general corporate purposes. The Credit Agreement contains customary covenants, representations, and events of default and also requires the Company to comply with a maximum consolidated leverage ratio and minimum fixed charge coverage ratio. OnApril 29, 2021 , the Company amended and restated the Credit Agreement (the "New Credit Agreement") with BoA, as a lender and administrative agent, and a syndicate of other lenders, which provided for a revolving line of credit of up to$400,000 . The revolving line of credit matures onApril 29, 2026 , and contains an accordion feature enabling the Company to increase the total amount of the revolver by$75,000 plus an amount that would enable the Company to remain in compliance with its consolidated secured net leverage ratio, on such terms as agreed to by the parties. The New Credit Agreement contains customary covenants, representations, and events of default and also requires the Company to comply with a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio. OnDecember 29, 2021 , the Company amended the New Credit Agreement (the "First Amendment"), which provides for an increase in the revolving line of credit by$125,000 , which increased the maximum aggregate principal amount of the revolving line of credit to$600,000 , including the accordion feature. The First Amendment made no other changes to the term or interest rates of the New Credit Agreement. -------------------------------------------------------------------------------- As ofJune 30, 2022 , we had$476,134 drawn against the revolving line of credit under the New Credit Agreement. The proceeds were used to finance the acquisitions detailed below. As ofJune 30, 2022 , the interest rate was 3.38% and the unused line of credit fee was 0.30%, and we were in compliance with the consolidated leverage ratio, interest coverage ratio, and other covenants under the New Credit Agreement. Acquisitions AdColony Holding AS. OnApril 29, 2021 , the Company completed the acquisition of AdColony Holding AS, aNorway company ("AdColony"), pursuant to a Share Purchase Agreement (the "AdColony Acquisition"). The Company acquired all outstanding capital stock ofAdColony in exchange for an estimated total consideration in the range of$400,000 to$425,000 , to be paid as follows: (1)$100,000 in cash paid at closing (subject to customary closing purchase price adjustments), (2)$100,000 in cash to be paid six months after closing, and (3) an estimated earn-out in the range of$200,000 to$225,000 , to be paid in cash, based onAdColony achieving certain future target net revenue, less associated cost of goods sold (as such term is referenced in the Share Purchase Agreement), over a 12-month period ending onDecember 31, 2021 (the "Earn-Out Period"). Under the terms of the earn-out, the Company would pay the seller a certain percentage of actual net revenue (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) ofAdColony , depending on the extent to whichAdColony achieves certain target net revenue (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) over the Earn-Out Period. The earn-out payment will be made following the expiration of the Earn-Out Period.AdColony is a leading mobile advertising platform servicing advertisers and publishers.AdColony's proprietary video technologies and rich media formats are widely viewed as a best-in-class technology delivering third-party verified viewability rates for well-known global brands. With the addition ofAdColony , the Company expanded its collective experience, reach, and suite of capabilities to benefit mobile advertisers and publishers around the globe. Performance-based spending trends by large, established brand advertisers present material upside opportunities for platforms with unique technology deployable across exclusive access to inventory. OnAugust 27, 2021 , the Company entered into an Amendment to Share Purchase Agreement (the "Amendment Agreement") withAdColony and Otello Corporation ASA, aNorway company andAdColony's previous parent company. Pursuant to the Amendment Agreement, the Company and Otello agreed to set a fixed dollar amount of$204,500 for the earn-out payment obligation, to setJanuary 15, 2022 , as the payment due date for such payment amount, and to eliminate all of the Company's earn-out support obligations under the Share Purchase Agreement. As a result, the Company recognized an$8,913 reduction of the earn-out payment obligation in change in fair value of contingent consideration on the condensed consolidated statement of operations and comprehensive income / (loss) for the fiscal second quarter endedSeptember 30, 2021 . The Company paid the cash consideration amounts that were due at closing and onOctober 26, 2021 , with a combination of available cash-on-hand and borrowings under the Company's senior credit facility. The payment made onOctober 26, 2021 , was reduced to$98,175 due to an adjustment for the impact of accrued and unpaid taxes to the net working capital acquired. The difference between the amount due of$100,000 and amount paid resulted in an adjustment to goodwill.
On
The Company recognized$150 and$2,871 of costs related to theAdColony Acquisition in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss) for the three months endedJune 30, 2022 and 2021, respectively.Fyber N.V. OnMay 25, 2021 , the Company completed the initial closing of the acquisition of 95.1% of the outstanding voting shares (the "Majority Fyber Shares") ofFyber N.V. ("Fyber") pursuant to a Sale and Purchase Agreement (the "Fyber Acquisition") betweenTennor Holding B.V .,Advert Finance B.V ., andLars Windhorst (collectively, the "Seller"), the Company, andDigital Turbine Luxembourg S.ar.l., a wholly-owned subsidiary of the Company. The remaining outstanding shares in Fyber (the "Minority Fyber Shares") are (to the Company's knowledge) held by other shareholders of Fyber (the "Minority Fyber Shareholders") and are presented as non-controlling interests within these financial statements. Fyber is a leading mobile advertising monetization platform empowering global app developers to optimize profitability through quality advertising. Fyber's proprietary technology platform and expertise in mediation, real-time bidding, advanced analytics tools, and video combine to deliver publishers and advertisers a highly valuable app monetization solution. Fyber represents an important and strategic addition for the Company in its mission to develop one of the largest full-stack, fully-independent, mobile advertising solutions in the industry. The combined platform offering is advantageously positioned to --------------------------------------------------------------------------------
leverage the Company's existing on-device software presence and global distribution footprint.
The Company acquired Fyber in exchange for an estimated aggregate consideration
of up to
i.Approximately$150,000 in cash,$124,336 of which was paid to the Seller at the closing of the acquisition and the remainder of which is to be paid to the Minority Fyber Shareholders for the Minority Fyber Shares pursuant to the tender offer described below; ii.5,816,588 newly-issued shares of common stock of the Company to the Seller, which such number of shares was determined based on the volume-weighted average price of the common stock on NASDAQ during the 30-day period prior to the closing date, equal in value to$359,233 at the Company's common stock closing price onMay 25, 2021 , as follows.
1.3,216,935 newly-issued shares of common stock of the Company equal in value to
2.1,500,000 newly-issued shares of common stock of the Company equal in value to
3.1,040,364 newly-issued shares of common stock of the Company equal in value to
4.59,289 shares of common stock equal in value to$3,662 , to be newly-issued during the Company's fiscal second quarter 2022, but subject to a true-up reduction based on increased transaction costs associated with the staggered delivery of the Majority Fyber Shares to the Company, which true-up reduction has been finalized, as described below; and iii.Contingent upon Fyber's net revenue (revenue less associated license fees and revenue share) being equal to or higher than$100,000 for the 12-month earn-out period ending onMarch 31, 2022 , as determined in the manner set forth in the Sale and Purchase Agreement, a certain number of shares of the Company's common stock, which will be newly-issued to the Seller at the end of the earn-out period, and under certain circumstances, an amount of cash, which value of such shares, based on the weighted average share price for the 30-days prior to the end of the earn-out period, and cash in aggregate, will not exceed$50,000 (subject to set-off against certain potential indemnification claims against the Seller). Based on estimates at the time of the acquisition, the Company initially determined it was unlikely Fyber would achieve the earn-out net revenue target and, as a result, no contingent liability was recognized at that time.
The Company paid the cash closing amount on the closing date with a combination of available cash-on-hand and borrowings under the Company's senior credit facility.
OnSeptember 30, 2021 , the Company entered into the Second Amendment Agreement (the "Second Amendment Agreement") to the Sale and Purchase Agreement for the Fyber Acquisition. Pursuant to the Second Amendment Agreement, the parties agreed to settle the remaining number of shares of Company common stock to be issued to the Seller at 18,000 shares (i.e., a reduction of 41,289 shares from the 59,289 shares described in (ii)(4) above). As a result, the Company issued a total of 5,775,299 shares of Company common stock to the Seller in connection with the Company's acquisition of Fyber. As ofMarch 31, 2022 , the Company had recognized the acquisition purchase price liability of$50,000 . The Company settled the obligation through the issuance of 1,205,982 shares of the Company's common stock onMay 19, 2022 . Pursuant to certain German law on public takeovers, following the closing, the Company launched a public tender offer to the Minority Fyber Shareholders to acquire from them the Minority Fyber Shares. The tender offer was approved and published inJuly 2021 , and is subject to certain minimum price rules under German law. The timing and the conditions of the tender offer, including the consideration of €0.84 per share offered to the Minority Fyber Shareholders in connection with the tender offer, was determined by the Company pursuant to the applicable Dutch and German takeover laws. During the fiscal year endedMarch 31, 2022 , the Company purchased an additional$18,341 of Fyber's outstanding shares, resulting in an ownership percentage of Fyber of approximately 99.5% as ofJune 30, 2022 . The Company expects to complete the purchase of the remaining outstanding Fyber shares during fiscal year 2023.
The delisting of Fyber's remaining outstanding shares on the
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The Company recognized$560 and$3,599 of costs related to the Fyber Acquisition in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss) for the three months endedJune 30, 2022 and 2021, respectively.
Segment Reporting
As ofMarch 31, 2022 , the Company operated through three segments, each of which was a reportable segment. The three segments were On Device Media ("ODM"), In-App Media -AdColony ("IAM-A"), and In-App Media-Fyber ("IAM-F"). EffectiveApril 1, 2022 , the Company made certain changes to its organizational and management structure that resulted in the following: (1) the renaming of the On Device Media segment to On Device Solutions and (2) the integration of IAM-A and IAM-F into a single segment. The integration of IAM-A and IAM-F was completed to drive operating efficiencies and revenue synergies. As a result of the integration of IAM-A and IAM-F, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. EffectiveApril 1, 2022 , the Company reports its results of operations through the following two segments, each of which represents an operating and reportable segment, as follows: •On Device Solutions ("ODS") - The Company re-named the ODM segment On Device Solutions to better reflect the nature of the segment's product offerings. This segment generates revenue from the delivery of mobile application media or content to end users. This segment provides focused solutions to all participants in the mobile application ecosystem that want to connect with end users and consumers who hold the device, including mobile carriers and device OEMs that participate in the app economy, app publishers and developers, and brands and advertising agencies. This segment's product offerings are enabled through relationships with mobile device carriers and OEMs. •App Growth Platform ("AGP") - This segment consists of the previously reported IAM-A and IAM-F segments. AGP customers are primarily advertisers and publishers and the segment provides platforms that allows mobile app publishers and developers to monetize their monthly active users via display, native, and video advertising. The AGP platforms allow demand side platforms, advertisers, agencies, and publishers to buy and sell digital ad impressions, primarily through programmatic, real-time bidding auctions and, in some cases, through direct-bought/sold advertiser budgets. The segment also provides brand and performance advertising products to advertisers and agencies. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker ("CODM") in making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer is the CODM.
Impact of COVID-19
Our results of operations are affected by economic conditions, including macroeconomic conditions, levels of business confidence, and consumer confidence. The worldwide spread of COVID-19, including the emergence of variants, has resulted, and may continue to result, in a global slowdown of economic activity, which may decrease demand for a broad variety of goods and services, including those provided by our clients, while also disrupting supply channels, sales channels and advertising and marketing activities for an unknown period of time until the COVID-19 pandemic is contained, or economic activity normalizes. With the current uncertainty in economic activity, the impact on our revenue and our results of operations is likely to continue, the size and duration of which we are currently unable to accurately predict. The extent to which COVID-19 impacts our operational and financial performance will depend on the impact to carriers and OEMs in relation to their sales of smartphones, tablets, and other devices, and on the impact to application developers and in-app advertisers. If COVID-19 continues to have a significant negative impact on global economic conditions over a prolonged period of time, our results of operations and financial condition could be adversely impacted. Presently, we are conducting business as usual. We will continue to actively monitor the situation and may take further actions that alter our business operations, as required, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders.
Impact of Inflation
Global inflation has increased significantly over the past year. Inthe United States ("U.S."), the Consumer Price Index for All Urban Consumers increased 9.1% over the twelve months endedJune 30, 2022 , as reported by theU.S. Bureau of Labor Statistics . Eurostat reported that consumer prices in the 19 countries sharing the Euro (the "Eurozone") rose 8.6% year-over-year inJune 2022 . Energy prices contributed significantly to the increases seen in both theU.S. and theEurozone . The Company does not have physical supply chain or input costs and, as a result, we have been largely insulated from the inflationary cost pressures experienced globally in the past year. The Company has experienced limited inflationary cost impacts in two areas; however, those have not materially affected our financial results to date: (1) modest wage pressures when --------------------------------------------------------------------------------
hiring certain positions, primarily in technology and product development and (2) carrier and OEM supply chain challenges.
In addition, like other advertising technology companies, we have seen a slowdown in digital advertising spending, which we believe is driven in part by the impact of inflation and fears of a recession and its potential impact on consumers. The slowdown in digital advertising spending is varied and depends on the geography, advertising type, operating system and business vertical. We will continue to actively monitor the impact of inflation and the broader economic outlook on our operations and financial results and will take actions as deemed necessary. RESULTS OF OPERATIONS (Unaudited) Net revenue Three months ended June 30, 2022 2021 % of Change Net revenue On Device Solutions$ 118,637 $ 120,383 (1.5) % App Growth Platform 72,366 39,474 83.3 % Elimination (2,370) (1,782) 33.0 % Total net revenue$ 188,633 $ 158,075 19.3 %
Comparison of the three months ended
Net revenue increased by
On Device Solutions
On Device Solutions revenue decreased by$1,746 or 1.5% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The decrease was primarily due to lower active daily users and revenue share for content media, mostly offset by higher revenue per device and additional distribution slots with carrier partners for application media. In addition, the Company completed a contract extension with an application media customer, resulting in a retroactive revenue share adjustment that increased net revenue by approximately$5,000 for the three months endedJune 30, 2021 .
App Growth Platform
App Growth Platform revenue increased by$32,892 or 83.3% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was primarily due to the impact of a full quarter of operations of theAdColony and Fyber acquisitions. Please see Note 3, "Acquisitions," for further information regarding the acquisitions.
Costs of revenue and operating expenses
Three months ended
2022 2021 % of Change Costs of revenue and operating expenses License fees and revenue share$ 87,367 $ 83,808 4.2 % Other direct costs of revenue 8,915 4,468 99.5 % Product development 14,133 12,924 9.4 % Sales and marketing 16,058 13,736 16.9 % General and administrative 37,725 23,994 57.2 % Total costs of revenue and operating expenses$ 164,198 $ 138,930 18.2 % --------------------------------------------------------------------------------
Comparison of the three months ended
Costs of revenue and operating expenses increased by$25,268 or 18.2% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 , primarily due to the impact of a full quarter of operations of theAdColony and Fyber acquisitions.
License fees and revenue share
License fees and revenue share are reflective of amounts paid to our carrier and OEM partners, as well as app publishers and developers, and are recorded as a cost of revenue. License fees and revenue share increased by$3,559 or 4.2% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 , primarily due to the impact of a full quarter of operations of theAdColony and Fyber acquisitions. License fees and revenue share as a percentage net revenue decreased to 46.1% for the three months endedJune 30, 2022 compared to 53.0% for the three months endedJune 30, 2021 . The decrease in license fees and revenue share as a percentage of net revenue was primarily due to the increase in net revenue that is reported net of license fees and revenue share for the AGP segment.
Other direct costs of revenue
Other direct costs of revenue are comprised primarily of hosting expense directly related to the generation of revenue and depreciation expense accounted for under ASC 985-20, Costs of Software to be Sold, Leased, or Otherwise Marketed. Other direct costs of revenue increased by$4,447 or 99.5% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 , primarily due to the impact of a full quarter of operations of theAdColony and Fyber acquisitions, which increased costs by approximately$2,808 and an increase of approximately$1,639 due to higher ad request volume for the AGP segment. Product development Product development expenses include the development and maintenance of the Company's product suite. Expenses in this area are primarily a function of personnel. Product development expenses increased by$1,209 or 9.4% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The three months endedJune 30, 2021 product development expenses included acquisition-related costs of$1,455 . The increase in product development costs was primarily due to increased people related costs due to higher wages as the Company continues to make investments in its product development organization to support the Company's growth.
Sales and marketing
Sales and marketing expenses represent the costs of sales and marketing personnel, advertising and marketing campaigns, and campaign management. Sales and marketing expenses increased by$2,322 or 16.9% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase in sales and marketing expenses was primarily due to the impact of a full quarter of operations of theAdColony and Fyber acquisitions.
General and administrative
General and administrative expenses represent management, finance, and support personnel costs in both the parent and subsidiary companies, which include professional services and consulting costs, in addition to other costs such as rent, stock-based compensation, and depreciation and amortization expense. General and administrative expenses increased by$13,731 or 57.2% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . General and administrative expenses include acquisition-related costs of$1,299 for the three months endedJune 30, 2022 and$6,603 for the three months endedJune 30, 2021 . Excluding acquisition-related costs, general and administrative costs increased$18,203 for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase in general and administrative expenses, excluding acquisition-related costs was primarily due to: (1) an increase of$10,502 attributable to the impact of a full quarter of operations of theAdColony and Fyber acquisitions and (2) an increase of$7,701 attributable to higher employee-related expenses for merit increases and stock-based compensation and stock-based compensation costs and depreciation and amortization related to capitalized internal-use software and intangible assets related to the Company's recent acquisitions. --------------------------------------------------------------------------------
Interest and other income / (expense), net
Three
months ended
2022 2021 % of Change
Interest and other income / (expense), net
Interest expense, net$ (4,082) $ (1,157) 252.8 % Foreign exchange transaction loss (331) (270) 22.6 % Other income / (expense), net 72 (35) 305.7 % Total interest and other income / (expense), net$ (4,341) $ (1,462) 196.9 %
Comparison of the three months ended
Interest expense, net
Interest expense, net, increased by$2,925 for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 due to higher average outstanding borrowings and interest rates. Interest expense also includes the amortization of debt issuance costs related to our New Credit Agreement.
Liquidity and Capital Resources
Our primary sources of liquidity are cash from operations and debt. As ofJune 30, 2022 , we had cash in total of approximately$89,839 and$123,866 available to draw under the New Credit Agreement with BoA. The maturity date of the New Credit Agreement isApril 29, 2026 , and the outstanding balance of$476,134 is classified as long-term debt, net of debt issuance costs of$3,147 , on our condensed consolidated balance sheet as ofJune 30, 2022 . We generated$36,629 in cash flows from operating activities for the three months endedJune 30, 2022 . Our ability to meet our debt service obligations and to fund working capital, capital expenditures, and investments in our business will depend upon our future performance, which will be subject to financial, business, and other factors affecting our operations, many of which are beyond our control, availability of borrowing capacity under our credit facility, and our ability to access the capital markets. For example, these factors could include general and regional economic, financial, competitive, legislative, regulatory, and other factors. We cannot ensure that we will generate cash flow from operations, or that future borrowings or the capital markets will be available, in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs. We could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional indebtedness or equity capital, or restructure or refinance our indebtedness. We may not be able to affect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The Company believes it will generate sufficient cash flow from operations and has the liquidity and capital resources to meet its business requirements for at least twelve months from the filing date of this Quarterly Report on Form 10-Q.
Hosting Agreements
The Company enters into hosting agreements with service providers and in some cases, those agreements include minimum commitments that require the Company to purchase a minimum amount of service over a specified time period ("the minimum commitment period"). The minimum commitment period is generally one-year in duration and the hosting agreements include multiple minimum commitment periods. Our minimum purchase commitments under these hosting agreements total approximately$205,269 over the next five years.
Outstanding Secured Indebtedness
The Company's outstanding secured indebtedness under the New Credit Agreement is$476,134 as ofJune 30, 2022 . See "Recent Developments - Credit Agreement" for additional information on the New Credit Agreement. The Company's ability to borrow additional amounts under its New Credit Agreement could have significant negative consequences, including: •increasing the Company's vulnerability to general adverse economic and industry conditions; •limiting the Company's ability to obtain additional financing; •violating a financial covenant, potentially resulting in the indebtedness to be paid back immediately and thus
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negatively impacting our liquidity; •requiring additional financial covenant measurement consents or default waivers without enhanced financial performance in the short term; •requiring the use of a substantial portion of any cash flow from operations to service indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures; •limiting the Company's flexibility in planning for, or reacting to, changes in the Company's business and the industry in which it competes, including by virtue of the requirement that the Company remain in compliance with certain negative operating covenants included in the credit arrangements under which the Company will be obligated as well as meeting certain reporting requirements; and •placing the Company at a possible competitive disadvantage to less leveraged competitors that are larger and may have better access to capital resources. Our credit facility also contains a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio. There can be no assurance we will continue to satisfy these ratio covenants. If we fail to satisfy these covenants, the lender may declare a default, which could lead to acceleration of the debt maturity. Any such default would have a material adverse effect on the Company. The collateral pledged to secure our secured debt, consisting of substantially all of our and ourU.S. subsidiaries' assets, would be available to the secured creditor in a foreclosure, in addition to many other remedies. Accordingly, any adverse change in our ability to service our secured debt could result in an event of default, cross default, and foreclosure or forced sale. Depending on the value of the assets, there could be little, if any, assets available for common stockholders in any foreclosure or forced sale.
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