ITEM 1A. RISK FACTORS
Our short and long -term success is subject to numerous risks and uncertainties, many of which involve factors that
are difficult to predict or beyond our control. As a result, investing in our common stock involves substantial risk.
Before deciding to purchase, hold or sell our common stock, stockholders and potential stockholders should
carefully consider the risks and uncertainties described below, in addition to the other information contained in or
incorporated by reference into this Annual Report , as well as the other information we file with the SEC . If any of
these risks are realized, our business, financial condition, results of operations, and prospects could be materially
and adversely affected. In that case, the value of our common stock could decline, and stockholders may lose all or
part of their investment. Furthermore, additional risks and uncertainties of which we are currently unaware, or which
we currently consider to be immaterial, could have a material adverse effect on our business.
Certain statements made in this section constitute “forward-looking statements,” which are subject to numerous
risks and uncertainties including those described in this section. Refer to the section entitled “Cautionary Note
Regarding Forward-Looking Statements” within this Annual Report for further information.
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Risks Related to Our Business and Industry
The footwear, apparel, and accessories industry is subject to rapid changes in consumer preferences, and
if we do not accurately anticipate and promptly respond to consumer demand and spending patterns, we
could lose sales, our relationships with customers could be harmed, and our brand loyalty could be
diminished.
The footwear, apparel, and accessories industry is subject to rapid changes in consumer preferences and fashion
tastes, which makes it difficult to anticipate demand for our products and forecast our results of operations. Our
success depends, in part, on brand loyalty, and there can be no assurance that consumers will continue to prefer
our brands. Consumer demand for our products relies on the continued strength of our brands, which in turn
depends on our ability to anticipate, understand, and respond promptly to evolving preferences, fashion trends, and
consumer spending patterns with appealing merchandise and effective brand-building initiatives. As our brands and
product offerings evolve, our products must appeal to a broader and more diverse range of consumers whose
preferences cannot be predicted with certainty. New products may not achieve market acceptance, including due to
pricing that consumers are unwilling to bear, or our brands may fall out of favor, which could impede our ability to
maintain or grow sales, adversely affect brand perception, and negatively impact our results of operations. If we do
not effectively respond to these changes, we could experience reduced sales and pressure on our gross profit as a
percentage of net sales ( gross margin ), including as a result of reduced pricing power and increased reliance on
promotional activity .
The value of our brands is also driven by evolving consumer perceptions, including shifting ethical, political, or
social standards. Concerns related to product pricing, quality, design, technical performance, components or
materials (including sustainability), customer service, or the effectiveness of our brand loyalty initiatives, including
loyalty programs, could result in negative perceptions, diminished consumer engagement, and a loss of brand
loyalty or value. These risks may be amplified by adverse publicity concerning us or our products, brands, marketing
campaigns, partners, or endorsers, particularly where social media and digital marketing channels accelerate the
dissemination, amplification, or persistence of negative claims, regardless of their accuracy, which could harm our
reputation and sales and have a material adverse effect on our business. In addition, actions or statements by
third‑party partners, collaborators, or organizations with which we are associated, including in connection with social
or political issues, could lead to consumer backlash, operational disruptions, or reputational harm. If our brand-
related initiatives, including loyalty programs, fail to drive sustained consumer engagement or incremental demand,
or involve increased costs or operational complexity that negatively affect customer perceptions, we could
experience reduced sales and pressure on our gross margin , adversely affecting our results of operations.
Changes to economic conditions may adversely affect our financial condition and results of operations.
Volatile economic conditions and changes in the market have affected, and may continue to affect, consumer
confidence and discretionary spending. A significant portion of our HOKA brand and UGG brand products are
premium, discretionary purchases, and demand for these products is sensitive to macroeconomic factors, including
inflation , wages and employment, consumer debt, declines in net worth driven by market conditions, interest rates,
tariffs, and public health issues such as a pandemic. During periods of economic uncertainty, consumers may
reduce discretionary purchases, trade down to lower-priced alternatives, or delay buying decisions, which could
require us to increase promotional activity or reduce prices, adversely affecting our sales and profitability .
We sell a significant portion of our products through higher-end specialty and department store retailers and online
marketplaces . These customers may be adversely affected by economic conditions, geopolitical instability, foreign
currency fluctuations, reduced demand for premium products, limited access to credit, and increased competition.
Financial difficulties among our customers could negatively affect our credit exposure, reserves, and relationships
with key customers, and could reduce orders or increase the risk of delayed payments or defaults.
We face intense competition from both established companies and newer entrants into the market, and our
failure to compete effectively could cause our market share to decline, which could harm our reputation and
have a material adverse effect on our financial condition and results of operations.
The footwear, apparel, and accessories industry is highly competitive and subject to rapidly changing consumer
preferences. If we are unable to compete effectively, we could experience a decline in market share, reduced
demand for our products, pricing pressure, or damage to our reputation, which could have a material adverse effect
on our financial condition and results of operations. Competition in our markets is influenced by factors such as
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brand recognition, product innovation and performance, pricing, speed‑to‑market, marketing effectiveness, use of
data analytics and AI , access to manufacturing capacity, and control of distribution channels.
Our competitors include both established global brands and newer market entrants, including competitors whose
broader product assortments and higher sales volumes may be more important to certain customers. We believe
that the growth and visibility of our HOKA brand and UGG brand have attracted competitors specifically targeting
the categories in which we operate. Barriers to entry have been reduced by access to offshore manufacturing and
evolving technologies, allowing competitors to develop and scale products more quickly and at lower cost.
Some of our competitors also have substantially greater financial, technological, manufacturing, marketing, and
distribution resources than we do, as well as broader brand awareness, which may enable them to compete more
effectively on price, accelerate product development, leverage advanced data analytics or AI , adapt to technological
changes, and withstand periods of excess inventory or reduced consumer demand. As a result, we face ongoing
competition for customer relationships and distribution channels, including competition for preferred access to key
retail accounts, shelf space, and digital visibility.
Consistent with these dynamics, we have experienced, and expect to continue to experience, pricing and
promotional pressure across our brands and channels, particularly during periods of elevated industry inventory
levels or inflationary pressure. Increased discounting or promotional activity by competitors may require us to
reduce prices or increase promotions to remain competitive, negatively affecting our gross margin and results of
operations, and could cause consumers to shift purchases to competing products. In addition, many of our key
wholesale customers face intense competitive pressures, and deterioration in their financial condition could
adversely affect their ability to do business with us.
I f we are unsuccessful at managing inventory planning, forecasting, and global supply chain execution, we
may be unable to accurately forecast our inventory and working capital requirements, which may have a
material adverse effect on our financial condition and results of operations.
Like other companies in our industry, we have an extended design and manufacturing process, which involves
product design, material purchases, inventory accumulation and the subsequent sale of the inventories, and
accounts receivable collection. This cycle requires us to incur significant expenses relating to the design,
manufacturing, and marketing of our products in advance of the realization of sales, and results in significant
liquidity requirements and working capital fluctuations throughout our fiscal year, which may be amplified by supplier
performance issues and broader supply chain constraints. As a result , these liquidity and working capital demands
may limit our ability to adjust inventory levels and respond efficiently to changes in consumer demand, particularly
during periods of macroeconomic uncertainty. Our forecasting processes rely on assumptions, data, and systems
that may not accurately reflect future consumer or customer demand, or supply chain conditions, including
manufacturing capacity, raw material availability, and logistics constraints. Further, variability and constraints within
our global supply chain may drive higher inventory procurement positions that could negatively affect our working
capital and gross margin as a result of selling excess quantities through close out channels. As a result, our
inventory levels, working capital requirements, and results of operations may be adversely affected by a number of
factors, including:
• constraints or inefficiencies in transportation capacity, delivery timing, inventory flow, or production
scheduling, which may contribute to uneven inventory receipts, elevated inventory levels, or delays
in fulfilling de mand;
• unfavorable or unexpected weather patterns that affect consumer demand for seasonally-driven
products, particularly within our UGG brand, which may be intensified by the effects of climate
change;
• changes in consumer preferences, discretionary spending patterns, prevailing fashion trends, and
pricing pressure that may require increased promotional activity to sell inventory;
• macroeconomic conditions, including inflation, interest rate volatility, or global economic uncertainty,
that may affect consumer purchasing behavior, supplier capacity, or logistics costs; and
• market acceptance of our products and competing offerings, and variability in product availability.
The evolution and expansion of our brands and product offerings have made our inventory management activities
more challenging. For example, if we overestimate demand for any products or styles, we may be forced to increase
promotional activity or adjust pricing to sell excess inventories, which would result in lower sales and reduced gross
margin , and we may not be able to recover our investment in the development of new styles and product lines. On
the other hand, if we underestimate demand, or if our independent manufacturing facilities are unable to supply
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products in sufficient quantities or on a timely basis, we may experience inventory shortages that may prevent us
from fulfilling customer orders or result in delays in shipments to customers. If that occurred, we could lose sales,
our relationships with customers could be harmed, and our brand loyalty could be diminished. In either event, these
factors could have a material adverse effect on our results of operations.
We rely upon a number of warehouse and distribution facilities to operate our business, and any damage to
one of these facilities, or any disruptions caused by incorporating new facilities into our operations, could
have a material adverse effect on our business.
We rely upon a broad network of warehouses and distribution facilities to store, sort, package and distribute our
products. Our distribution operations depend on the effective functioning of global transportation and logistics
networks, including ports, carriers, and third-party service providers. Disruptions to these networks, including labor
shortages or disputes, capacity constraints, fuel and freight cost volatility, routing inefficiencies, or infrastructure
limitations could increase delivery times, delay inbound or outbound shipments, strain distribution capacity, increase
fulfillment and other costs, and impair our ability to efficiently receive, store, and distribute products.
In the US , we distribute products primarily through self-managed warehouses and DC s in Moreno Valley, California,
and in Mooresville, Indiana , which feature a complex warehouse management system that enables us to efficiently
pack products for direct shipment to our customers and consumers. We could face a significant disruption in our
domestic warehouse and DC operations if our warehouse management system does not perform as anticipated or
ceases to function for an extended period of time, which could occur due to damage to the facility, failure of software
or equipment, cyber-security incidents, power outages or similar problems. Any significant disruption to our
domestic warehouse or DC operations could a dversely affect our ability to fulfill customer orders . In addition,
increased reliance on automation, data analytics, and system integrations within our warehouse operations,
including to address outdated or no longer supported software, systems and equipment, may increase the risk of
system failures, data inaccuracies, or operational disruptions if such systems are not implemented or maintained
effectively, which could similarly have a material adverse effect on our business.
Internationally, we distribute our products through warehouses and DC s managed by 3PL s in certain international
locations. For example, we are currently transitioning certain international 3PL operations to a new partner. While
we conduct diligence prior to entering into service agreements with 3PL s, we depend on these providers to operate
their warehouses and DC s in a manner that meets our business and performance requirements, including with
respect to data security and compliance with applicable data protection and privacy laws, and the provision of
quality services on a timely basis at the prices we expect. If our 3PL s fail to manage these responsibilities, including
during or following an operational transition, system cutover, or data migration, or if their operations are disrupted as
a result of factors outside of their control, such as sanctions that could in the future be imposed by the US
government, or broader disruptions or inefficiencies in global logistics and transportation networks, our distribution
operations could face delays, reduced reliability, or increased costs. The loss of or disruption to the operations of
any one or more of these facilities could materially and adversely affect our sales, business performance, and
results of operations. Although we believe we possess adequate insurance to cover the potential effect of a
disruption to the operations of these facilities, such insurance may not be sufficient to cover all of our potential
losses and may not continue to be available to us on acceptable terms, or at all.
We rely upon independent manufacturers for all of our production needs, and the failure of these
manufacturers to manage these responsibilities would prevent us from filling customer orders, which
would result in loss of sales and harm our relationships with customers.
We rely upon independent manufacturers and their respective material suppliers for all of our production needs, the
majority of which are located in Southeast Asia, predominantly in Vietnam and Indonesia , which exposes us to
geographic concentration risk, including risks arising from regional economic, political, environmental, or operational
conditions, and we do not have direct control over these manufacturers or their suppliers. We expect our
independent manufacturers to finance the production of goods ordered, maintain manufacturing capacity, comply
with our policies, and store finished goods in a safe location pending shipment. The ability of our independent
manufacturers to meet these expectations may be adversely affected by liquidity constraints or limitations in their
access to third-party financing arrangements supporting their supply chains or working capital needs, which could
reduce available production capacity, delay shipments, or result in lost sales. Disruptions arising from these
geographic concentrations, our limited control over independent manufacturers and their suppliers, or our
manufacturers’ inability to meet these expectations could adversely affect our ability to manufacture products or
fulfill customer orders, which could negatively affect our results of operations.
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There can be no assurance of a long-term, uninterrupted supply of products from our independent manufacturers .
Our dependence on a limited number of key manufacturing partners may increase our exposure to disruptions,
pricing changes, or capacity constraints. While we have long-standing relationships with most of these
manufacturers, they could terminate our engagement, seek to increase their prices, or extract other concessions
from us, and we may not be able to timely engage a suitable alternative. If we are required to find alternative
manufacturers, we could experience manufacturing delays, increased manufacturing costs, and substantial
disruption to our business, any of which could negatively affect our results of operations.
Interruptions in the supply of our products can also result from adverse events that impair our manufacturers’
operations. For example, we keep proprietary materials necessary to produce our products, such as shoe molds
and other materials, in the custody of our independent manufacturers . If these independent manufacturers were to
lose or damage these proprietary materials, we cannot be assured that the manufacturers would have adequate
insurance to cover such loss or damage, and, in any event, the replacement of such materials would likely result in
significant delays in the production of our products, which could result in a loss of sales and earnings.
Our financial success is influenced by the success of our customers, and the loss of a key customer could
have a material adverse effect on our results of operations.
Much of our financial success is related to the ability of our customers in the wholesale channel, including
international distributors and retail partners, to effectively market and sell our brands to consumers. These
relationships are typically governed by contractual arrangements. If a customer fails to meet contractual obligations,
satisfy our expectations and standards , or experiences operational or financial difficulties, it may be challenging and
time-consuming to identify and transition to an acceptable alternative. In addition, disputes under these
arrangements could result in litigation, arbitration, settlement costs, or operational disruptions.
We may also be adversely affected by our customers’ actions or omissions, including failures to comply with
applicable laws, regulatory requirements, labor or employment standards, or our policies. Such conduct could harm
our reputation, subject us to regulatory scrutiny or liability, disrupt our relationships with other customers and
business partners, and adversely affect demand for our products. Transitioning away from an existing customer,
whether due to performance or compliance concerns, may result in lost sales, significant transition costs, and
operational disruption as we identify, onboard, and integrate replacement distribution or retail partners, and there
can be no assurance that a replacement will generate comparable or improved results.
We face the risk that key customers may not increase their business with us as anticipated, may significantly reduce
purchases, or may terminate their relationships with us. However, no single customer accounted for 10.0% or more
of our total net sales during fiscal year 2026 . The failure to increase sales to these customers could negatively affect
our growth prospects, and any reduction or loss of their business could materially and adversely affect our net sales
and results of operations, particularly if we are unable to offset such declines through our DTC channel. As of March
31, 2026 , one customer represents 18.5% of trade accounts receivable, net, which is generally unsecured and
exposes us to collection risk that could affect our results of operations and liquidity .
W e rely on customer purchase orders and delivery schedules for forecasting sales and results of operations. If
customers postpone, cancel, reduce, or discontinue orders, we may fail to meet our forecasts. These risks may be
exacerbated by structural changes in the retail industry including shifts in technology, consumer and wholesale
partner purchasing behavior, economic conditions, and a shrinking retail footprint. The loss of a key customer, or a
significant reduction in orders, could result in lower sales, excess inventory and related write-downs, and materially
and adversely affect our financial condition or results of operations. In addition, a key customer may liquidate
excess inventory through discounted channels, including unauthorized sellers, which could negatively impact brand
perception and divert demand from our authorized distribution channels.
We depend on qualified talent and, if we are unable to retain or hire executive officers, key employees, and
skilled talent, we may not be able to achieve our strategic objectives, which could adversely affect our
results of operations.
To execute our growth plan, we must continue to attract and retain highly qualified talent, including executive
officers and key employees. In addition, to develop new products and successfully operate and grow our key
business processes, we rely on employees with specialized expertise across design, marketing, merchandising,
sourcing, technology, operations, and support functions, including talent in areas such as data analytics, digital
commerce, and supply chain management. Competition for executive officers, key employees, and skilled talent is
intense within our industry, and we continue to experience upward pressure on compensation costs. Changes to our
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office environment or work models may not meet employees’ expectations, and many of the companies with which
we compete for talent have greater name recognition and financial resources than we have. Continued strength in
our results may also increase the risk that our employees are targeted by competitors. If our overall employment
proposition, including compensation, benefits, culture, work model, or career development opportunities, is not
perceived as favorable relative to other employers, our ability to attract, hire, and retain qualified personnel could be
adversely affected. We are committed to offering competitive compensation and benefits, which may increase our
selling, general, and administrative ( SG&A ) expenses. Further, our domestic headquarters are located in Goleta,
California, which may further limit our ability to attract qualified professionals.
If we hire employees from competitors, their former employers may assert that we or these employees have
breached legal obligations, resulting in a diversion of management time and resources. Prospective and existing
employees also often consider the value of stock-based compensation when deciding whether to accept or remain
in a position. Accordingly, volatility in our stock price may adversely affect our ability to recruit and retain qualified
talent. Any inability to attract, retain, or motivate executive officers, key employees, or other skilled personnel could
adversely affect our ability to achieve our long-term strategic objectives, harm our results of operations, and impair
our ability to compete effectively.
The continued service of our executive officers and key employees is particularly important, and the departure of
such talent may disrupt our business or result in the depletion of significant institutional knowledge. Our executive
officers and key employees are employed on an at-will basis, which means that they can terminate their
employment with us at any time. The loss of one or more of our executive officers or other key employees or
significant turnover in our senior management, and the often-extensive process of identifying and hiring other talent
to fill those key positions, could have a material adverse effect on our results of operations.
S heepskin and other raw materials are used to manufacture a significant portion of our products, and
disruptions in the availability, pricing, or quality standards of these inputs could have a material adverse
effect on our business.
We purchase raw materials and components that are subject to supplier and geographic concentration, most
significantly sheepskin, which is used in a substantial portion of our UGG brand products. Sh eepskin is in high
demand and sourced primarily from Australia and processed largely by two tanneries in China capable of meeting
our quality, volume, and animal welfare standards . This geographic and supplier concentration exposes us to supply
disruption risk. We also rely on designated suppliers for certain other specialized raw materials, including
sugarcane-derived EVA , used in certain components of our products.
If suppliers of sheepskin, including tanneries involved in its processing, sugarcane-derived EVA , or other materials
are unable to meet our quality, sustainability, or volume requirements, or if their operations are disrupted or cease,
we may not be able to obtain adequate quantities of these materials or suitable substitutes on acceptable terms, or
at all. Although alternative materials may be available for certain branded components, which may be limited, such
alternatives would not include the same trademarks. As a result, supply disruptions could require product redesign
or delayed production, increase costs, reduce inventory availability, result in loss of sales or increased returns, and
harm our reputation.
In addition, the raw materials used in the manufacturing of our products are subject to commodity price volatility,
most significantly sheepskin. Although sheepskin pricing has been relatively stable in recent years, prices and
availability may fluctuate due to changes in supply and demand, weather conditions, energy and logistics costs,
labor disruptions, regulatory developments, disease incidence, the effects of climate change, and broader market
dynamics. While we use contracts and other pricing arrangements to mitigate price volatility, prolonged increases in
sheepskin costs or other key inputs could increase manufacturing expenses and negatively impact our gross
margin , and we may be unable to offset such increases through pricing actions or changes in product mix.
Evolving fashion trends, social expectations, and ethical considerations, including increased opposition to the use of
animal-derived materials, as well as existing or potential legislation restricting the sale of such products in certain
jurisdictions, could also reduce consumer demand for sheepskin products or limit our ability to sell them in key
markets. Because sheepskin is integral to the UGG brand, adverse changes in consumer preferences, regulatory
requirements, or sourcing standards applicable to sheepskin could have a material adverse effect on our business,
financial condition, and results of operations.
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We rely on technical innovation to compete in the market for our products, and if we fail to innovate
effectively or in a timely manner, our competitive position and results of operations could be adversely
affected.
Our success relies in part on our continued innovation in both the materials we use and the design of our footwear.
In particular, our HOKA brand maintains its competitiveness through continuous product innovation and timely
introduction of new features and technologies that align with current and emerging consumer expectations,
including our ability to bring such innovations to market ahead of or in line with competitors. Also, we continue to
invest in research and development to increasingly incorporate recycled, renewable, regenerated, and certified/
natural materials ( preferred materials ) in our products as part of our sustainability efforts. We also increasingly use
preferred synthetics, regenerated or synthetic cellulosic fibers, and plant fibers. Although we continue to refine our
materials and develop new properties for specific applications, if we fail to introduce technical innovation in our
products in a timely or commercially successful manner, or experience issues with the quality of our products or
materials, consumer demand for our products could decline and we may experience reputational damage. In
addition, if our competitors introduce superior or more cost-effective innovations, we may lose market share or be
required to increase promotional activity to remain competitive. Further, as our brands transition to suppliers with
preferred materials , we may be subject to increased costs or supply constraints, which could reduce our sales and
profitability and have a material adverse effect on our financial condition and results of operations. Our investments
in research and development and new materials may not result in commercially successful products or may not
generate the expected return on investment, which could adversely affect our results of operations.
We may not succeed in implementing our growth strategies, in which case we may not be able to take
advantage of certain market opportunities and our competitive position and results of operations could be
adversely affected.
As part of our overall growth strategy, we seek to enhance the positioning of our brands, diversify our product
offerings, extend our brands into complementary product categories and markets, expand geographically, and
optimize our retail presence both in stores and online. Our future growth depends in part on our expansion efforts
outside of the United States ( international growth strategy ). For example, we have opened UGG brand and HOKA
brand retail locations in international markets through Company-owned stores and through third-party retailers . If we
are unable to identify new retail locations with consumer traffic sufficient to support a profitable sales level or elevate
our brand market positioning, our retail growth may be limited, and we may be unable to avoid losses or negative
cash flows from these locations. In addition, investments in new or expanded retail locations may not generate
expected returns and could result in impairments or reduced profitability. Furthermore, our future growth depends in
part on our ability to effectively manage the profitability of our existing retail locations. For example, our failure to
successfully identify and close underperforming stores in a timely manner could have a number of material adverse
effects, such as impairments and a negative impact on our financial condition and results of operations.
We also license the right to operate our brand retail stores to third parties through our partner retail program. All of
the partner retail stores are operated in international markets . We provide training to support these stores and set
and monitor operational standards. However, the quality of these store operations may decline due to the failure of
these third parties to operate the stores in a manner consistent with our standards or our failure to adequately
monitor these third parties, which could result in reduced sales and harm our brand image.
As part of our international growth strategy , we may transition certain brands in certain geographies from a third-
party distribution model to a direct distribution model or vice versa. Failure to effectively implement our growth
strategies, including transitioning between distribution models or developing our business in international markets,
or disappointing growth within existing markets, could negatively affect our sales growth rate. In addition, taking
steps to implement our growth strategies could have a number of negative effects, including increasing our working
capital needs, causing us to incur costs without corresponding benefits, and diverting management time and
resources away from our existing business. Our growth initiatives may not be successful, may take longer than
anticipated to achieve expected results, or may expose us to operational complexities that we are unable to
effectively manage.
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Increasing expectations from investors, regulators, and other key stakeholders with respect to our ESG
practices may impose additional costs on us or expose us to additional risks.
Investors, advocacy groups, customers, consumers, employees, regulators, and other stakeholders are increasingly
scrutinizing companies’ ESG practices and disclosures, including the social and environmental impacts of their
operations. We periodically communicate ESG initiatives, including through our annual Creating Change Report and
may face heightened scrutiny, regulatory inquiries, or litigation regarding the accuracy, completeness, or
consistency of such disclosures, including allegations of “greenwashing.” Our ESG disclosures address a broad
range of topics, including human rights, governance, environmental compliance, sustainability, human capital
management, supply chain practices, and diversity and inclusion.
Despite our efforts, our ESG practices, the pace at which we implement related initiatives, or our disclosures may
not meet evolving stakeholder expectations. Perceptions regarding our ESG priorities, whether viewed as over- or
under-emphasized, could adversely affect customer demand, employee recruitment and retention, or investor
relations, or lead to reputational harm, regulatory action, or litigation. In addition, developing ESG goals, metrics,
and data collection processes is complex, costly, and subject to evolving standards, internal controls, and regulatory
regimes, including ESG -related disclosure requirements of the SEC , European, and other regulators, such as those
in California. Failure, or perceived failure, to achieve or accurately report progress against our ESG initiatives or
adapt to changing regulatory requirements could increase compliance costs, damage our reputation, and negatively
affect our business and results of operations.
C limate change, natural disasters, public health issues, or other events beyond our control, as well as
related regulations, have adversely affected, and could in the future adversely affect, our business.
Natural disasters and other catastrophic events, including those associated with climate change and extreme
weather conditions, may disrupt our operations, supply chain, international markets, and the global economy. Our
business is subject to interruption from events such as extreme weather, power shortages, pandemic s, war, political
instability, terrorism, and failures of infrastructure or communications systems. Although we maintain disaster and
business continuity plans designed to support critical operations and information systems, these events could
disrupt our operations, impair employee availability, damage facilities, interrupt supply chains, or compromise the
integrity of our IT systems, which could materially increase costs, reduce sales, or otherwise adversely affect our
business continuity.
In addition, climate-related regulatory developments and evolving standards may require us to incur significant
capital expenditures or other costs to enhance the resiliency of our infrastructure, comply with legal requirements, or
implement mitigation measures. We may also experience increased costs for energy, transportation, raw materials,
production, and insurance, including higher premiums or deductibles. Our insurance coverage may not be sufficient
to cover all losses or may not remain available on acceptable terms. Further, severe weather events, health crises,
or other widespread disruptions may reduce consumer demand, impair the ability of our manufacturers, third-party
distributors, or other partners to operate effectively, or disrupt the supply of key raw materials, any of which could
adversely affect our results of operations.
We face risks associated with strategic acquisitions and divestitures, and our failure to successfully
integrate any acquired business could have a material adverse effect on our results of operations and
financial condition.
As part of our overall strategy, we may periodically consider strategic acquisitions to expand our brands into
complementary product categories and markets, or to acquire new brands, technologies, intellectual property, or
other assets. Our ability to do so depends on our ability to identify and successfully pursue suitable acquisition
opportunities. Such acquisitions involve numerous risks, challenges, and uncertainties, including the potential to:
• expose us to risks inherent in entering into new markets or geographic regions;
• lose significant customers or key personnel of the acquired business;
• encounter difficulties integrating and managing acquired assets;
• encounter difficulties marketing to new consumers or managing geographically dispersed
operations;
• divert management’s time and attention away from other aspects of our business operations; and
• incur costs relating to potential acquisitions that we fail to consummate, which we may not recover.
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Additionally, we may not be able to successfully integrate acquired businesses into our operations or achieve the
expected benefits of such acquisitions. We may also face cannibalization of existing product sales by newly
acquired products unless we successfully differentiate target consumers and increase our overall market share.
Further, we may be required to issue equity securities to finance an acquisition, which would be dilutive to our
stockholders, and equity securities may have rights or preferences senior to those of our existing stockholders. If we
incur indebtedness to finance an acquisition, it will result in debt service costs, and we may be subject to covenants
restricting our operations or liens encumbering our assets.
As part of our overall strategy to allocate resources that best align with our long-term objectives, we may seek to
sell one or more brands. For example, during fiscal year 2026 , we completed the phase out of the standalone
operations of the Koolaburra brand and AHNU brand. Further, during fiscal year 2025 , we completed the sale of the
Sanuk brand. These transactions involve financial and operational risks, including diverting management and
employee time and attention from other aspects of our business, separating personnel and financial and other
systems, impairments, and adversely affecting relationships with existing suppliers and customers.
The process of completing any acquisitions or divestitures may be time-consuming, involve significant costs and
expenses, and the expected benefits of such acquisitions or divestitures may not be realized. Our business, results
of operations, and financial condition could be negatively impacted. In addition, we may overestimate the value of
acquisition targets or fail to realize anticipated synergies, which could result in impairments or reduced returns on
our investments.
Risks Related to Our Global Business Strategy and Operations, and
International Commerce
Our reliance on independent manufacturers and suppliers located primarily in Southeast Asia exposes us
to risks associated with unpredictable and evolving international trade policies, regulatory environments,
and geopolitical conditions that could materially increase our costs, disrupt our global supply chain, and
adversely affect our results of operations.
The production of our finished goods is outsourced to independent manufacturers , the majority of which are in
Southeast Asia. During fiscal year 2026 , production of our finished goods was predominantly from Vietnam and
Indonesia, while less than 5% was from China or any other individual country. As a result, we are exposed to
geographic concentration risk arising from regional and global economic conditions, changes in diplomatic and trade
relationships (including the imposition of new or increased tariffs), political and social instability, armed conflict,
disease outbreaks, natural disasters, and other regulatory, environmental, and geopolitical developments.
The majority of raw materials and components used by our independent manufacturers are sourced from
designated suppliers , and tariffs, duties, or other trade restrictions may be imposed, modified, or expanded with
limited notice. These measures could require us or our independent manufacturers to seek alternative sourcing
options that may not be available in sufficient quantities, at acceptable quality levels, or in a timely manner. Evolving
international trade dynamics could materially increase our cost of goods sold, disrupt logistics or inventory flows,
adversely affect product pricing and demand, and reduce our gross margin . Customs authorities may also challenge
our tariff classifications or treatment of certain products, resulting in additional costs or penalties. In addition, certain
tariffs imposed under the International Emergency Economic Powers Act have been invalidated by a recent US
Supreme Court decision, and additional tariffs may be invalidated, modified, or refunded in the future. As a result,
we may face uncertainty regarding the treatment of tariff-related costs, including the potential recovery or refund of
tariff amounts previously paid or partially reflected in selective pricing actions or cost-sharing arrangements. These
and other judicial, regulatory, or trade policy developments could increase compliance complexity, create cost
volatility, impair our ability to plan sourcing, pricing, and inventory strategies, and result in disputes, claims,
unrecoverable costs, and reputational harm, regardless of the ultimate outcome.
In addition to trade-related risks, our international operations and independent manufacturers are subject to
regulatory, operational, and reputational risks. Although we require compliance with environmental, labor, ethical,
health, safety, and other business standards and conduct periodic audits, we do not directly control the practices of
our independent manufacturers or suppliers. A s we continue to diversify within Southeast Asia, monitoring
compliance across a broader supplier base may be more complex. Any n oncompliance could result in product
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recalls, regulatory penalties, seizure or forfeiture of goods, reputational harm, termination of supplier relationships,
violations of US or international trade laws, increased costs, supply chain disruption, or the loss of import privileges.
Our international operations and independent manufacturers are also exposed to additional risks, including:
• logistics, infrastructure, transportation, and distribution constraints, including raw material
availability, and cost volatility related to fuel costs, labor disputes, inflation, port congestion, or
geopolitical or climate‑related disruptions;
• restrictions on fund repatriation or foreign currency volatility;
• local labor practices, workforce availability, or holidays;
• counterfeit, unauthorized or misclassified materials, or product integrity or compliance risks;
• health-related disruptions, including disease outbreaks; and
• adverse consumer perceptions of goods sourced from certain countries, including as a result of
geopolitical or social conditions.
Although we pursue mitigation strategies, including selective pricing actions and cost-sharing arrangements with
independent manufacturers , these measures may not fully offset trade-related and regulatory cost increases. If such
strategies are ineffective, it could materially and adversely affect our business, financial condition, and results of
operations.
Our sales in international markets are subject to a variety of legal, regulatory, political, cultural, and
economic risks that may adversely affect our results of operations.
Our ability to capitalize on growth in new international markets and to maintain the current level of operations in our
existing international markets is subject to risks associated with international operations that could adversely affect
our results of operations. These risks include:
• foreign currency exchange rate fluctuations between the US dollar and primarily the currencies of
Europe, Asia, Canada, and Latin America affect the prices at which products are sold to
international consumers and our reported results;
• limitations on our ability to move currency out of international markets or repatriate earnings;
• burdens of complying with a variety of international laws and regulations, which may change
unexpectedly, and the interpretation and application of such laws and regulations;
• legal costs related to defending allegations of non-compliance with international laws;
• inability to import products into a foreign country;
• difficulties associated with promoting and marketing products in unfamiliar markets and cultures;
• political or economic uncertainty or instability, which may disrupt the global economy and reduce
consumer spending, which could have a material adverse effect on our business, particularly for our
HOKA and UGG brands;
• anti-American sentiment in international markets in which we operate;
• changes in diplomatic and trade relationships between the US and other countries;
• general economic fluctuations in international markets; and
• challenges associated with local laws, regulations, and business practices, including employment,
tax, and data privacy requirements.
Global geopolitical developments, including armed conflicts, escalating global tensions, and related disruptions ,
have resulted in, and could continue to result in, instability and heightened volatility in global markets .
We conduct business outside the US , which exposes us to foreign currency exchange rate risk, and could
have a negative effect on our results of operations.
We operate on a global basis, with 41.7% of our total net sales for the year ended March 31, 2026 , generated from
operations outside the US . As we continue to expand our international operations, our sales and expenditures in
foreign currencies are expected to become increasingly material and subject to foreign currency exchange rate
fluctuations. A significant portion of our international operating expenses are paid in local currencies, and our
international distributors typically sell our products in local currency, which affects the price to international
consumers. Many of our subsidiaries operate with their local currency as their functional currency. Foreign currency
fluctuations, which can be exacerbated by volatility in global credit markets, may change the US dollar value of our
purchases or sales and, when converted to US dollars, could materially affect our net sales, gross margin , and
results of operations. When the US dollar strengthens relative to foreign currencies, our sales and profits
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denominated in foreign currencies are reduced when converted into US dollars and our margins may be negatively
affected. We routinely utilize foreign currency forward contracts or other derivative instruments for the amounts we
expect to purchase and sell in foreign currencies to mitigate exposure to foreign currency exchange rate
fluctuations. As we continue to expand international operations and increase purchases and sales in foreign
currencies, we may utilize additional derivative instruments to hedge our risk. Our hedging strategies depend on our
forecasts of sales, expenses, and cash flows, which are inherently subject to inaccuracies. Further, such strategies
may not fully offset the effects of exchange rate fluctuations and may introduce additional volatility into our results of
operations. Foreign currency exchange rate hedges, transactions, remeasurements, or translations could materially
affect our consolidated financial statements .
Risks Related to Technology, Data Security and Privacy
A security breach or disruption to our IT systems could materially harm our business, disrupt our
operations, or result in unauthorized disclosure of sensitive information, which could damage our
relationships, expose us to litigation or regulatory proceedings, or harm our reputation, any of which could
materially and adversely affect our business and results of operations.
We store and transmit sensitive information, including personal information of customers, consumers, and
employees, payment card information, and proprietary operational, financial, and strategic data. Unauthorized
access to, loss, misuse, or disclosure of such information could result in reputational harm, litigation, regulatory
investigations, significant remediation costs and substantial losses. Our operations also depend on the continued
performance of internal information systems and third-party technology providers, including systems utilizing data
analytics and AI , to prevent unauthorized access and to respond quickly and effectively to data security incidents.
Cybersecurity threats continue to evolve in frequency and sophistication, and our reliance on interconnected
systems, cloud-based platforms, and third-party service providers increases the risk that a security incident affecting
us or these parties could disrupt our operations. Although we invest in security controls and monitoring, these
measures may not prevent all incidents or ensure timely detection.
A cyber-attack, data security incident, or system disruption could materially and adversely affect our business if:
• critical systems become inoperable or require significant time or cost to restore;
• employees are unable to perform their duties or communicate effectively with third parties;
• sensitive or confidential information is lost, misused, or disclosed without authorization;
• business operations, including order placement, fulfillment, or reporting, are disrupted;
• significant, unplanned investments in technology, security remediation, or recovery are required; or
• we incur additional liabilities, costs, claims, or regulatory exposure.
Any such event could result in reputational harm, loss of customer trust, strained relationships with partners and
suppliers, litigation, fines, penalties, or regulatory actions under domestic and international data protection and
privacy laws and could materially and adversely affect our business, financial condition, or results of operations.
If we are found to have violated laws concerning the privacy and security of consumers’ or other
individuals’ personal information, we could be subject to civil or criminal penalties, which could increase
our liabilities and harm our reputation or our business.
There are a number of laws protecting the privacy and security of personal information, as well as increased
scrutiny by regulators, such as the Federal Trade Commission, and state attorneys general focused on our industry.
Such laws include the California Consumer Privacy Act and California Privacy Rights Act, the EU ’s General Data
Protection Regulation and member state directives, Canada’s Personal Information Protection and Electronic
Documents Act, and China’s Personal Information Protection Law, and limit how we may collect, use, share and
store personal information, and they impose obligations to protect that information. We may also be subject to new
or evolving data privacy and security laws and regulations. If we, or any of our service providers who have access to
the personal data for which we are responsible, are found to be in violation of the privacy or security requirements of
applicable data protection laws, we could be subject to civil or criminal penalties, which could increase our liabilities,
harm our reputation, and have a material adverse effect on our business, financial condition, and results of
operations. In addition, these laws may provide for private rights of action, statutory damages, or enhanced
regulatory enforcement, which could increase our exposure to litigation and liability. Although we utilize a variety of
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measures to secure the data that we control, even compliant entities can experience security breaches or have
inadvertent failures despite employing reasonable practices and safeguards.
If the technology-based systems that give our customers the ability to shop or interact with us online do
not function effectively, our results of operations, as well as our ability to grow our e-commerce websites
globally or to retain our customer base, could be materially and adversely affected.
Many consumers shop with us through Company-owned e-commerce websites and third-party digital marketplaces,
where expectations and competitive pressures, including delivery speed, shipping costs, return policies, and mobile
functionality, continue to increase. Consumers increasingly use mobile platforms, social media, and digital channels
to shop, comparison shop, and engage with brands, and we rely on these channels to attract and retain customers.
Our success may depend on the continued effectiveness of third‑party digital platforms and marketplaces, which
may change algorithms, policies, fee structures, data access, or content moderation practices, including through
increased use of AI ‑driven tools, in ways that reduce traffic, increase customer acquisition costs, or otherwise
diminish the effectiveness of our marketing and sales efforts. These platforms may also become subject to
regulatory actions that limit our ability to operate on them or require costly operational or technological changes.
Failure to provide effective, reliable, secure, and user-friendly digital platforms that offer competitive delivery options
and meet evolving consumer expectations or to scale our technical infrastructure to support increased demand,
could disrupt operations, reduce sales, harm our reputation, and adversely affect our results of operations.
Additional risks include channel conflict with Company-owned and third-party brick and mortar stores, challenges in
replicating the in-store experience online, and liability for online content.
If we are unsuccessful at improving our operational and IT systems and our efforts do not result in the
anticipated benefits to us or result in unanticipated disruption to our business, our results of operations
could be adversely affected.
We continually strive to improve and automate our operational and IT systems and processes to enhance the
efficiency and competitiveness of our business. Transitioning to these new or upgraded processes and systems
requires significant capital investments and personnel resources. Implementation is also highly dependent on the
coordination of numerous employees, contractors and software and system providers. While these efforts have
resulted in improvements to our operational systems, we expect to continue to incur expenses to implement
additional improvements and upgrades to our systems. Many of these expenditures have been and may continue to
be incurred in advance of realizing any direct benefits to our business. Moreover, our investments in operational and
IT systems may not generate the expected return on investment or may take longer than anticipated to deliver
benefits. We cannot guarantee that we will be successful in improving our operational systems, adapting to changes
in technology, including the effective use of data analytics, and other emerging technologies, or that these efforts will
result in anticipated benefits. We may also experience difficulties in implementing or operating our new or upgraded
operational or IT systems, including ineffective or inefficient operations, significant system failures, outages, delayed
implementation and loss of system availability, which could lead to increased implementation and operational costs,
loss or corruption of data, delayed shipments, excess inventory and interruptions of operations resulting in lost sales
or profits. If our operational or IT system upgrades, improvements and associated implementation efforts are not
successful, our financial condition and results of operations could be adversely affected, and our business may
become less competitive.
Risks related to our use of artificial intelligence technologies could adversely affect our business,
reputation, results of operations, or financial condition.
We and our third-party service providers are increasingly using AI , data analytics, and machine learning
technologies across our business, including operational and IT systems, digital platforms, and certain business
processes. While these technologies may improve efficiency and decision-making, they may not perform as
intended and may produce inaccurate, incomplete, or otherwise unreliable outputs, including due to deficiencies in
the data used to develop or operate such tools.
Our use of AI , and the use of AI by third parties on which we rely, may introduce additional risks related to the
integrity, security, and governance of data used by such technologies, including the potential for unauthorized use,
processing, or exposure of sensitive information in ways that may not be fully addressed by our existing data
protection controls, as well as operational disruptions resulting from reliance on AI -driven outputs or systems that do
not perform as intended. In addition, the use of AI technologies in the creation or development of content, designs,
or other intellectual property may present uncertainty regarding ownership, copyright-ability, or potential
infringement of third-party intellectual property rights. The legal and regulatory landscape governing AI is rapidly
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evolving, and compliance with new or changing requirements may require additional resources or operational
changes. If we are unable to effectively manage these risks, our business and results of operations could be
materially and adversely affected.
Risks Related to Our Legal, Compliance, and Regulatory Environment
Failure to adequately protect our intellectual property rights could reduce sales and adversely affect the
value of our brands.
Our business could be significantly harmed if we are not able to protect our intellectual property rights. We believe
our competitive position is attributable to the value of our trademarks, patents, trade dress, trade names, trade
secrets, copyrights, and other intellectual property rights. As a result of the success of our brands, we have become
a target of counterfeiting and product imitation. Although we actively pursue legal and other actions against those
who infringe on our intellectual property rights, we cannot guarantee that these actions will be adequate to protect
our brands in the future, particularly because some countries’ laws do not protect these rights to the same extent as
US laws. If we fail to adequately protect our intellectual property rights, it may allow competitors to sell products that
are similar to and directly competitive with our products, or we could lose opportunities to sell our products to
consumers who instead purchase counterfeit or imitation products, which could reduce sales of our products and
adversely affect the value of our brands. In addition, any intellectual property lawsuits in which we are involved
could require significant time and expense and distract management’s attention from operating our business, which
may negatively affect our business and results of operations. In addition to enforcing our intellectual property rights,
we may need to defend claims against us related to our intellectual property rights. For example, we have faced
claims that the word “ugg” is a generic term. Such a claim was successful in Australia, but similar claims have been
rejected by courts in the US , China, the Republic of Türkiye, and the Netherlands. Any court decision or settlement
that invalidates or limits trademark protection of our brands, which allows a third-party to continue to sell products
similar to our products or to sell counterfeit products, could lead to intensified competition and a reduction in our
sales and adversely affect the value of our brands.
Our revolving credit facility agreements expose us to certain risks.
From time to time, we have financed our liquidity needs in part through borrowings under revolving credit facilities.
We may be unable to renew, extend, or replace our revolving credit facilities on acceptable terms, or at all, when
they mature, which could reduce our available liquidity. Our ability to borrow under our revolving credit facilities may
be limited if the lenders believe there has been a material adverse change to our business. In addition, our revolving
credit facility agreements contain a number of customary financial covenants and restrictions, which may limit our
ability to engage in transactions that would otherwise be in our best interests, or otherwise respond to changing
business and economic conditions, and may therefore have a material effect on our business. Failure to comply with
any of these covenants could result in a default, allowing our lenders to accelerate the timing of payments, which
could have a material adverse effect on our business, operations, financial condition, and liquidity. In addition, in
some cases, a default under one revolving credit facility could result in a cross-default under other facilities. Certain
of our revolving credit facility agreements bear interest at a rate that varies by currency. Any increases in interest
rates applicable to our borrowings would increase our cost of borrowing, which would reduce our net income and
liquidity.
The tax laws applicable to our business are complex, and changes in tax laws or audits by taxing
authorities could increase our worldwide tax rate and may subject us to additional tax liabilities, which may
materially affect our financial position and results of operations .
Changes in global tax laws, regulations, and treaties could materially affect our business. These tax laws require
significant judgment and specialized expertise to evaluate and estimate our worldwide provision for income taxes.
Changes in these tax laws (and our interpretation thereof), could result in a materially higher tax expense or a
higher effective tax rate on our worldwide earnings. For example, global tax authorities may take differing positions
in interpreting the Organization for Economic Co-operation and Development’s (commonly known as OECD)
guidance, including with respect to Pillar Two model rules, which could modify existing tax principles and increase
our tax liabilities; in addition, the enactment of H.R. 1, also known as the One Big Beautiful Bill Act, or similar future
legislation, may also affect applicable tax rules and interpretations. These changes and potential other tax law
changes could increase our income tax liability or adversely affect our long-term effective tax rates and net income .
Refer to Note 5, “Income Taxes,” of our consolidated financial statements in Part IV within this Annual Report for
further information regarding tax law changes.
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Additionally, we are subject to tax audits, which may result in the assessment of additional taxes. Although we
believe our tax estimates are reasonable and our tax filings are prepared in accordance with all applicable tax laws,
the final determination with respect to any tax audits, and related litigation, could be materially different from our
estimates or from our historical tax provisions and accruals, especially as there is continued economic and political
pressure to increase tax revenue in jurisdictions in which we operate. The results of a tax audit or other tax
proceeding could have a material adverse effect on our results of operations or cash flows during the periods for
which that determination is made and may require a restatement of prior financial reports. In addition, changes in
our estimates related to uncertain tax positions could result in adjustments to our tax expense and effective tax rate
in future periods.
Risks Related to Our Common Stock
Our common stock price has been volatile, which could result in losses for stockholders.
The trading price of our common stock has been and may continue to be volatile. The trading price of our common
stock could be affected by a number of factors, including:
• changes in expectations regarding our future financial performance and results of operations;
• changes in estimates and opinions of our performance by securities analysts and other market
participants, or our failure to meet such estimates;
• changes in our stockholder base or public actions taken by investors, including activism;
• market research and opinions published by securities analysts and other market participants, and
the response to such publications;
• third-party data sources estimating our intra-quarter financial performance;
• quarterly fluctuations in our sales, margins, expenses, financial condition, and results of operations;
• the financial stability of our customers, manufacturers, suppliers, and competitors;
• announcements made by us or our competitors regarding product launches or developments;
• announcements by our competitors, or other companies in our industry, regarding changes in
financial condition, results of operations or financial outlook;
• legal proceedings, regulatory actions, and legislative changes impacting us, our competitors, or the
industry in which we operate;
• the declaration of stock or cash dividends, stock repurchases, or stock or reverse stock splits;
• consumer confidence and discretionary spending levels;
• broad market fluctuations in trading volume and market price of publicly traded securities;
• general market, geopolitical, and macroeconomic conditions, including evolving international trade
dynamics and recessionary conditions; and
• trading activity in our stock by short-term or technical investors, including algorithmic trading, index
funds, or other market participants whose investment decisions are not based on our fundamentals.
In addition, the stock market in general has experienced extreme price and volume fluctuations. Accordingly, the
price of our common stock is volatile and any investment in our stock is subject to risk of loss. These broad market
and industry factors and other general macroeconomic conditions unrelated to our financial performance may also
affect our common stock price, including in ways that are disproportionate to or not directly related to our operating
performance.
Anti-takeover provisions contained in our Amended and Restated Certificate of Incorporation (Certificate)
and Amended and Restated Bylaws ( Bylaws ), as well as provisions of Delaware law, could impair or delay a
takeover attempt.
Our C ertificate and Bylaws contain provisions that could have the effect of rendering more difficult hostile takeovers,
change-in-control transactions, or changes in our Board or management. As a Delaware corporation, we are also
subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which may
delay, deter, or prevent a change-in-control transaction. Any provision of Delaware law, our Certificate, or our
Bylaws that has the effect of rendering more difficult, delaying, deterring, or preventing a change-in-control
transaction could limit the opportunity for stockholders to receive a premium for their shares of our common stock,
and could affect the price that investors are willing to pay for our common stock.
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ITEM 1B. UNRESOLVED COMMENT LETTERS
Unresolved Comment Letters
None.
Table of Contents 27
ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
We maintain a comprehensive cybersecurity program, recognizing the critical importance of safeguarding our
operations, employees, customers, and other business partners from cybersecurity risks, which continue to evolve
in frequency and sophistication. These risks include, among others, operational, financial, reputational, legal, and
regulatory risks.
As a part of this program, we have developed an incident response plan ( IRP ) designed to quickly respond to,
mitigate, and recover from cybersecurity incidents. The IRP includes procedures for incident detection and
reporting, initial assessment, containment, eradication, recovery, post-incident activities, and continuous
improvement.
We also integrate cybersecurity risk management into our overall risk management framework to ensure that
cybersecurity risks are considered in all aspects of our business . Our management team works closely with our
Chief Digital & Data Officer ( CDDO ) and Chief Information Security Officer ( CISO ) , and is designed to align our
cybersecurity efforts with our business objectives and operational needs. Key components of our cybersecurity
approach include, among other things:
• establishing a dedicated action team, led by our CDDO and CISO , to oversee and manage
cybersecurity risks;
• implementing a comprehensive cybersecurity risk assessment process and strategy based on
industry standards and established frameworks such as the National Institute of Standards and
Technology ( NIST );
• implementing a third-party and vendor risk management program, which includes evaluating risk
levels such that third parties and vendors with access to our systems or data are subject to
cybersecurity onboarding and review, along with cybersecurity and data privacy audits and ongoing
risk monitoring and mitigation efforts;
• conducting penetration tests and security maturity assessments throughout the year;
• periodically engaging independent third-party assessors to audit our cybersecurity and information
system programs to evaluate their effectiveness;
• implementing industry-standard technologies and processes to protect our system and data and to
help detect potential unauthorized activity;
• maintaining access controls to safeguard data and systems;
• providing annual trainings to employees on responsible information security, data security and
cybersecurity practices including appropriate action to take against cybersecurity threats;
• conducting periodic phishing simulations to our employees;
• engaging in cybersecurity incident tabletop exercises and scenario planning exercises;
• maintaining a cybersecurity and information security risk insurance policy, which insures for data
incidents or breaches and other technology related exposures; and
• periodically reviewing and updating our IRP , privacy policy, and other relevant policies/procedures.
We continuously evaluate and enhance our cybersecurity risk management practices in response to evolving
threats and business needs .
In the three-year period ended March 31, 2026 , our business, results of operations and financial condition have not
been materially affected by risks from cybersecurity threats, including as a result of any prior cybersecurity incidents
experienced by either us or third parties, but we cannot provide assurance that they will not be materially affected in
the future by such risks or any future material incidents. Refer to Part I, Item 1A, “Risk Factors - Risks Related to
Technology, Data Security and Privacy” within this Annual Report for further information.
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Cybersecurity Governance
Our Board has delegated to the Audit Committee primary responsibility for oversight of enterprise risk assessment
and risk management, including risks related to cybersecurity and information security. Our CDDO and CISO , who
head our cybersecurity and information security initiatives, provide quarterly updates to the Audit Committee , and
annual updates to the full Board . These updates cover various topics, such as efforts to enhance our cybersecurity
posture, operational and incident metrics, mitigation actions, and key performance indicators such as cybersecurity
maturity, program health, and audit and compliance activities. The Audit Committee reviews and monitors these
updates as part of its oversight of our cybersecurity risk management program. The Audit Committee also engages
in regular dialogue with management, including our CDDO and CISO , regarding cybersecurity and technology risks
and related initiatives. In addition, the Audit Committee reviews relevant internal audit findings and key metrics used
to assess our capabilities to manage cybersecurity, information security, and technology risks.
In addition to these regular updates, significant cybersecurity incidents and updates are escalated on an as-needed
basis in accordance with our IRP, and the Audit Committee discusses with management the nature and potential
impact of material cybersecurity incidents on our business, financial condition, and results of operations.
Our CDDO and CISO have extensive experience in cybersecurity. Our CDDO has served in his role since
September 2024. He has over 15 years of experience in digital transformations, enterprise technology, artificial
intelligence, and data management. Our CISO has served in various roles in information technology for over 25
years, including 15 years in information security. He holds a B.S. in Cybersecurity and Information Assurance, along
with industry certifications including ISACA’s Certified in Risk and Information Systems Control, ISACA’s Certified
Information Security Manager, and ISC2’s Certified Information Systems Security Professional certifications.
