Innovex International (INVX) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01overall domestic and global economic conditions
2. 02The cyclical nature of the oil and natural gas industry may cause our operating results to fluctuate
3. 03We are subject to risks relating to existing international operations and expansion into new geographical markets
4. 04fluctuations in foreign currency exchange rates
5. 05We must comply with export and import controls, economic sanctions and embargoes, anti-boycott, and other international trade laws and any failure to comply with such laws could subject us to liability and have a material adverse impact on our business, financial condition and results of operations
6. 06Our business, financial condition and results of operations may be affected by economic sanctions and export controls, including those targeting Russia
7. 07Our operations outside the United States must comply with a number of U.S. and other anti-corruption laws, violations of which could have a material adverse effect on our business, results of operations, and financial condition
8. 08The scope of our international operations subjects us to risks from currency fluctuations that could adversely affect our liquidity, financial position and results of operations
9. 09In addition, our foreign subsidiaries also hold significant amounts of cash that may be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and withholding taxes of the applicable foreign country if we repatriate that cash to the United States
10. 10Policy changes affecting international trade and investments could adversely impact our supply chain, the demand for our products and our competitive position
11. 11We are subject to taxation in many jurisdictions and there are inherent uncertainties in the final determination of our tax liabilities
12. 12A change of control could limit our use of net operating losses
13. 13We face significant competition that may cause us to lose market share
14. 14Our competitors may be able to respond more quickly to new or emerging technologies and services and changes in customer requirements. The amount of equipment available may exceed demand, which could result in active price competition
15. 15We are subject to the risk of supplier concentration for certain product lines
16. 16Our customers’ industries are undergoing continuing consolidation that may impact our results of operations
17. 17We could lose customers or generate lower revenue, operating profits and cash flows if there are significant increases in the cost of raw materials or if we are unable to obtain raw materials
18. 18We are exposed to counterparty credit risk. Nonpayment and nonperformance by our customers, suppliers or vendors could adversely impact our operations, cash flows and financial condition
19. 19We may not be able to satisfy technical requirements, testing requirements or other specifications under contracts and contract tenders
20. 20Growth in drilling and completion activity, and our ability to benefit from such growth, could be adversely affected by any significant constraints in equipment, labor or takeaway capacity in the regions in which we operate
21. 21Equipment failures or production curtailments or shutdowns at our manufacturing and production facilities could adversely affect our manufacturing capability
22. 22We rely on a few key employees whose absence or loss could adversely affect our business
23. 23If we are unable to employ a sufficient number of skilled and qualified workers, our capacity and profitability could be diminished and our growth potential could be impaired
24. 24A negative shift in investor sentiment of the oil and natural gas industry has had and could in the future have adverse effects on our customers’ operations, our business and on our access to investors and financing
25. 25Our ability to access capital and credit markets or borrow on affordable terms to obtain additional capital could be limited
26. 26increases in our expenses and working capital requirements
27. 27Furthermore, competition for acquisitions may increase the cost of, or cause us to refrain from, completing acquisitions
28. 28The failure to integrate successfully the businesses of Dril-Quip and Legacy Innovex could adversely affect the Company’s future results
29. 29Inflation could adversely impact our operating results and the global economy
30. 30Inflation also leads to increased interest rates as country monetary policies combat inflation. This can result in reduced economic growth and recessionary conditions, as well as higher borrowing costs
31. 31in energy costs. While the global inflation rate began to ease in 2023 and 2024 as a result of central bank policy tightening, core inflation has proved persistent as a result of the preceding factors, in addition to others such as the escalating number of significant geopolitical conflicts throughout the world
32. 32Disruptions in our supply chain for materials and components and the resulting increase in equipment and logistics costs could adversely affect our financial performance
33. 33We have identified and may in the future identify additional material weaknesses in internal controls over financial reporting, which may not be remedied in a timely manner and could affect the reliability of our financial statements and have other adverse consequences
34. 34Our indebtedness and liquidity needs could restrict our operations and make us more vulnerable to adverse economic conditions
35. 35Restrictions in our debt agreements and any future financing agreements may limit our ability to finance future operations, meet capital needs or capitalize on potential acquisitions and other business opportunities
36. 36make acquisitions, capital expenditures or other investments and make dividends or repurchase our stock
37. 37Our and our customers’ operations are subject to unforeseen interruptions and hazards inherent in the oil and natural gas industry, for which we or our customers may not be adequately insured and which could cause us to lose customers and substantial revenue
38. 38A terrorist attack or armed conflict could harm our business
39. 39unable to satisfy indemnification claims against them. As a result, we may incur substantial losses which could materially and adversely affect our financial condition and results of operations
40. 40Oilfield anti-indemnity provisions enacted by many U.S. states may restrict or prohibit a party’s indemnification of us
41. 41Seasonal weather conditions, natural disasters, public health crises, and other catastrophic events outside of our control could severely disrupt normal operations and harm our business
42. 42Global climate change may in the future increase the frequency and severity of weather events and the losses resulting therefrom, which could have a material adverse effect on the economies in the markets in which we operate or plan to operate in the future and therefore on our business
43. 43Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate
44. 44We evaluate our property and equipment for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and we could incur additional impairment charges related to the carrying value of our long-lived assets
45. 45We may be required to recognize a charge against current earnings because of over time method of accounting

Risks Related to Environmental and Regulatory Matters

1. 46Our operations and the operations of our customers are subject to environmental, health and safety laws and regulations, and future compliance, claims, and liabilities relating to such matters may have a material adverse effect on our results of operations, financial position or cash flows
2. 47Our operations, and those of our customers, are subject to compliance with governmental regulations related to climate change
3. 48contributed to climate change or alleging that the companies have been aware of the adverse effects of climate change for some time but defrauded their investors or customers by failing to adequately disclose those impacts
4. 49Conservation measures, commercial development and technological advances could reduce demand for oil and natural gas and our products
5. 50Additional restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct completion activities
6. 51Demand for our products and services could be reduced by existing and future legislation, regulations and public sentiment related to the transition away from fossil fuel energy sources

Risks Related to Technology Advancement

1. 52To compete in our industry, we must continue to develop new technologies and products to support our operations, secure and maintain patents related to our current and new technologies and products and protect and enforce our intellectual property rights
2. 53If we are unable to obtain patents, licenses and other intellectual property rights covering our products, our operating results may be adversely affected
3. 54Patent terms may be inadequate to protect our competitive position for an adequate amount of time
4. 55Technology disputes could negatively impact our operations or increase our costs
5. 56Our failure to protect our proprietary information and any successful intellectual property challenges against us could materially and adversely affect our competitive position
6. 57able to develop technology independently that is similar to ours without infringing on our patents or gaining access to our trade secrets, and this could have a similar effect on our competitive position
7. 58We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property
8. 59We may be adversely affected by disputes regarding intellectual property rights of third parties
9. 60If we are not able to design, develop, and produce commercially competitive products, our business and consolidated results of operations and the value of our intellectual property could be materially and adversely affected
10. 61We are subject to cyber security risks. A cyber incident could occur and result in information theft, data corruption, operational disruption and/or financial loss
11. 62We have experienced IT system disruptions and cyber attacks in the past, and a failure of our IT infrastructure and cyber attacks could adversely impact us in the future
12. 63Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy and data protection

Risks Related to Ownership of our Common Stock

1. 64The market price of our common stock may be volatile
2. 65A significant reduction by Amberjack of its ownership interests in us could adversely affect us
3. 66Amberjack and its affiliates have the ability to exercise significant influence over certain corporate actions
4. 67Provisions in our certificate of incorporation and bylaws and under Delaware law could make an acquisition of the Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management
5. 68the authorization given to our board of directors to issue and set the terms of preferred stock
6. 69Amberjack may invest in other companies in the future that may compete with us. Conflicts of interest could arise in the future between us, on the one hand, and Amberjack, on the other hand, concerning among other things, potential competitive business activities or business opportunities
7. 70We do not anticipate declaring or paying any cash dividends to holders of our common stock in the foreseeable future, and our existing debt agreements place certain restrictions on our ability to do so
8. 71We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock