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MLP Group S.A. — Annual Report 2023
Mar 17, 2026
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Download source filePART I
ITEM 1. BUSINESS
General Overview
Our company, K-DAB-INC, is a holding company organized under the laws of the State of Delaware, incorporated on February 25, 2015. Our principal executive offices are located at 123 Corporate Drive, Suite 400, Parsippany, New Jersey 07054. Our telephone number is (973) 581-5000.
We are a diversified, multinational corporation operating in three principal segments: Digital Media, Specialized Components, and Renewable Energy Solutions. Our strategy focuses on leveraging technological innovation, strategic acquisitions, and operational excellence to deliver value to our shareholders and customers globally.
Digital Media Segment
The Digital Media segment provides comprehensive content creation, distribution, and interactive platform services to consumers and businesses worldwide. This segment includes:
- Content Production: Development and production of original film, television, and digital content.
- Platform Services: Operation of proprietary streaming platforms and licensing of content catalogs to third-party distributors.
- Advertising Technology: Development and deployment of targeted advertising solutions for digital environments.
Revenues for the Digital Media segment have grown consistently, driven primarily by subscriber acquisition on our flagship streaming service, "VisionStream," and increased programmatic advertising revenue. Competition in this segment is intense, primarily from established global technology and entertainment conglomerates. We continually invest in original programming and platform enhancements to maintain our competitive edge.
Specialized Components Segment
The Specialized Components segment designs, manufactures, and markets high-precision electronic and mechanical components primarily for the aerospace, automotive, and industrial automation sectors. Key product lines include:
- Advanced Sensor Arrays: Used in autonomous navigation systems and industrial robotics.
- High-Durability Actuators: Essential for demanding environmental applications, particularly in aerospace.
- Custom Fabrication Services: Providing bespoke manufacturing solutions for Tier 1 suppliers.
This segment requires significant investment in research and development (R&D) to meet stringent regulatory and performance standards. Our global manufacturing footprint, with facilities in North America, Europe, and Asia, allows us to manage supply chain risks and serve our international client base efficiently.
Renewable Energy Solutions Segment
The Renewable Energy Solutions segment focuses on developing, installing, and managing utility-scale solar and wind energy projects, as well as providing energy storage solutions. This segment is strategically positioned to benefit from global shifts towards sustainable energy infrastructure.
Our primary activities include:
- Project Development & Engineering (EPC): Managing the full lifecycle of large-scale renewable energy installations.
- Asset Management: Providing long-term operational and maintenance services for deployed assets.
- Energy Storage: Integrating battery storage systems to stabilize grids and optimize energy delivery.
Regulatory frameworks and government incentives significantly impact the revenue profile of this segment. We actively monitor energy policy changes across our operating jurisdictions to optimize project pipelines.
Employees
As of December 31, 2023, we employed approximately 45,000 individuals globally. This total includes technical, sales, administrative, and operational personnel across all segments. We strive to maintain a highly skilled and diverse workforce, recognizing that human capital is critical to innovation and operational execution across our technology-intensive segments.
Financial Information (See Item 7 and Item 8)
Selected financial information by segment is provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and consolidated financial statements and related notes are included in Item 8, "Financial Statements and Supplementary Data."
ITEM 1A. RISK FACTORS
We face a variety of risks and uncertainties that could materially and adversely affect our business, financial condition, operating results, and prospects. The following are the most significant risk factors we currently face:
Risks Related to Our Business and Industry
- Intense Competition and Rapid Technological Change: Our Digital Media segment faces aggressive competition from established technology giants and emerging streaming services, leading to constant pressure on pricing and content acquisition costs. In the Specialized Components segment, rapid technological obsolescence requires continuous, substantial R&D investment to maintain market relevance.
- Dependence on Key Personnel and Talent Acquisition: The success of our content creation, engineering, and software development efforts depends heavily on retaining key executive talent, creative personnel, and specialized engineers. Failure to attract or retain such individuals could severely impair our operations and future growth.
- Supply Chain Disruptions and Input Costs: The Specialized Components and Renewable Energy Solutions segments rely on complex global supply chains for raw materials (e.g., rare earth minerals, specialized silicon) and manufactured sub-assemblies. Geopolitical instability, trade restrictions, or material shortages could increase costs or delay production schedules.
- Regulatory and Policy Changes in Renewable Energy: The financial viability of our Renewable Energy Solutions segment is often supported by government subsidies, tax credits, and feed-in tariffs. Changes or discontinuance of these policies in key operating regions could negatively impact project profitability and development activity.
- Intellectual Property Risks: We rely on our portfolio of patents, trademarks, and copyrights to protect our competitive advantage. Litigation regarding intellectual property infringement, whether asserting claims against us or defending our rights, could result in significant financial losses or injunctions against key products.
Financial and Economic Risks
- Macroeconomic Fluctuations: Global economic downturns, inflation, or shifts in consumer spending habits could reduce demand across all segments, particularly impacting advertising revenues in Digital Media and capital expenditure spending by industrial clients in Specialized Components.
- Foreign Currency Exchange Risks: We conduct significant business internationally. Fluctuations in foreign currency exchange rates against the U.S. Dollar can negatively impact reported revenues and expenses, particularly when translating foreign subsidiary financial results.
- Leverage and Debt Obligations: We carry a significant amount of debt to finance acquisitions and capital expenditures. Our ability to service this debt depends on our future operating performance. Adverse changes in credit markets could impact our ability to refinance existing debt on favorable terms.
Operational and Compliance Risks
- Cybersecurity and Data Privacy: As a major distributor of digital content and a handler of sensitive component specifications, we are a target for cyberattacks. Data breaches or ransomware attacks could lead to significant financial damage, reputational harm, and regulatory penalties, especially concerning compliance with global data protection regulations (e.g., GDPR, CCPA).
- Environmental, Social, and Governance (ESG) Risks: Growing investor and public scrutiny regarding our ESG performance, particularly concerning the environmental impact of our manufacturing processes and diversity in leadership, poses reputational and operational risks. Failure to meet evolving sustainability expectations could affect financing opportunities and customer relationships.
ITEM 2. PROPERTIES
Our principal executive offices are located in Parsippany, New Jersey, as noted above.
Owned and Leased Facilities:
| Segment | Description | Location Type | Square Footage (Approx.) | Lease/Ownership Status |
|---|---|---|---|---|
| Digital Media | Corporate HQ & Content Studios | Los Angeles, CA, USA | 450,000 | Owned |
| Specialized Components | R&D and Precision Manufacturing | Munich, Germany | 220,000 | Leased (Exp. 2030) |
| Specialized Components | Assembly & Logistics Hub | Shenzhen, China | 180,000 | Leased (Exp. 2027) |
| Renewable Energy | Project Management Office | Austin, TX, USA | 50,000 | Owned |
| Corporate | Global Data Centers | Ashburn, VA, USA | 100,000 | Leased (Variable) |
We consider our properties to be in good operating condition and adequate for our current needs. We maintain active expansion plans for our manufacturing capacity in the Specialized Components segment to meet projected growth in autonomous vehicle component demand.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are involved in various legal proceedings incidental to our normal business operations, including commercial disputes, employment-related matters, and intellectual property litigation.
Current Material Proceedings:
- Patent Infringement Litigation (Digital Media): We are currently a defendant in a patent infringement lawsuit filed in the U.S. District Court for the Northern District of California by TechForward Innovations, Inc. The suit alleges that our VisionStream platform infringes on three patents related to content recommendation algorithms. We believe the claims are without merit and are vigorously defending the action. As of December 31, 2023, we have accrued $5 million for potential settlement or loss, though the ultimate outcome is uncertain.
- Environmental Compliance Audit (Renewable Energy): In Q3 2023, a regulatory body in the European Union initiated an inquiry regarding compliance with specific waste disposal regulations at a former solar panel component recycling facility operated by a subsidiary acquired in 2021. The investigation is ongoing, and while the subsidiary has ceased operations at that site, potential fines or remediation costs are being assessed. We have established a reserve estimated at $10 million, subject to adjustment based on the investigation's outcome.
Except as disclosed above, there are no other legal proceedings pending or known to be contemplated against us which, in the opinion of management, are likely to have a material adverse effect on our financial condition or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
This item is not applicable to K-DAB, INC., as we are not engaged in coal mining or any other form of mining operations subject to the jurisdiction of the Federal Mine Safety and Health Administration.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded on the New York Stock Exchange (NYSE) under the ticker symbol "KDBI." As of February 15, 2024, there were approximately 12,500 holders of record of our common stock.
Price Range of Common Stock
The following table sets forth the high and low sales prices per share of our common stock for the fiscal years ended December 31, 2023, and 2022, as reported on the NYSE.
| Fiscal Year | High | Low |
|---|---|---|
| 2023 | ||
| Quarter 1 | $115.50 | $98.25 |
| Quarter 2 | $122.10 | $105.75 |
| Quarter 3 | $135.80 | $118.00 |
| Quarter 4 | $140.45 | $125.30 |
| 2022 | ||
| Quarter 1 | $95.10 | $80.50 |
| Quarter 2 | $88.90 | $75.20 |
| Quarter 3 | $92.60 | $78.15 |
| Quarter 4 | $102.75 | $85.60 |
Dividend Policy
The Board of Directors declared dividends totaling \$1.20 per share during the year ended December 31, 2023, compared to \$0.90 per share declared during the year ended December 31, 2022. The declaration and payment of future dividends are subject to the discretion of the Board of Directors and will depend on our financial condition, results of operations, capital requirements, contractual restrictions, and other factors.
Issuer Purchases of Equity Securities
During the year ended December 31, 2023, the Company executed the following transactions related to the repurchase of its common stock:
| Period | Total Shares Purchased (1) | Average Price Paid per Share (2) | Total Shares Purchased as Part of Publicly Announced Plan (3) | Maximum Dollar Value That May Yet Be Purchased Under the Plan or Program (4) |
|---|---|---|---|---|
| Q1 2023 | 1,500,000 | $110.20 | 1,500,000 | $250,000,000 |
| Q2 2023 | 1,800,000 | $118.50 | 1,800,000 | $200,000,000 |
| Q3 2023 | 2,100,000 | $128.90 | 2,100,000 | $150,000,000 |
| Q4 2023 | 2,500,000 | $133.10 | 2,500,000 | $100,000,000 |
| Total 2023 | 7,900,000 | $124.37 | 7,900,000 | $100,000,000 |
(1) Includes shares repurchased on the open market.
(2) Calculated based on total cost divided by shares purchased in the period.
(3) All shares purchased during 2023 were pursuant to the share repurchase program authorized by the Board of Directors in February 2023, authorizing the repurchase of up to $500 million of common stock.
(4) Remaining authorization capacity as of December 31, 2023.
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis (MD&A) should be read in conjunction with the consolidated financial statements and the accompanying notes included in Item 8 of this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements.
Overview of Financial Performance
For the fiscal year ended December 31, 2023, K-DAB, INC. achieved consolidated net revenues of \$18.5 billion, representing an increase of 14% compared to \$16.2 billion in 2022. This growth was driven primarily by strong performance in the Digital Media segment and successful commissioning of new assets in the Renewable Energy segment. Net income for 2023 was \$2.1 billion, compared to \$1.75 billion in 2022.
Results of Operations by Segment
Digital Media Segment
| Metric (in millions) | 2023 Revenue | 2023 Operating Income | 2022 Revenue | 2022 Operating Income | YoY Change (Revenue) |
|---|---|---|---|---|---|
| Content & Licensing | $7,500 | $1,100 | $6,500 | $950 | 15.4% |
| Platform Subscriptions | $4,100 | $850 | $3,500 | $700 | 17.1% |
| Advertising Solutions | $2,400 | $450 | $1,900 | $300 | 26.3% |
| Total DM | $14,000 | $2,400 | $11,900 | $1,950 | 17.6% |
Digital Media revenue growth of 17.6% was fueled by a 19% increase in global subscribers to VisionStream and the maturation of our programmatic advertising platform. Operating income improved due to scaling efficiencies, though margins were slightly compressed by increased upfront spending on premium content licenses in the second half of 2023.
Specialized Components Segment
| Metric (in millions) | 2023 Revenue | 2023 Operating Income | 2022 Revenue | 2022 Operating Income | YoY Change (Revenue) |
|---|---|---|---|---|---|
| Aerospace Components | $2,100 | $350 | $1,950 | $300 | 7.7% |
| Automotive & Robotics | $1,500 | $150 | $1,250 | $100 | 20.0% |
| Total SC | $3,600 | $500 | $3,200 | $400 | 12.5% |
The segment experienced strong double-digit revenue growth driven by higher order volumes for automotive sensors, reflecting increased penetration into electric vehicle platforms. Operating margin improved from 12.5% to 13.9% as higher-margin automotive sales comprised a larger share of the total revenue mix, partially offsetting input cost pressures.
Renewable Energy Solutions Segment
| Metric (in millions) | 2023 Revenue | 2023 Operating Income | 2022 Revenue | 2022 Operating Income | YoY Change (Revenue) |
|---|---|---|---|---|---|
| Project Development (EPC) | $600 | $50 | $800 | $120 | (25.0%) |
| Asset Management/PPA | $200 | $100 | $100 | $30 | 100.0% |
| Total RES | $800 | $150 | $900 | $150 | (11.1%) |
The decrease in revenue in the RES segment is attributable to the planned completion of two large utility-scale EPC contracts in late 2022, resulting in lower large-scale project recognition in 2023. However, operating income remained flat because recurring revenue from Power Purchase Agreements (PPAs) and long-term asset management contracts increased significantly, providing a more stable and predictable earnings base.
Liquidity and Capital Resources
As of December 31, 2023, we had \$4.5 billion in cash and cash equivalents, compared to \$3.2 billion at December 31, 2022. Total debt outstanding was \$6.8 billion at the end of 2023, compared to \$7.1 billion at the end of 2022, reflecting planned debt reduction efforts utilizing cash flow from operations.
Our primary sources of liquidity are cash flow from operations, existing cash balances, and access to committed credit facilities. Our revolving credit facility, which matures in 2028, provides up to \$2.0 billion in borrowing capacity, of which \$0 was drawn as of year-end 2023.
Cash used in operating activities for 2023 was \$2.8 billion, up from \$2.3 billion in 2022. This increase was primarily due to higher working capital needs associated with inventory build-up in the Specialized Components segment to mitigate expected supply chain constraints in 2024.
Capital expenditures for 2023 totaled \$1.5 billion, significantly allocated to R&D infrastructure upgrades within Digital Media and the acquisition/construction of new Renewable Energy assets.
We believe our current cash position, projected operating cash flows, and access to capital markets provide sufficient liquidity to meet our known short-term and long-term obligations and fund planned capital expenditures and strategic initiatives.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. GAAP. The preparation of these statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Critical accounting policies requiring significant judgment include:
- Revenue Recognition (ASC 606): Recognizing revenue from content licensing agreements, software-as-a-service models (Digital Media), and long-term construction contracts (Renewable Energy). Estimates involve determining the transaction price, allocating it to performance obligations, and estimating the probability of collecting contingent consideration.
- Valuation of Goodwill and Intangible Assets: Goodwill is tested annually for impairment. This testing requires significant management judgment in determining fair values, primarily relying on discounted cash flow models, which depend on long-term operating forecasts and discount rates.
- Asset Impairment: Assessing recoverability of long-lived assets when events or changes in circumstances indicate that the carrying amount may not be recoverable. This is particularly relevant for older manufacturing equipment in Specialized Components or discontinued renewable projects.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a multinational corporation, we are exposed to market risks primarily related to foreign currency exchange rates and interest rates.
Foreign Currency Exchange Rate Risk
Our operations generate revenues and incur expenses in various foreign currencies, primarily Euros (EUR), Chinese Yuan (CNY), and Canadian Dollars (CAD). Changes in these rates relative to the U.S. Dollar impact our consolidated financial results when translated.
| Currency Exposure (Notional Value in $ millions) | 2023 | 2022 |
|---|---|---|
| EUR Payables/Receivables | $1,800 | $1,550 |
| CNY Payables/Receivables | $950 | $1,100 |
| CAD Payables/Receivables | $500 | $400 |
We utilize forward contracts and options to hedge a significant portion of our anticipated foreign currency exposure over the subsequent 12 to 18 months. A hypothetical 10% adverse movement in all foreign currencies against the USD would result in an estimated \$325 million unfavorable impact on pre-tax income for 2023, net of hedging activities.
Interest Rate Risk
We are exposed to interest rate risk primarily through our variable-rate debt obligations and potential future debt issuances. As of December 31, 2023, approximately 40% of our total debt was subject to variable interest rates, tied primarily to SOFR benchmarks.
A hypothetical 100 basis point (1.00%) increase in benchmark interest rates would result in an estimated \$27 million increase in annual interest expense based on the outstanding variable-rate debt balance at year-end 2023. We manage this risk by employing interest rate swaps to convert a portion of our variable obligations into fixed-rate payments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(The following represents the structure and selected data points for the required financial statements. Full statements are assumed to follow this section in the original filing).
Report of Independent Registered Public Accounting Firm
(Fictionalized Summary for Formatting)
We have audited the consolidated financial statements of K-DAB, INC. as of December 31, 2023 and 2022, and for each of the three years in the period ended December 31, 2023. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company...
Consolidated Balance Sheets
K-DAB, INC. CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| ASSETS | December 31, 2023 | December 31, 2022 |
|---|---|---|
| Current Assets: | ||
| Cash and cash equivalents | $4,500,000 | $3,200,000 |
| Accounts receivable, net | $2,850,000 | $2,400,000 |
| Inventories | $1,200,000 | $950,000 |
| Prepaid expenses and other current assets | $450,000 | $350,000 |
| Total Current Assets | $9,000,000 | $6,900,000 |
| Non-Current Assets: | ||
| Property, plant, and equipment, net | $8,500,000 | $7,800,000 |
| Goodwill | $12,000,000 | $11,500,000 |
| Intangible assets, net | $3,500,000 | $3,800,000 |
| Deferred tax assets, net | $750,000 | $650,000 |
| Other non-current assets | $1,250,000 | $1,150,000 |
| Total Assets | $35,000,000 | $31,800,000 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current Liabilities: | ||
| Accounts payable | $1,900,000 | $1,700,000 |
| Current portion of long-term debt | $800,000 | $700,000 |
| Deferred revenue | $1,100,000 | $900,000 |
| Total Current Liabilities | $4,800,000 | $4,000,000 |
| Non-Current Liabilities: | ||
| Long-term debt, net | $6,000,000 | $6,400,000 |
| Other long-term liabilities | $2,500,000 | $2,300,000 |
| Total Liabilities | $13,300,000 | $12,700,000 |
| Stockholders' Equity: | ||
| Common Stock | $1,000 | $1,000 |
| Additional paid-in capital | $14,800,000 | $13,500,000 |
| Retained earnings | $6,900,000 | $5,600,000 |
| Accumulated other comprehensive income (loss) | $200,000 | $500,000 |
| Total Stockholders' Equity | $21,700,000 | $19,100,000 |
| Total Liabilities and Stockholders' Equity | $35,000,000 | $31,800,000 |
Consolidated Statements of Operations
K-DAB, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
| Year Ended December 31, 2023 | Year Ended December 31, 2022 | Year Ended December 31, 2021 | |
|---|---|---|---|
| Net revenues | $18,500,000 | $16,200,000 | $14,300,000 |
| Cost of revenues | $10,175,000 | $9,050,000 | $8,000,000 |
| Gross Profit | $8,325,000 | $7,150,000 | $6,300,000 |
| Operating expenses: | |||
| Selling, general, and administrative | $3,100,000 | $2,900,000 | $2,600,000 |
| Research and development | $1,900,000 | $1,750,000 | $1,600,000 |
| Total Operating Expenses | $5,000,000 | $4,650,000 | $4,200,000 |
| Operating Income | $3,325,000 | $2,500,000 | $2,100,000 |
| Other income (expense): | |||
| Interest expense, net | $(400,000)$ | $(380,000)$ | $(350,000)$ |
| Equity in earnings of affiliates | $50,000 | $40,000 | $30,000 |
| Income Before Income Taxes | $2,975,000 | $2,160,000 | $1,780,000 |
| Income tax expense | $(875,000)$ | $(410,000)$ | $(330,000)$ |
| Net Income | $2,100,000 | $1,750,000 | $1,450,000 |
| Earnings per share: | |||
| Basic | $1.65 | $1.35 | $1.10 |
| Diluted | $1.60 | $1.32 | $1.08 |
Consolidated Statements of Cash Flows
K-DAB, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| CASH FLOWS FROM OPERATING ACTIVITIES | Year Ended December 31, 2023 | Year Ended December 31, 2022 | Year Ended December 31, 2021 |
|---|---|---|---|
| Net Income | $2,100,000 | $1,750,000 | $1,450,000 |
| Adjustments to reconcile net income to net cash provided by operating activities: | |||
| Depreciation and amortization | $1,100,000 | $1,050,000 | $1,000,000 |
| Stock-based compensation expense | $250,000 | $220,000 | $190,000 |
| Gain on sale of assets | $(20,000)$ | $(10,000)$ | $0 |
| Changes in operating assets and liabilities: | |||
| Increase in accounts receivable | $(450,000)$ | $(300,000)$ | $(250,000)$ |
| Increase in inventories | $(250,000)$ | $(150,000)$ | $(100,000)$ |
| Increase in accounts payable and accrued expenses | $200,000 | $180,000 | $150,000 |
| Net Cash Provided by Operating Activities | $2,880,000 | $2,740,000 | $2,440,000 |
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
| Purchases of property, plant, and equipment | $(1,300,000)$ | $(1,100,000)$ | $(950,000)$ |
| Acquisitions, net of cash acquired | $(200,000)$ | $(500,000)$ | $(1,000,000)$ |
| Investment in renewable energy projects | $(300,000)$ | $(200,000)$ | $(150,000)$ |
| Net Cash Used in Investing Activities | $(1,800,000)$ | $(1,800,000)$ | $(2,100,000)$ |
| CASH FLOWS FROM FINANCING ACTIVITIES | |||
| Proceeds from issuance of long-term debt | $0 | $500,000 | $200,000 |
| Repayment of long-term debt | $(400,000)$ | $(600,000)$ | $(500,000)$ |
| Proceeds from issuance of common stock (options) | $150,000 | $120,000 | $100,000 |
| Repurchases of common stock | $(878,000)$ | $(550,000)$ | $(300,000)$ |
| Payment of cash dividends | $(154,000)$ | $(117,000)$ | $(90,000)$ |
| Net Cash Used in Financing Activities | $(1,282,000)$ | $(647,000)$ | $(490,000)$ |
| Net Increase (Decrease) in Cash and Cash Equivalents | $1,298,000 | $293,000 | $(150,000)$ |
| Cash and cash equivalents, beginning of period | $3,200,000 | $2,907,000 | $3,057,000 |
| Cash and Cash Equivalents, End of Period | $4,498,000 | $3,197,000 | $2,907,000 |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no disagreements with our former independent registered public accounting firm, Deloitte & Touche LLP, regarding accounting and financial disclosure matters during the fiscal year ended December 31, 2023. We voluntarily transitioned to our current auditor, KPMG LLP, effective January 1, 2024, for the audit of the 2024 financial statements. The selection of KPMG LLP was approved by the Audit Committee of the Board of Directors.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this report, December 31, 2023, our management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, our CEO and CFO concluded that, as of December 31, 2023, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed by us in reports that we file or submit pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (ICFR). ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The framework used to evaluate the effectiveness of our ICFR is the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Integrated Framework (2013).
As of December 31, 2023, management concluded that K-DAB, INC.'s internal control over financial reporting was effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth quarter of the fiscal year ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
(This section is typically used for required disclosures under Item 11 of Form 8-K filed after the end of the fiscal year, or other specific required items. None are noted in the provided raw text structure.)
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
(Details regarding the names, ages, biographies, and committee memberships of directors and executive officers are omitted here as they are typically extensive tables/lists not present in the provided snippet structure, but would be required for a complete 10-K.)
Corporate Governance and Compliance
The Board of Directors has affirmatively determined that [Name of Director], [Name of Director], and [Name of Director] qualify as independent directors under the listing standards of the NYSE. The Board maintains standing Audit, Compensation, and Nominating/Corporate Governance Committees composed entirely of independent directors.
ITEM 11. EXECUTIVE COMPENSATION
(Detailed compensation tables, summaries of equity awards, and compensation discussion and analysis (CD&A) are omitted here as they are extensive narrative and tabular requirements not present in the provided snippet structure.)
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
(Information regarding ownership exceeding 5% and ownership by directors/officers is omitted as it is tabular and not present.)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transactions
The Company has a policy requiring review and approval of all transactions involving executive officers, directors, or their immediate family members that may constitute a related party transaction.
In 2023, the Company executed a three-year software development services agreement with "InnovateTech Solutions," a firm partially owned by the brother of our Chief Technology Officer. The aggregate value of the contract in 2023 was $4.5 million, which is within established commercial terms verified by an independent third party. This transaction was approved by the Audit Committee.
Director Independence
As stated in Item 10, the Board has affirmatively determined that a majority of its members are independent based on NYSE rules.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees billed to our independent registered public accounting firm (KPMG LLP for 2023, Deloitte & Touche LLP for 2022) for the fiscal years ended December 31, 2023, and 2022:
| Fee Category | 2023 Fees (in thousands) | 2022 Fees (in thousands) |
|---|---|---|
| Audit Fees (1) | $6,500 | $6,100 |
| Audit-Related Fees (2) | $450 | $400 |
| Tax Fees (3) | $800 | $750 |
| All Other Fees (4) | $150 | $100 |
| Total Fees | $7,900 | $7,350 |
(1) Fees related to the audit of the annual financial statements and the review of interim financial statements, and services related to statutory and regulatory filings.
(2) Fees for assurance and related services that are reasonably related to the performance of the audit or review of financial statements.
(3) Fees primarily related to tax compliance services for foreign subsidiaries.
(4) Fees for permitted non-audit, non-tax services, primarily involving advisory related to new regulatory compliance systems.
The Audit Committee pre-approves all audit and permitted non-audit services provided by the independent registered public accounting firm.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Annual Report on Form 10-K:
(a) Financial Statements:
* Report of Independent Registered Public Accounting Firm
* Consolidated Balance Sheets (as of December 31, 2023 and 2022)
* Consolidated Statements of Operations (for the years ended December 31, 2023, 2022, and 2021)
* Consolidated Statements of Cash Flows (for the years ended December 31, 2023, 2022, and 2021)
* Consolidated Statements of Stockholders' Equity (for the years ended December 31, 2023, 2022, and 2021)
* Notes to Consolidated Financial Statements
(b) Financial Statement Schedules:
* Schedule II – Valuation and Qualifying Accounts (Valuation Allowances)
(c) Exhibits:
* Exhibit 10.1: Material Employment Agreement between K-DAB, INC. and [CEO Name]
* Exhibit 21.1: List of Significant Subsidiaries
* Exhibit 23.1: Consent of Independent Registered Public Accounting Firm
* Exhibit 24.1: Power of Attorney
* Exhibit 31.1: Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
* Exhibit 31.2: Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
* Exhibit 32.1: Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
* Exhibit 101: Financial Statements and Financial Statement Schedules in XBRL format.
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