ITEM 1A. RISK FACTORS
In addition to the risks stated elsewhere in this Annual Report on Form 10-K, set forth below are certain risk factors that we believe are material. If any of these risks occur, our business, financial condition, results of operations, cash flows and reputation could be harmed. You should also consider these risk factors when you read forward-looking statements elsewhere in this report.
Risk Factors Summary
This summary contains a high-level summary of risks associated with our business. It does not contain all the information that may be important to you, and you should read this summary together with the more detailed discussion of risks and uncertainties set forth in Item 1A “Risk Factors” of this Annual Report on Form 10-K. A summary of our risks includes, but is not limited to, the following :
Risks Related to Our Business
• Our business depends on the performance of distributors, builders, buying groups, retailers and servicers.
• The demand for our products may be adversely affected by unfavorable economic and business conditions.
• We operate in markets with high levels of competition.
• Our future success depends on developing, manufacturing and attaining market adoption of new products and maintaining product quality and reliability.
• Our ability to keep pace with evolving technologies, including AI, and effectively develop and deploy such technologies.
• Our results of operations and cash flows may fluctuate from quarter to quarter.
• A loss of, or material cancellation, reduction or delay in purchases by one or more of our largest customers.
• Our exposure to credit risk on our accounts receivable.
• Our exposure to risks arising from our international business operations.
• Past growth may not be indicative of future growth.
• Inability to identify, finance and complete suitable acquisitions.
• Negative impacts of litigation and other claims.
• Future impairment of our goodwill and intangible assets.
• Exchange rate fluctuations, cost increases and other inflation, changes in our effective tax rate or exposure to additional income tax liabilities.
• Our ability to attract, develop and retain highly qualified personnel, including key members of management.
• Disruptions in the financial markets.
• Significant disruption or breach of our technology infrastructure or that of our vendors or third parties, or failure to maintain the security of confidential information.
• Difficulties in operating or implementing a new ERP system or human resources information system.
• Misuse of our technology-enabled products.
• Failure to maintain an effective system of internal controls.
Risks Related to the Manufacturing, Supply and Distribution of Our Products
• Dependence on key suppliers, including single-source suppliers and sole-source suppliers.
• Ability to manage product inventory in an effective and efficient manner.
• Product manufacturing disruptions, including as a result of catastrophic or other events beyond our control.
• Tariffs and other trade restrictions and cost of raw materials.
Risks Related to Government Regulation
• Compliance with, and potential liabilities under, employment, environmental, health, transportation, safety and other governmental laws and regulations.
• Risks related to our handling of personal information.
• Our employees, commercial partners and vendors may engage in misconduct or other improper activities.
• Violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and other anti-corruption laws.
• Our failure to comply with international trade compliance regulations, and changes in U.S. government sanctions.
• Changes in laws, regulations, government policies or regulatory interpretations.
• Climate change and legal or regulatory responses thereto, and increasing scrutiny from stakeholders on environmental, social and other sustainability matters.
Risks Related to Intellectual Property Matters
• Our ability to obtain, maintain and enforce our intellectual property and proprietary rights.
• Protection of our trademarks or trade names.
• Our reliance on access to intellectual property owned by third parties.
• Claims that our employees, consultants or advisors have wrongfully used or disclosed alleged trade secrets or other proprietary information or claims asserting ownership of intellectual property that we regard as our own.
• Our ability to enforce our intellectual property rights in all jurisdictions.
Risks Related to Our Indebtedness
• Our indebtedness could adversely affect our financial condition.
• An inability to generate sufficient cash flow to meet our debt service obligations.
• The terms of our indebtedness restrict our current and future operations, particularly our ability to respond to change or to take certain actions.
• Our dependence on distributions and other payments from our subsidiaries to fund our operations and expenses.
• We may incur additional debt and may also require additional capital that may not be available on acceptable terms, if at all.
Risks Related to Our Corporate Structure
• Provisions in our certificate of incorporation, bylaws and Delaware law may deter takeover efforts that stockholders may believe to be beneficial to stockholder value.
• Our certificate of incorporation, designates specific courts as the exclusive forum for certain claims, which could discourage lawsuits against the Company and our directors and officers.
Risks Related to Ownership of Common Stock
• Future sales of our common stock, or the perception that such sales may occur, may depress the market price of our common stock.
• The market price of our common stock has been, and may continue to be, volatile, and the value of an investment in our common stock could decline.
• Our capital allocation decisions, including share repurchases.
Risks Related to Our Business
Our business depends on the performance of distributors, builders, buying groups, retailers and servicers.
We distribute our products through our customers who are distributors, builders, buying groups, retailers and servicers, many of whom also sell products of competing manufacturers. In certain circumstances, we also sell our products to customers that may compete with us in one or more product categories or geographic markets. These relationships may present inherent conflicts of interest, including the risk that such customers could use market knowledge, technical insights or other information obtained through their commercial relationship with us to support competing offerings. In addition, a competitor-customer may reduce or discontinue purchases in favor of internally developed or alternative products, which could adversely affect our sales and margins. As our customer base evolves, including through consolidation or expansion into adjacent markets, these risks may increase.
We rely on these customers to stock, market and recommend our products to consumers, and our business depends on retaining strong relationships with them. However, the financial condition of these customers could weaken, they could elect to discontinue distributing our products, or they could reduce sales of our products in favor of competitors’ offerings. In addition, uncertainty regarding demand for our products could cause these customers to reduce their ordering, inventory levels or marketing efforts related to our products. These events have occurred in the past, and future occurrences could adversely impact our business, financial condition, results of operations and cash flows.
In several geographic markets, including Europe, many potential consumers prefer local suppliers, in some cases because of existing relationships and in other cases because of local legal restrictions or incentives that favor local businesses. Our success in these markets depends on obtaining and maintaining relationships with local customers that can effectively sell our products to consumers in the applicable markets. We have invested, and intend to continue to invest, in programs designed to enhance sales to distributors, builders, buying groups, retailers and servicers, including volume rebate programs with key distributors. However, these programs may not be successful in retaining or increasing product purchases by these customers or in maintaining or increasing our net income.
The demand for our products may be adversely affected by unfavorable economic and business conditions.
We compete in various geographic regions and product markets around the world. The most significant of these include residential markets in the U.S., Canada, Europe and Australia, as well as commercial markets in the U.S. and Europe. We have experienced, and expect to continue to experience, fluctuations in sales and results of operations due to economic and business cycles. Consumer spending affects sales of our products for initial pool installations and, more broadly, sales to our customers, such as distributors, builders, buying groups, retailers and servicers, who sell our products to consumers and who must account for anticipated changes in consumer demand when purchasing our products. Consumer spending is impacted by factors outside of our control, including general economic and geopolitical conditions, interest rates, conditions in the residential housing market, unemployment rates and wage levels, inflation, disposable income levels, consumer confidence and access to credit. In economic downturns, demand for swimming pool equipment products and the growth rate of pool-eligible households and pool construction may decline. A weak economy may also cause consumers to defer replacement and refurbishment activity or upgrades to new products, or to purchase less expensive brands. Historically, our aftermarket product sales have comprised most of our net sales. Even in generally economic conditions, and/or in the housing market and home ownership rates could lead to a in demand for our products and have a material impact on our financial performance. In addition, homeowners’ access to consumer credit is a factor the purchase of new pools and related products. High interest rates and tightened credit markets may limit homeowners’ ability to access financing for new pools and related supplies and, consequently, for the replacement, repair and operation of equipment, which could impact our product sales. Any of the foregoing factors, individually or in the aggregate, could reduce demand for our products and could have a material effect on our business, financial condition, results of operations and cash flows.
We operate in markets with high levels of competition, which may result in pressure on our profit margins and limit our ability to maintain or increase the market share of our products.
The markets for our products are geographically diverse and highly competitive. We compete against large and well-established national and global companies, as well as regional and local niche OEMs, lower cost manufacturers
and new market entrants. Our competitors offer products of varied quality and across a wide range of retail price points. We compete based on brand recognition with consumers, strong relationships with our distributors and resellers, and the loyalty of our builders and servicers with whom we have built a large installed base. In addition, we compete based on technical innovation, intellectual property, reputation for providing quality and reliable products, competitive pricing and contractual terms. Some of our competitors, particularly smaller companies, compete primarily on price and local relationships, especially with respect to products that do not require significant engineering or technical expertise. In addition, during economic downturns average selling prices tend to decrease as market participants compete more aggressively on price, which may significantly and adversely impact our profit margins. Moreover, demand for our products is affected by changes in customer ordering and consumer purchasing patterns, such as changes in the levels of inventory maintained by customers, the timing of customer and consumer purchases, and changes in customer and consumer preferences for our products. For example, our results of operations have been negatively impacted, and in the future, may continue to be negatively impacted by customer decisions to reduce inventory levels. Consumer purchasing behavior may also shift by product mix within the market or result in a shift to new distribution channels, including e-commerce, which is a rapidly developing area.
In addition, our products have and may continue to become subject to competition from counterfeit products, which are products sold under the same or very similar brand names and/or having a similar appearance to genuine products, but which are sold without proper licenses or approvals. Similarly, our products also have and may continue to be subject to competition from producers that attempt to reverse engineer our products, produce similar products in low cost-of-labor locations, and sell those products at low margins, significantly undercutting our pricing. In each case, such products divert sales from genuine products, often are of lower cost and quality, and have the potential to damage the reputation for quality and effectiveness of the genuine product and of our brands.
If we are unable to continue to differentiate our products or adapt to changes in purchasing behavior or shifts in distribution channels, or if we are forced to cut prices or to incur additional costs to remain competitive, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our future success depends on developing, manufacturing and attaining market adoption of new products and maintaining product quality and reliability. Even if we attain significant market acceptance of our planned or future products, the commercial success of these products is not guaranteed.
Our future financial success will depend substantially on our ability to develop, manufacture, market and sell products that we develop. Consumers are increasingly demanding “smart home” technology, automation and environmentally friendly, sustainable and ethical product features to enhance their pools. Staying at the forefront of product innovation and evolving consumer demand is important to our future success. We must continue to develop and bring to market innovative and technologically advanced products, which require hiring and retaining technical staff, maintaining and upgrading manufacturing facilities and equipment and expanding our intellectual property. We must also identify emerging technological and commercial trends in our target end markets, as well as understand and react to potential regulatory changes. Successful growth of our sales and marketing efforts will depend on the strength of our marketing infrastructure and the effectiveness of our sales and marketing strategies, as well as the continued quality, reliability and innovation of our products. Because we sell our products primarily through distributors, we rely in part on the efforts of third-party sales representatives, who may be required to learn about new features or other aspects of our new products to effectively sell those products, which may prove . Further, our ability to product demand driven by our sales and marketing efforts will be largely dependent on our ability to maintain a commercially viable manufacturing process that complies with regulatory standards. media reports about us or our products, whether accurate or , could our reputation and relationships with our customers and suppliers, cause customers and suppliers to their relationship with us, or our ability to effectively compete. Our reputation and brand are important to our ability to compete effectively and maintain demand for our products. Actual or perceived in the quality, reliability, performance or safety of our products, whether arising from design, manufacturing, supplier quality, installation, or other factors, could affect our brand, reputation and customer relationships. Even isolated or limited quality issues, , or may be widely publicized or amplified through digital media, distributor networks or customer communications and could result in a of confidence in our brands. Because we sell our products primarily through distributors, builders and servicers who influence product selections and purchasing decisions, any in brand perception could reduce their willingness to recommend or stock our products, adoption of new products, increase returns, warranty or service costs,
or shift demand toward competing products. Negative perceptions may persist even after underlying issues are addressed and may impair our ability to introduce new products, maintain pricing, protect market share or achieve anticipated returns on innovation investments. Failure to manufacture, market and sell our newly developed products could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our ability to keep pace with rapidly evolving technological developments, including AI technologies, and to effectively develop, deploy and manage such technologies could adversely affect our competitiveness, increase our costs and expose us to regulatory scrutiny, liability and reputational risk.
Technological developments, including advances in AI, machine learning, generative AI and other emerging technologies, are evolving rapidly and may materially affect our industry, our products, and the manner in which we operate our business. To remain competitive, we must continue to adapt to these developments, successfully incorporate new technologies into our products, services, processes and internal operations, and respond to evolving industry standards and customer expectations. We have made, and expect to continue to make, investments in technology-enabled and AI-powered solutions intended to improve efficiency, accuracy and customer outcomes. However, our ability to successfully develop, enhance, introduce and deploy new technologies that achieve market acceptance depends on numerous factors, many of which are outside of our control. If we are unable to innovate effectively or keep pace with technological change, or if competitors more successfully adopt or deploy emerging technologies, our competitive position and results of operations could be affected.
The development, adoption and use of AI technologies remain rapidly evolving, and the associated technical, operational, legal and regulatory risks are not fully understood. Developing, testing and deploying AI-enabled systems may require significant investment, increase operating costs and divert management and technical resources, and there can be no assurance that our use of AI will provide anticipated benefits. Ineffective, flawed or inadequate AI development, deployment or governance practices by us or by third-party vendors on which we rely could result in unintended consequences, including bias, errors, miscalculations, misleading or inaccurate outputs, operational disruptions, delays in product development or performance deficiencies. AI-enabled systems may to perform as intended or may not be adopted by customers at anticipated levels.
In addition, the use of AI technologies may increase our exposure to cybersecurity risks and the potential compromise or misuse of confidential, proprietary or personal information, including intellectual property. AI tools may unintentionally expose sensitive information, create vulnerabilities in our systems or those of our vendors, or be misused by personnel or third parties in ways that result in compliance failures, operational disruptions or reputational harm. We may also face claims, investigations or regulatory scrutiny relating to data privacy, data protection, consumer protection, product performance, intellectual property or other matters arising from our use of AI technologies. The legal and regulatory environment governing AI is uncertain, complex and rapidly evolving in the United States and internationally, and new or changing laws, regulations, enforcements priorities or industry standards may require us to modify our practices, incur substantial compliance costs or limit certain uses of AI technologies. In addition, actors may increasingly use AI to conduct , or other activities targeting our systems, data, customers or intellectual property.
Any of these factors, individually or in the aggregate, could adversely affect our business, reputation, financial condition, results of operations and cash flows.
Our results of operations and cash flows may fluctuate from quarter to quarter for many reasons, including seasonality and weather conditions.
We experience seasonal demand from customers and consumers and, as a result, experience fluctuations in quarterly results. During the second quarter of a fiscal year, sales are typically higher in anticipation of the start of the summer pool season. In the fourth quarter, we incentivize customers to buy and stock inventory in preparation for the following year’s pool season under an “Early Buy” program, which features price discounts and extended payment terms. Under the 2025 Early Buy program, we generally ship products beginning in the late third quarter through approximately the first quarter of 2026 and expect to receive payments for most of these shipments during the second quarter of 2026. As a result, our accounts receivable balance typically increases from September to April before Early Buy payments are received. In addition, cash flow is generally higher in the second quarter as the seasonality of our business peaks and payments are received. Also, because most of our sales are to distributors whose inventory levels of our products may vary due to reasons beyond our control, such as consumer demand,
supply chain lead times and macroeconomic conditions, our revenue may fluctuate from period-to-period. For example, our results of operations have been negatively impacted, and in the future may be negatively impacted, by distributors reducing inventory levels.
As a result, management believes that period-to-period comparisons of results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance or results expected for any fiscal year. In addition, seasonal effects in our business may vary from year to year and be impacted by weather patterns, particularly by temperature fluctuations, heavy flooding and droughts, which patterns may become less predictable and more extreme as a result of climate change. Additionally, while the majority of our sales are driven by aftermarket repair, replacement and remodeling products, adverse weather conditions, such as cold or wet weather, may negatively affect demand for, and sales of, pool equipment due to diminished pool usage and reduced construction activity.
A loss of, or material cancellation, reduction or delay in purchases by, one or more of our largest customers could harm our business.
Most of our net sales are generated from sales to distributors, including our largest customer, Pool Corporation, which represented approximately 33% of our net sales in Fiscal Year 2025 and approximately 46% of our accounts receivable as of December 31, 2025. Another customer accounted for 12% of our net sales in Fiscal Year 2025 and approximately 14% of our accounts receivable as of December 31, 2025. Our top five customers accounted for a significant portion of our net sales in Fiscal Year 2025. Our concentration of sales among a relatively small number of large customers make our relationships with each of these customers important to our business. Our success depends on retaining these customers, which requires us to effectively manage relationships and anticipate their needs across the channels in which we sell our products. The loss of one or more of our largest customers, any material cancellation, reduction or delay in purchases by these customers, or our inability to successfully develop relationships with additional customers could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, as our largest customers continue to evolve their approaches to assessing appropriate inventory levels, our net sales have been, and in the future could be, affected by purchasing decisions associated with reductions of their inventory levels.
We are exposed to credit risk on our accounts receivable, and this risk is heightened during periods of weak economic conditions.
We distribute our products through distributors, builders, buying groups, retailers and servicers. A substantial majority of our outstanding accounts receivable are not secured by collateral, third-party bank support or financing arrangements or credit insurance. In addition, a significant portion of our accounts receivable is typically concentrated among a relatively small number of distributors, builders, buying groups, retailers and servicers. As of December 31, 2025, our largest customer represented approximately 46% of our accounts receivable, and another customer represented approximately 14% of our accounts receivable. Our exposure to credit and collectability risk on accounts receivable is higher in certain international markets, and our ability to mitigate these risks is limited. There can be no assurance that our procedures to monitor and limit exposure to credit risk will effectively reduce such risk and prevent losses. If general economic conditions are weak or worsen, it may be more likely that one or more of our customers will default on amounts owed to us, and it may be more difficult for us to enforce judgments against such customers, which could result in significant write-offs of accounts receivable and have a material adverse effect on our results of operations.
We are exposed to political, regulatory, economic, trade and other risks arising from our international operations, including risks associated with geopolitical conflicts.
For Fiscal Year 2025, sales outside of the U.S. accounted for approximately 21% of our net sales. In addition, we source certain components and raw materials from non-U.S. suppliers and operate manufacturing facilities in Europe and China. As a result, our business is subject to political, regulatory, economic, trade and other risks inherent in operating across multiple jurisdictions. These risks include, among others:
• adverse changes in general economic, political or social conditions in countries where we operate, particularly in emerging markets;
• the imposition of, or changes in, tariffs, duties, exchange controls, licensing requirements, sanctions or other trade restrictions and trade relations;
• geopolitical conflicts and related governmental responses (including sanctions and export controls), which may be unpredictable and could disrupt markets, supply chains, transportation routes, payment flows or customer demand;
• changes in tax treaties, laws, regulations or interpretations that could adversely affect our effective tax rate or increase our tax liabilities;
• difficulties enforcing agreements, protecting contractual rights and collecting receivables through non-U.S. legal systems;
• challenges in communicating, implementing and monitoring evolving standards, directives and regulatory requirements across our products, services and global facilities;
• the threat of nationalization or expropriation, limitations on repatriation of earnings, and other regionally-imposed capital controls or requirements;
• difficulties staffing, managing and maintaining personnel in non-U.S. labor markets, including as a result of differing labor laws, practices and customs, and managing widespread operations;
• increased risk of infringement, misappropriation or other challenges in protecting our intellectual property and other proprietary rights in non-U.S. jurisdictions; and
• changes in, and required compliance with, a variety of non-U.S. laws and regulations, including those related to trade, customs, sanctions, anti-corruption, privacy, data protection, labor and the environment.
Changes in U.S. or foreign government policies or administrative practices, including with respect to trade and investment matters, may affect our ability, or the ability of our suppliers, contract manufacturers, channel partners or other business partners to import products or raw materials into the U.S. or other markets, or to operate efficiently across borders. We purchase certain key parts and components from suppliers in China and maintain a manufacturing facility in China, and we also maintain a manufacturing facility in Europe. Accordingly, we are exposed to risks relating to any deterioration in the relationship between the U.S. and China, or between the U.S. and the European Union, including through the imposition or escalation of tariffs, sanctions, export controls or other trade or investment restrictions.
Our ability to anticipate and effectively manage these and other risks may be limited, and there can be no assurance that these factors will not have a material adverse effect on our international operations or our business, financial condition, results of operations and cash flows.
Past growth may not be indicative of future growth.
Historically, we have experienced substantial sales growth driven by a combination of organic market share gains, geographic expansion, technological innovation, new product offerings, increased demand for outdoor living products and acquisitions that have expanded our size, scope and geographic footprint. During the first two years of the COVID-19 pandemic, residential pool equipment sales increased, and this increase in demand was experienced broadly across our product lines as consumers refocused on improving the quality of the homeowner’s outdoor living experience. In addition, customer expectations regarding extended lead-times during the COVID-19 pandemic partially accelerated demand for our products. As the impact of the COVID-19 pandemic has lessened, we believe that these pandemic-related demand trends have generally abated, and the industry has returned to more normalized historical seasonal patterns. As a result, our historical growth rates, including those experienced during the COVID-19 pandemic, may not be indicative of future growth or demand for our products.
Our business strategies and initiatives, including our growth initiatives, are subject to a variety of business, economic and competitive uncertainties and contingencies, many of which are beyond our control. If we are unable to continue to compete effectively in our existing markets, successfully expand into new markets, or otherwise grow our business, our business, financial condition, results of operations and cash flows could be adversely affected.
We may not be able to identify, finance and complete suitable acquisitions, and any completed acquisitions may be unsuccessful or consume significant resources.
Our business strategy includes the acquisition of businesses and product lines that complement or enhance our existing businesses. We continue to evaluate potential strategic acquisitions and investments that we believe could strengthen our industry position or expand our product offerings; however, we may not be able to identify suitable acquisition candidates, obtain necessary financing on acceptable terms, or have sufficient cash available to complete acquisitions in the future. Future acquisitions and investments may require significant cash expenditures and may involve the incurrence of indebtedness, the issuance of equity or equity-linked securities, operating losses, integration costs and other expenses. In addition, acquisitions involve numerous risks and uncertainties, including, among others:
• diversion of management time and attention from the day-to-day operation of our business;
• difficulties integrating acquired businesses, technologies, systems, culture, infrastructure and personnel into our existing operations;
• challenges in obtaining, assessing and verifying the financial statements and other information of acquired businesses;
• inability to obtain required regulatory or governmental approvals on a timely basis or at all or financing on favorable terms;
• cybersecurity risks arising from the integration of acquired information technology systems and networks;
• potential loss of key employees, contractual relationships or customers of the acquired businesses or our existing business;
• assumption of known and unknown liabilities and exposure to unforeseen liabilities of acquired companies, including liabilities relating to anti-corruption laws, such as the Foreign Corrupt Practices Act, and privacy and data protection laws, including the General Data Protection Regulation; and
• increased leverage or dilution of existing stockholders’ interests resulting from the issuance of equity securities or equity-linked securities.
Any acquisitions or investments that we complete may not achieve our anticipated benefits or synergies or take longer than expected to realize, may fail to meet our expectations, or may require us to record impairment charges, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We may be negatively impacted by litigation and other claims, including intellectual property, product liability or warranty claims, and health and safety matters, including product recalls.
We have been, and in the future may be, made a party to litigation or other legal proceedings arising in the ordinary course of our business. These matters may include, among others, commercial or contractual disputes with suppliers, customers or counterparties to acquisitions and divestitures; intellectual property claims; product liability or warranty claims; matters relating to the use, installation or performance of our products; consumer matters; employment and labor disputes; alleged violations of securities laws; and environmental, health and safety matters, including claims based on alleged exposure to asbestos-containing product components. The outcome of such proceedings is inherently uncertain, and one or more matters may be resolved unfavorably to us. Regardless of the outcome, these proceedings may result in substantial defense and settlement costs, require significant management time and attention, and otherwise adversely affect our business, financial condition, results of operations and cash flows. In addition, in connection with prior acquisitions or dispositions, we have provided indemnification for certain liabilities and , and we cannot provide any assurance that material indemnification will not be asserted us in the future. We also have been, and in the future may be, subject to lawsuits or other actions related to products manufactured or sold by businesses we have acquired.
We have in the past and may in the future, implement voluntary product recalls or market withdrawals, or may be required to do so by regulatory authorities. A recall or market withdrawal could be costly, divert management resources and disrupt our operations. A recall or withdrawal of one of our products, or a similar product
manufactured or distributed by another entity, could also adversely affect demand for our products due to confusion regarding the scope of the recall or withdrawal, or due to actual or perceived harm to our reputation for quality and safety.
If our products are, or are alleged to be, defectively designed, manufactured or labeled; contain, or are alleged to contain, defective components or hazardous materials, such as asbestos; or are misused, we may become subject to costly litigation by consumers, as well as government investigations or enforcement actions. Product liability claims, whether or not meritorious, could harm our reputation, divert management’s attention from our core business, be expensive to defend, reduce sales of our products and result in significant damage awards or settlement costs. Although we maintain product liability insurance, such insurance may not be adequate to cover all future claims or liabilities, and asserted us could increase our insurance premiums or limit our ability to obtain or maintain coverage on commercially reasonable terms. In addition, product liability made one of our competitors could lead to increased us or create a perception that our products are subject to similar risks.
We have significant goodwill and intangible assets, and future impairment of our goodwill and intangible assets could have a material adverse effect on our results of operations.
We test goodwill and other indefinite-lived intangible assets for impairment at least annually, and more frequently if circumstances warrant. As of December 31, 2025, our goodwill and intangible assets were reported at $1,954.2 million and represented approximately 62% of our total assets. The determination of whether goodwill or intangible assets are impaired involves significant judgments and estimates, including assumptions regarding future cash flows, discount rates and market conditions. Actual results may differ from these assumptions, and declines in the estimated fair value of our reporting units or intangible assets could result in future impairment charges, which could have a material adverse effect on our results of operations. In addition, changes to our business strategy, including the expansion, consolidation or relocation of manufacturing operations, shifts in our geographic footprint, or the exit of certain markets or product lines, could trigger impairment assessments or result in the write-down of goodwill, intangible assets, property, plant and equipment or other long-lived assets. Such actions may also give rise to restructuring charges, which could be material and could adversely affect our results of operations and financial condition in the period in which they are recognized.
Exchange rate fluctuations could adversely affect our financial condition, results of operations and cash flows.
We are exposed to currency transaction and translation risk when we enter into purchases or sales denominated in currencies other than the local currency of the transacting entity. We conduct business in multiple jurisdictions worldwide and are subject to market risk arising from changes in the value of foreign currencies relative to our reporting currency, the U.S. dollar. The functional currencies of our international operating locations are generally the applicable local currencies. We manage many operating activities at the local level, and our net sales, costs, assets and liabilities are denominated in a combination of local currencies and the U.S. dollar. Because our results of operations and our assets and liabilities are reported in U.S. dollars, fluctuations in exchange rates may affect our reported results and the comparability of our results of operations and cash flows between periods.
Our financial instruments that are subject to foreign currency fluctuations and exchange risks consist primarily of cash and cash equivalents, trade receivables, trade payables and net sales denominated in currencies other than the U.S. dollar. For Fiscal Year 2025, approximately 17% of our net sales were generated by international operating locations that use a functional currency other than the U.S. dollar, with sales primarily denominated in Euros and Canadian dollars. As a result, we are exposed to exchange rate volatility between the U.S. dollar and these currencies. We periodically enter into foreign currency derivative contracts to manage certain aspects of these risks; however, these activities may not be effective or may not offset our exposure.
We expect that the proportion of our sales denominated in non-U.S. dollar currencies may increase in future periods. Given the volatility of currency exchange rates, there can be no assurance that we will be able to effectively manage our currency-related risks or that fluctuations in exchange rates will not have a material adverse effect on our financial condition, results of operations or cash flows. See “Quantitative and Qualitative Disclosures about Market Risk.”
Changes in our effective tax rate or exposure to additional income tax liabilities could adversely affect our financial results.
Our effective tax rate may fluctuate as a result of a variety of factors, including changes in tax laws, regulations or policies; changes in statutory tax rates; new or revised interpretations of existing tax laws; changes in accounting standards or guidance related to tax matters; and differences between expected and actual tax outcomes. In addition, our effective tax rate may be affected by changes in the geographic mix of our earnings, the jurisdictions in which we operate or generate income, and the extent of our operations in those jurisdictions. Any of these factors could increase our income tax expense and adversely affect our financial results.
We may experience cost increases and other inflation.
In recent years, we have experienced material cost increases and other inflation across several aspects of our businesses. More recently, inflationary pressures have resulted in increased prices across various sectors of the economy, and we have been affected by higher costs for raw materials and other associated manufacturing inputs. The ongoing volatile market for commodities and impact of immigration policies has the potential to continue to drive price increases in our supply chain. In addition, changes in immigration laws, regulations or enforcement policies in jurisdictions in which we operate may affect the availability and cost of labor within our operations or those of our suppliers, contract manufacturers and customers. Such changes could contribute to higher operating expenses, supply chain disruptions or reduced demand in certain markets. We seek to mitigate the impact of cost inflation through productivity improvements and, where appropriate, by implementing increases in selling prices to offset higher costs for raw materials (particularly metals such as ruthenium and copper), energy and other expenses, including wages, pension, health care and insurance costs. We continue to pursue operational initiatives intended to reduce costs and mitigate the effects of inflation; however, these initiatives may not be successful or sufficient to offset increased costs, and we may not be able to pass on price increases to our customers. Continued cost increases, inflationary pressures and supply cost could have a material effect on our business, financial condition, results of operations and cash flows.
We depend on our ability to attract, develop, and retain highly qualified personnel, including key members of management.
Our future success depends in part on the continued service and performance of our executive management team and other key personnel. If one or more members of our executive management team or other key personnel are unable or unwilling to continue in their current roles, or if we are unable to attract, develop and retain qualified executives or key personnel in the future, our business, operations and strategic initiatives may be adversely affected.
In addition, our employees are critical to our growth and long-term success, and our future performance depends largely on our ability to attract, train, retain and motivate a skilled and experienced workforce. During periods of unexpected or increased demand for our products, we may need to hire and onboard additional personnel to support our operations and maintain appropriate inventory levels. Furthermore, the market for skilled personnel is often very competitive, both in markets where our operations are located and with the emergence of remote work. If we are unable to attract, hire, train or retain qualified personnel in sufficient numbers, our operating results, productivity and ability to execute our business strategies could be adversely affected.
Disruptions in the financial markets could adversely affect us, our customers, consumers and suppliers by increasing funding costs or reducing the availability of credit.
In the ordinary course of our business, we may access credit markets for a variety of purposes, including to refinance or repay indebtedness, complete acquisitions, fund working capital needs, repurchase shares, make capital expenditures and invest in our subsidiaries. Our access to capital, as well as the terms and cost of available financing, may be adversely affected by disruptions or volatility in the financial markets, which have occurred in the past and have, at times, made financing less attractive or unavailable. In addition, disruptions in the financial markets may adversely affect the ability of our suppliers to obtain financing to meet demand for their products and services and adversely affect the ability of our customers and prospective consumers of our products to obtain financing to initiate and complete new projects. Financial market disruptions have also had adverse effects on broader economic conditions and have contributed to slowdowns in general economic activity, which may reduce
demand for our products and otherwise adversely affect our business. One or more of these factors could have a material adverse effect on our business, financial condition, results of operations or cash flows.
We rely on information technology systems to support our business operations, and a significant disruption or breach of our technological infrastructure, or that of our vendors or other third parties, could adversely affect our financial condition, results of operations and reputation. In addition, a failure to maintain the security of confidential information could expose us to litigation and regulatory action.
We rely on information technology systems and networks to support a wide range of business activities, some of which are managed or provided by third parties whose products, services and systems are outside our control. Our reliance on information technology systems is expected to increase as we continue to implement new technologies to support our operations, including our new enterprise resource planning (ERP) system and new human resources information system, both of which are currently being implemented. Accordingly, our ability to operate effectively, maintain effective internal controls and accurately report our financial results depends on the reliability and security of our technological infrastructure, which is inherently susceptible to internal and external threats. These threats include malicious code embedded in open-source software, errors, misconfigurations, “bugs” or other vulnerabilities in commercial software integrated into our (or our suppliers’ or service providers’) systems, as well as system failures, downtime, fires, natural disasters, power , telecommunications , internet , security and other events.
Our software and systems, as well as those of our third-party service providers, are subject to cybersecurity risks and vulnerabilities. We and certain of our third-party service providers have experienced cybersecurity attacks and other incidents in the past, and expect to be subject to such threats in the future. These incidents may compromise the confidentiality, integrity or availability of our information technology systems and networks and the confidential information, including personal information, that we or third parties collect, maintain or process. We periodically evaluate and test the effectiveness of our security measures, controls and procedures and conduct third-party risk assessments. However, such threats have increased in frequency, sophistication and potential impact. The techniques used by threat actors evolve rapidly and are often not detected until after an attack has been launched, which may limit our ability to anticipate, prevent or adequately mitigate such incidents. We prioritize the remediation of identified security vulnerabilities based on known and anticipated risks, and we seek to address within reasonable timeframes. However, we may not be to identify all , particularly those associated with third-party software or systems, or timely implement patches or mitigating measures, and our systems, data or operations could be materially compromised. In addition, the development and use of AI technologies may further existing cybersecurity risks and introduce new or previously unknown and .
We have experienced interruptions, delays and outages in service and availability from time to time, including infrastructure changes, human or software errors, upgrade disruptions and capacity constraints. If we experience a material cybersecurity incident or other failure of our information technology systems or those of our vendors or other third parties, whether as a result of accidental or intentional actions, ransomware, malware or other malicious activity, we could be exposed to data loss, misappropriation of proprietary or confidential information, business interruption, reputational harm, regulatory investigations or enforcement actions, or , , and significant response, system restoration, remediation and future compliance costs. Such could also result in liabilities related to the theft or of information or the design or manufacture of our products. Our insurance coverage may not cover all or , including any to our reputation. Establishing and maintaining systems, controls and processes to address cybersecurity and information technology risks may require significant expenditures and management resources and may be mandated by law and regulations. For example, the California Internet of Things Security Law, which became in 2020, requires the implementation of reasonable security measures for certain IoT devices, and to comply with such requirements could result in or other consequences.
Difficulties in operating or implementing a new ERP system or human resources information system could adversely affect our operations and financial reporting.
We rely extensively on information systems and technology to manage our business and summarize operating results. We are in the process of implementing a new ERP system across most of our business as part of our efforts to improve and strengthen our operational, financial and reporting processes. In addition, we are implementing a
new human resources information system designed to enhance the efficiency of our global human resources operations. The implementation, integration and ongoing operation of these systems involve significant time, resources and management attention and has been subject to delays, disruptions and unforeseen challenges which may continue to occur. These systems may not perform as expected or deliver the anticipated benefits and could increase costs, disrupt or complicate existing operations, or adversely affect our ability to process transactions, all of which may have a material adverse effect on our business and results of operations. If the new ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected.
Misuse of our technology-enabled products could lead to reduced sales, increased costs, liability claims or harm to our reputation.
As we continue to design and develop products, services and solutions that leverage hosted or cloud-based resources, the IoT and other wireless or remote technologies, including our OmniLogic application, that incorporate networks of distributed and interconnected devices with sensors, data transmission and other computing capabilities, our products and our customers’ data and systems may be exposed to harmful or unlawful content or attacks, including cybersecurity threats. We may not fully anticipate, identify or mitigate any of these risks through our product design, development or testing processes. These products, services and solutions may contain vulnerabilities or critical security defects that have not been identified or remedied, and certain vulnerabilities or defects may not be disclosed without increasing security risks. In addition, we may make prioritization decisions regarding which vulnerabilities or security defects to address and the timing of any remediation, which could result in compromised security. The existence or of such or security could us or our customers to risks of data , access to or of information, and to systems or property; result in , regulatory or enforcement actions, or , or other liability; customers from using our products, services or solutions; and otherwise affect our business, financial condition, results of operations and reputation.
If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the rules and regulations of the SEC, as well as the listing standards of the New York Stock Exchange (“NYSE”). The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting and that we evaluate and report on the effectiveness of such controls. For our fiscal years ended December 31, 2022 and 2021, we identified material weaknesses in our internal control over financial reporting relating to, among other matters, our policies and procedures and controls over segregation of duties within our financial reporting function and the preparation and review of journal entries. While no material weaknesses have been identified since fiscal 2022, there can be no assurance that additional material weaknesses will not be identified in the future.
If we fail to maintain effective disclosure controls and procedures or internal control over financial reporting, we may be unable to accurately or timely report our financial condition or results of operations, or to prevent or detect fraud. Any such failure could adversely affect investor confidence in the reliability of our financial reporting and, as a result, adversely affect the market price of our common stock. In addition, if we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline or could result in the Company being subject to regulatory or even risk from the NYSE.
Risks Related to the Manufacturing, Supply and Distribution of Our Products
We depend on suppliers, including single-source suppliers, and, in certain cases, sole-source suppliers, to provide components used in our products, and any failure to obtain such components could have a material adverse effect on our business, product inventories, sales and profit margins.
Our suppliers, and the third parties on which they rely for materials and services, are subject to a variety of risks, including labor disputes or shortages, union organizing activities, financial constraints, adverse weather
conditions, public health epidemics, natural disasters, significant public health and safety events, supply constraints, and general economic and political conditions. Any of these factors could limit our suppliers’ ability to manufacture or deliver components to us at acceptable prices or in sufficient quantities, or at all. We generally place purchase orders with suppliers on an as-needed basis, and suppliers may discontinue the manufacture or supply of components at any time and our safety stock inventory levels may not be sufficient to meet our requirements in the event of supply disruptions. In addition, our suppliers may be unable to meet our demand due to factors outside of their control, the nature of our contractual arrangement, or our relative importance as a customer, and they may elect to reduce or discontinue their business with us in the future.
We also rely on single-source suppliers for certain components, and, in a limited number of cases, on sole-source suppliers. A single-source supplier is a supplier from which we purchase all of a particular component, even though alternative suppliers may exist, while a sole-source supplier is the only supplier of a particular component available in the market. Any interruption, delay or disruption in supply from these suppliers, or our inability to establish additional or replacement suppliers on acceptable terms or within a reasonable timeframe, could limit our ability to manufacture our products, result in production delays, increase costs and adversely affect our ability to deliver products to our customers on a timely basis or at all. If alternative sources of supply cannot be identified, we may be required to redesign or modify our products to incorporate substitute components, which could increase design and manufacturing costs, delay product shipments and result in higher prices. Any such modified products may not perform as effectively as prior versions or may not achieve market acceptance, which could lead to customer or consumer , our reputation and materially and affect our business, product inventories, sales and profit margins.
If we or our customers do not manage product inventory in an effective and efficient manner, our profitability could be adversely affected.
The efficient planning and management of product inventory depends on a variety of factors, including the accuracy of demand forecasting, the ability to align manufacturing capacity with anticipated demand, managing product mix and customer requirements, and controlling product expiration and obsolescence. We typically build inventory during the first quarter in anticipation of the upcoming pool season and during the third quarter in anticipation of shipments of products purchased under our Early Buy program in the fourth quarter. However, actual demand during these periods may differ from our expectations, and we may not accurately forecast customer demand. If we are unable to manage our inventory efficiently, including maintaining inventory within targeted budget levels, managing work-in-process inventory, controlling expired or obsolete products, or maintaining sufficient inventory to meet customer demand, our operating efficiency, margins and long-term growth prospects could be adversely affected. Excess inventory may result in increased storage, handling and obsolescence costs, while insufficient inventory could lead to sales or customer relationships. In addition, we sell our products primarily through distributors, and the inventory levels maintained by our distributors may fluctuate due to changes in market demand, perceptions regarding our ability to meet demand, shifts in customer order patterns, including the timing and quantity of purchases, adoption of new technologies or connected products, changes in customers preferences, or other factors. Because we do not control the inventory levels of our distributors, fluctuations in distributor inventory may our ability to forecast demand accurately. Reductions in distributor inventory levels have affected and may in the future affect, our net sales in a given period and our ability to manage our inventory .
Product manufacturing disruptions, including as a result of catastrophic or other events beyond our control, could prevent us from meeting customer demand or increase our costs.
Our manufacturing operations, warehouses and suppliers are subject to risks of disruption from a variety of events beyond our control, including significant equipment failures, natural or man-made disasters, earthquakes, power outages, fires, explosions, terrorism, adverse weather conditions (including hurricanes), labor disputes, public health epidemics and other catastrophic events. If operations at any of our manufacturing facilities, warehouses or supplier locations are disrupted for any of these reasons, we may be unable to fill customer orders, meet delivery schedules or otherwise satisfy customer demand for our products. In addition, in certain instances, we maintain inventory and own manufacturing equipment at facilities owned and operated by third parties, which may limit our ability to prevent, respond to or mitigate the impact of such disruptions. Any of these events could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We have experienced, and may continue to experience, increased costs and delays associated with obtaining raw materials and components and transporting finished goods to our customers. Geopolitical conflicts, labor disputes and adverse weather events, including those exacerbated by climate change, have contributed to increased shipping costs and supply chain disruptions in recent years, and such conditions may persist or worsen. Supply chain disruptions have, in the past, resulted in higher raw material and manufacturing costs, which have adversely affected our profitability, and similar disruptions could continue to have an adverse impact in the future.
Interruptions in production, particularly at our manufacturing facilities, could increase our operating costs and reduce our sales. Any material disruption to our production capabilities could require us to incur substantial capital expenditures or other costs in order to meet customer demand. Proceeds from applicable insurance policies covering such events may not fully offset the lost sales, increased costs or other adverse events, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Tariffs and other trade restrictions could adversely affect our business and financial results, we face uncertainties regarding duty reduction and deferral programs, and we may not be able to implement strategies to offset impacts resulting from such tariffs.
Our business is impacted by international or cross-border trade, including the import and export of products and components into and out of the U.S., as well as by trade policies and tensions among nations. The U.S. government has implemented, and may propose or impose additional significant tariffs and other trade restrictions on certain goods, including products and components sourced from China, as well as tariffs on steel and aluminum imports. Because we purchase certain key parts and components from suppliers in China and use steel and aluminum in many of our products, such tariffs and trade restrictions have increased our costs and adversely affected our profitability. In addition, we sell our products in international markets, and other countries have imposed retaliatory tariffs or other trade measures in response to U.S. trade policies, or could do so in the future, which could reduce demand for our products in those markets or otherwise adversely affect our sales. We may be unable to successfully implement strategies to offset increased costs resulting from tariffs. For example, there can be no assurance that we will be able to implement future price increases to offset cost increases, or that customers will accept such price increases. If we are to offset impacts resulting from tariffs or other trade restrictions, demand for our products, our margins and financial results could continue to be affected.
Global trade policy continues to evolve and the ultimate impact of recent developments with respect to U.S. tariffs is unclear. On February 20, 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”). Following the Supreme Court’s decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. Furthermore, the process for potential refunds remains unclear. These and future changes in tariffs, trade policies, trade actions, or retaliatory trade measures in response, have resulted and may continue to result in additional costs and pricing pressures, supply chain disruptions, volatile or unpredictable customer spending patterns, and increased economic or geopolitical risks, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Duty reduction and deferral programs, such as free-trade agreements and duty drawback, are available to reduce our duties and tariffs for qualifying imports and exports. The amount and timing of our receipt of refunds (and whether we will ultimately receive a refund) or whether we may be required to repay refunds previously received is uncertain and subject to our compliance with each program’s specific requirements, changes in trade policy and the governing terms of duty reduction and deferral programs. As discussed in Note 14 , “Commitments and Contingencies,” we recorded a charge related to certain prior-year duty drawback claims that were required to be refunded to U.S. Customs and Border Protection. Our current expectations that no additional refunds will be required may prove to be incorrect, as we continue to assess our obligations. Any additional repayment could adversely affect our financial condition, results of operations and cash flows.
The cost of raw materials could increase our cost of goods sold and adversely affect our results of operations and financial condition.
Our principal raw materials consist primarily of metals, including ruthenium, copper, steel, titanium and aluminum; resins, including polypropylene (PP), ABS, high-density polyethylene (HDPE), and polyvinyl chloride (PVC); and liner board used for packaging, each of which is subject to price volatility as a commodity material. The prices of these materials are influenced by a variety of factors, including global manufacturing capacity, supply and demand dynamics, energy costs, transportation constraints, trade policies and geopolitical conditions. We may not be able to timely or fully pass through certain cost increases in raw materials to our consumers in the future. We source most of our key parts and components from large suppliers in the U.S., Mexico and Asia, and we may not be able to access reliable or cost-effective alternatives to these suppliers. Significant price fluctuations, supply disruptions or shortages of raw materials required for our products could increase our cost of goods sold, adversely affect our margins and cause our results of operations and financial condition to suffer.
Risks Related to Government Regulation
The nature of our business subjects us to compliance with, and potential liabilities under, employment, environmental, health, transportation, safety, and other governmental laws and regulations.
We are subject to a broad range of laws and regulations relating to, among other things, product labeling, weights and measures, zoning and land use, environmental protection, local fire codes, and workplace and consumer health and safety. Our operations and products are regulated by numerous governmental authorities in jurisdictions where we operate, including the U.S. Environmental Protection Agency, the U.S. Food and Drug Administration, the Federal Communications Commission, the Consumer Product Safety Commission, the Occupational Safety and Health Administration, the National Fire Protection Agency and the Federal Trade Commission. Many of these requirements govern the packaging, labeling, handling, transportation, storage, sale and use of our products. We and certain of our affiliates store hazardous materials and chemicals at various locations, and the storage, handling and use of such materials are subject to strict regulation under applicable laws and local fire codes. In addition, we sell ultraviolet, ozone, and salt chlorinator products and related technologies that are regulated under the Federal Insecticide, Fungicide, and Rodenticide Act, which governs, among other things, the testing, use, reporting, sale, distribution, licensing and market verification of these products. We are also subject to regulations administered by the U.S. Department of Energy relating to the labeling, testing, reporting and certification of new and replacement pool pumps.
Failure to comply with applicable laws and regulations, or with new or evolving requirements to which we may become subject in the future, could result in investigations, administrative, civil or criminal penalties, fines, damages, seizures, disgorgement, injunctive relief, cessation or suspension of operations, or other enforcement actions. These laws and regulations have changed significantly in recent years and may continue to change, sometimes rapidly, resulting in increased compliance complexity and uncertainty.
Environmental, health, transportation and safety regulations, in particular, have trended toward increasingly stringent standards and restrictions on activities that may impact the environment, including the use, handling, storage and disposal of hazardous materials and chemicals. Under certain environmental laws, we could be strictly, jointly and severally liable for remediation costs associated with contamination at properties we currently or formerly owned, leased or operated, or at third-party sites where we have arranged for disposal of waste. We could also be subject to claims by third parties for damages arising from such contamination, including property damage or personal injury. Certain of our properties have a history of industrial or other uses that may have resulted in contamination and we have from time to time been involved in investigation and remediation activities. There can be no assurance that future remediation obligations, liabilities or related costs will not be material.
Compliance with existing and future governmental regulations has resulted in, and may continue to result in, increased operating costs, capital expenditures and administrative burdens. We cannot provide assurance that the costs of complying with applicable laws and regulations will not increase.
Our handling of personal information could give rise to significant costs and liabilities, including as a result of governmental regulation, which may have a material adverse effect on our reputation, business, financial condition and results of operations.
We collect, use, store, transmit and otherwise process data that is sensitive to the Company and its employees, customers, dealers and suppliers. A variety of state, federal, and foreign laws, regulations and binding industry standards apply to the collection, use, retention, protection, disclosure, transfer and other processing of certain types of data, including the California Consumer Privacy Act (CCPA), the European Union’s General Data Protection Regulation (GDPR), Canada’s Personal Information Protection and Electronic Documents Act, and Australia’s Privacy Act. In addition, many U.S. states have enacted data privacy laws that are in effect or are expected to come into effect. Certain jurisdictions also are considering or have enacted legislation requiring the local storage or processing of data, or similar requirements, which could increase the cost and complexity of delivering our products and services. For example, the GDPR generally restricts the transfer of personal information, including employee and consumer information, to countries outside of the European Economic Area without appropriate safeguards or other permitted mechanisms. If we are unable to implement or maintain a valid compliance mechanism for cross-border data transfers, we may face increased exposure to regulatory actions, substantial fines or injunctions restricting the processing or transfer of personal information from Europe or other jurisdictions.
Many foreign data privacy laws and regulations, including the GDPR, which has extraterritorial application, are more stringent than those in the U.S. The GDPR has resulted, and may continue to result, in increased compliance burdens and costs for companies with customers, users or operations in the European Union. The GDPR’s requirements governing the collection, use and sharing personal information may be operationally complex and costly, and violations may result in fines of up to €20 million/£17.5 million or up to 4% of the infringer’s total worldwide annual turnover of the preceding financial year, whichever is greater. Similarly, the data privacy laws of certain U.S. states may impose additional obligations and potential liabilities on us. For example, the CCPA requires covered businesses to provide specified disclosures to California consumers and affords such consumers certain data privacy rights, including the right to opt-out of certain sales of personal information, and provides for civil penalties enforceable by the California Attorney General, as well as a private right of action for certain data breaches.
We make public statements about our collections, use and disclosure of personal information through our privacy policies, website disclosures and other public communications. These statements may subject us to governmental or legal action if they are alleged to be deceptive, unfair or inconsistent with our actual practices.
Obligations relating to data privacy and data security are evolving rapidly, becoming increasingly complex and stringent, and creating regulatory uncertainty. In addition, these obligations may be interpreted or applied differently across jurisdictions, which may result in inconsistent or conflicting requirements. Compliance with existing and future data privacy and security laws, regulations and industry standards may be costly and time consuming, and may require changes to our information systems, technologies and business practices, as well as those of third parties that process personal information on our behalf. If we, or the third parties on which we rely, fail or are perceived to have failed to comply with applicable data privacy and security obligations, we could be subject to significant adverse consequences, including governmental investigations, fines, penalties, audits, inspections, additional reporting requirements or processing restrictions, reputational harm, or on our ability to process data or operate in certain jurisdictions, any of which could have affect our business, reputation, revenues and results of operations.
Our employees, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk that our employees, commercial partners and vendors may engage in fraudulent, illegal or otherwise improper conduct. Such misconduct could include intentional, reckless or negligent actions that violate applicable laws or regulations, including regulatory requirements, manufacturing standards, data privacy laws, or laws that require the complete and accurate reporting of financial information or data.
It is not always possible to identify or deter misconduct by our employees or third parties, and the measures we take to detect and prevent such conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations, enforcement actions or litigation arising from alleged noncompliance with applicable laws or regulations. Regardless of the outcome of any such investigations or
proceedings, and even if no misconduct ultimately is found to have occurred, we could incur substantial costs, which could have a material adverse effect on our business, financial condition and results of operations.
Violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other anti-corruption laws could have a material adverse effect on us.
The U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act and other anti-corruption laws in jurisdictions outside the U.S. generally prohibit companies and their intermediaries from making improper payments or providing other items of value to government officials or other persons for the purpose of obtaining or retaining business. Our policies require compliance with applicable anti-corruption laws. We operate in multiple jurisdictions that are perceived to present heightened risks of governmental or commercial corruption, and in certain circumstances, compliance with anti-corruption laws may conflict with local customs or business practices. In addition, many of our suppliers, customers and consumers operate in industries that are subject to enhanced regulatory scrutiny, including infrastructure construction and energy-related activities. We cannot provide assurance that our internal controls, policies and procedures will always prevent, detect or mitigate reckless or acts by our employees or third-party intermediaries. of anti- laws could result in , potential self-disclosures to governmental authorities, and or civil , any of which could our business and have a material effect on our reputation, business, financial condition, results of operations and cash flows.
Our failure to comply with international trade compliance regulations and changes in U.S. government sanctions, could have a material adverse effect on us.
Our global operations require the regular import and export of goods and technology across international borders. Certain products that we manufacture are “dual use” products, meaning products that may have both civilian and military applications or may otherwise be impacted in weapons proliferation, and therefore may be subject to heightened or more complex export control and sanctions requirements. From time to time, we receive information alleging improper activity in connection with our import or export activity. Our policies require compliance with applicable U.S. and non-U.S. trade laws and regulations, including export controls and economic sanctions, and provide for investigation of alleged improper activity and, where appropriate, reporting to relevant governmental authorities. However, these policies may not prevent violations, and even when we are in compliance with applicable laws and our internal policies, we may nevertheless experience reputational harm if of our products are sold through intermediaries to parties operating in, or associated with, sanctioned jurisdictions. Any actual or alleged violations could subject us to civil or , including significant monetary , or restriction of import or export privileges, and other governmental actions, and could affect our reputation, business and prospects.
Changes in laws, regulations, government policies or regulatory interpretations could adversely affect our business, financial condition and results of operation.
We and many of our customers are subject to a wide range of international, federal, state and local laws, regulations, rules and policies governing, among other things, product design, manufacturing processes, environmental protection, energy efficiency, climate-related matters, product certification, product liability, workplace safety, taxation, trade, tariffs and the availability of government incentives. Changes in existing laws or regulations, the adoption of new laws or regulations, changes in regulatory interpretations or enforcement practices, or shifts in government or political leadership could materially affect our business. In particular, evolving environmental, sustainability, energy efficiency and climate-related regulations may require changes to our products, manufacturing processes or supply chain, increase compliance and development costs, or limit the markets in which certain products may be sold. Our ability to timely develop, manufacture and market products that meet customer demand while also complying with applicable regulatory requirements may be constrained, and any delays or failures in doing so could adversely affect our sales, margins and profitability. Regulatory changes may also alter customer purchasing behavior, accelerate shifts in product preferences or technologies, or reduce demand for certain product categories, which could affect our results of operations. In addition, legislative or regulatory changes relating to taxes, trade policies, tariffs, customs duties, international trade agreements or economic policy, including changes arising from shifts in political in the countries in which we operate or sell our products, could increase our costs, our operations or supply chain, or affect our competitive position. Compliance with new or modified regulatory requirements may require significant management attention and
financial resources, result in increased operating or capital expenditures, or expose us to fines, penalties, recalls, seizures or other enforcement actions. Further, certain regulations or government policies may currently support demand for some of our products or those of our customers. If such regulations, incentives or policies are modified, eliminated or interpreted differently, demand for our products could decline. Any of these factors, individually or in the aggregate, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Climate change and legal or regulatory responses thereto may have an adverse impact on our business and results of operations.
The effects of climate change are uncertain and increasingly unpredictable. There is growing concern that rising global average temperatures associated with increased concentrations of greenhouse gases are contributing, and may continue to contribute, to changes in global weather patterns and an increased frequency and severity of natural disasters. Such climate-related events and adverse weather conditions may impair our manufacturing operations, disrupt our supply chain or affect demand for our products. Climate change may also present challenges for water-related products, including potential degradation of water quality and changes in water conservation or efficiency requirements. Certain climate-related events may disrupt our operations or affect demand in certain markets, as changes in climate conditions may influence consumer behavior and purchasing patterns in ways that are difficult to predict, which could affect our business and results of operations
In addition, increased public and regulatory focus on climate change may result in additional legal or regulatory requirements intended to limit greenhouse gas emissions or mitigate the effects of climate change. For example, the European Union has enacted the Corporate Sustainability Reporting Directive, which requires certain companies to provide expanded disclosures regarding climate-related risks, impacts, and greenhouse gas emissions, and could apply to us depending on evolving scope criteria and regulatory interpretation. Compliance with such requirements may be costly and time-consuming. Increased energy costs, compliance costs or other expenses from climate-related legal or regulatory initiatives may also disrupt, or increase the costs of, the manufacturing and distribution of our products. The effects of climate change and related legal or regulatory responses could have a long-term adverse impact on our business and results of operations.
There is increasing scrutiny from stakeholders on environmental, social and other sustainability matters.
Investors, customers, policymakers and other stakeholders are increasingly focused on companies’ management of environmental, social and other sustainability matters, including climate change and human capital management. We undertake various initiatives to manage such matters and respond to stakeholder expectations; however, these initiatives may be costly and may not achieve their intended objectives. For example, many of our sustainability initiatives rely on methodologies, standards, and data that are complex, may depend in part on third-party information and continue to evolve. Achieving our sustainability strategy goals and targets may be impacted by factors such as availability of resources, technological advances, legislative and regulatory changes, and customer or supplier requirements, many of which are not within our control. Also, changing standards for measuring and reporting on applicable sustainability metrics could result in increased costs and negatively impact our results of operations or cash flows. If our sustainability strategy and initiatives are misaligned with evolving stakeholder expectations, it could negatively impact our reputation. In addition, stakeholder expectations regarding sustainability matters may differ or conflict, and proponents and opponents of particular issues have increasingly engaged in activism, including , to advance their views. Addressing stakeholder expectations on sustainability matters, including compliance with evolving legal and regulatory requirements, may require significant resources. Any to effectively manage or respond to such expectations, or to changes in the interpretation or application of applicable laws or regulations, could result in reputational , of customers or employees, increased regulatory or investor , or other effects on our business.
Risks Related to Intellectual Property Matters
If we are unable to adequately obtain, maintain and enforce our intellectual property and proprietary rights, or if we are accused of infringing, misappropriating or otherwise violating the intellectual property of others, our competitive position could be harmed, or we could be required to incur significant costs to enforce or defend such rights.
Patents, trademarks and other intellectual property rights are important to our business, and our success depends in part on our ability to obtain and maintain patent and trademark protection in the U.S. and other jurisdictions. As of December 31, 2025, we held approximately 221 issued U.S. patents and 242 issued foreign patents relating to our technologies, including pumps, filters, heaters, drains and white goods, robotic cleaners, in-floor cleaning systems, lighting, automation and controls, sanitization, valves and flow control, and IoT and other technologies, as well as approximately 139 U.S. trademark registrations and 707 foreign trademark registrations covering our marks, brands and products. As of December 31, 2025, we also held approximately 38 pending U.S. patent applications, 58 pending foreign patent applications, 7 pending U.S. trademark applications and 18 pending foreign trademark applications. See “Business—Intellectual Property.” In addition, we have in-licensed patents and patent applications to certain technologies incorporated in our products.
Pending and future patent applications may not result in patents being issued that protect our products or effectively prevent others from commercializing competing technologies or products. In addition, the scope of claims in a patent application may be narrowed before a patent is issued. Even after issuance, the scope, validity, enforceability and commercial value of patent rights are uncertain. This uncertainty has been heightened by actions of the U.S. Congress, U.S. federal courts and the U.S. Patent and Trademark Office, which have modified, and in some cases weakened, laws and regulations governing patents. Further, any patents that we own or in-license may be challenged, narrowed, circumvented or invalidated by third parties, which could permit others to commercialize competing technologies or products or could restrict our ability to manufacture or commercialize products without infringing third-party rights. Even where we obtain intellectual property protection, such protection may not prevent competitors from developing similar products or from challenging our names, brands or products. In addition, participants in our markets may use intellectual property challenges as a competitive strategy.
If we do not adequately maintain our intellectual property, we may lose our rights. For example, we are required to pay periodic maintenance and renewal fees for certain registered intellectual property, and our failure to do so could result in partial or complete loss of such rights. If this were to occur, competitors could use our technologies, brands or the goodwill we have developed, which could erode or eliminate any competitive advantage.
Competitors have infringed, and may in the future infringe, our intellectual property. Defending against such infringement may be expensive and time-consuming, and an adverse outcome could result in our intellectual property rights being narrowed or invalidated. In addition, it may be difficult or impossible to obtain evidence of infringement in a third party’s products. We may be required to devote significant resources monitoring, enforcing and defending our intellectual property rights. Competitors that infringe or develop products that imitate ours may reduce demand for our products and otherwise adversely affect our business. We may not prevail in disputes that we initiate, and any remedies obtained may not be commercially meaningful. Moreover, the extensive discovery often required in intellectual property may increase the risk that our confidential or proprietary information could be .
Patent enforcement and defense proceedings in the United States, including actions before federal courts and administrative proceedings before the U.S. Patent and Trademark Office, can be costly, time-consuming and unpredictable. Third parties may seek to invalidate our patents through inter partes review or other post-grant proceedings, which have become increasingly common and may result in patent claims being narrowed or invalidated. Even if we prevail in enforcement actions, the remedies obtained may be limited, delayed or insufficient to adequately protect our competitive position.
From time to time, we have received notices alleging that our products infringe patents or other intellectual property rights of third parties. Costs associated with defending infringement claims and any resulting settlements are generally not covered by insurance. If we do not prevail in any such dispute, we could be required to pay damages, cease the challenged activities or obtain licenses requiring royalty payments. Any required license may not
be available on commercially reasonable terms, or at all, which could prevent us from continuing to manufacture or commercialize certain products.
If we are unable to successfully enforce our intellectual property rights or obtain and maintain new patent or trademark protection, our competitive position could be harmed, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If our trademarks and trade names are not adequately protected, we may be unable to build name recognition in our markets, and third parties could assert trademark infringement claims against us.
If our trademarks and trade names are not successfully registered and adequately protected, we may be unable to build name recognition in our target markets, which could adversely affect our business. Competitors or other third parties have in the past, and may in the future, adopt trade names or trademarks that are similar to ours, which could impede our ability to build brand identity, cause market confusion and require us to pursue legal action. In addition, owners of other registered trademarks, or trademarks incorporating variations of our registered or unregistered trademarks or trade names, may assert infringement or other claims against us. Our efforts to protect or enforce our trademark and trade name rights, including with respect to trademarks, domain names or other similar intellectual property, may be unsuccessful and could result in substantial costs, diversion of management resources and the payment of or the imposition of injunctive relief restricting our use of certain intellectual property, any of which could affect our business, financial condition or results of operations.
We rely on access to intellectual property owned by third parties, and our ability to develop and commercialize certain products depends on the terms of licenses granted to us by such parties.
Certain of our products incorporate intellectual property owned by third parties, and we rely on licenses from such third parties to use that intellectual property. For example, we license patents relating to certain technologies used in our pool cleaner and lighting products. These licenses may not grant us rights, whether exclusive or non-exclusive, to use the licensed intellectual property for all purposes or in all geographic markets in which we may seek to commercialize our products, now or in the future. As a result, other parties may be permitted to use the same licensed intellectual property in competing products, now or in the future, which could diminish any competitive advantage derived from such licenses. In addition, if our licensors fail to prosecute, maintain, enforce, or defend their intellectual property rights, the licensed rights available to us may be reduced or eliminated, which could adversely affect our ability to develop or commercialize products that rely on those rights. Disputes with licensors, or future negotiations relating to license renewals, amendments or new licenses, could result in the or modification of existing license agreements, potentially limiting or eliminating our ability to develop and commercialize products covered by such agreements, or to do so on commercially acceptable terms.
We may be subject to claims that our employees, consultants or advisors have wrongfully used or disclosed trade secrets or other proprietary information of their current or former employers, or claims asserting ownership of intellectual property that we regard as our own.
Third parties may assert claims challenging the inventorship or ownership of our intellectual property. For example, although we take measures to prevent our employees, consultants and advisors from using the proprietary information or know-how of third parties in their work for us, we may be subject to claims that we or such individuals have used or disclosed trade secrets or other intellectual property of others. In addition, we may face claims that our agreements with employees, consultants or advisors requiring the assignment of intellectual property rights to us are invalid or unenforceable, which could result in ownership disputes regarding intellectual property we have developed or may develop in the future and interfere with our ability to realize the commercial value of such intellectual property. Litigation may be necessary to resolve such disputes, and if we are not successful, we could be from using certain intellectual property or could rights in such intellectual property, either of which could our business and competitive position.
We may not be able to effectively enforce our intellectual property rights in all jurisdictions.
The laws of certain foreign countries do not provide intellectual property protection to the same extent as the laws of the U.S., and companies frequently encounter difficulties protecting and enforcing intellectual property rights in some foreign jurisdictions. For example, certain foreign countries maintain compulsory licensing regimes under which a patent owner may be required to grant licenses to third parties. As a result, we may be unable to
prevent third parties from using our patented technologies outside the U.S. or from manufacturing and exporting products that infringe our intellectual property into jurisdictions where we have patent protection, which could increase competition and adversely affect our business.
Risks Related to Our Indebtedness
Our indebtedness could adversely affect our financial condition.
As of December 31, 2025, the Company’s total indebtedness was approximately $963.5 million, consisting of $955.0 million outstanding under our first lien term loan facility, $3.6 million of finance lease obligations and $4.8 million of other long-term debt. In addition, our asset-based lending facility (the “ABL Facility”) permits borrowing of up to $425.0 million, or $475.0 million during certain seasonal periods, subject to compliance with applicable borrowing base requirements and financial covenants. Borrowings under the ABL Facility are subject to a borrowing base calculation, which may limit availability from time to time. As of December 31, 2025, we had no outstanding borrowings under the ABL Facility and approximately $124.9 million of availability under the ABL Facility.
Our substantial indebtedness, together with our other financial obligations and contractual commitments, could have important consequences, including:
• requiring us to dedicate a substantial portion of our cash flows from operations to debt service, thereby reducing funds available for working capital, capital expenditures, acquisitions, sales and marketing activities, product development and other corporate purposes;
• increasing our vulnerability to adverse economic, industry or market conditions, which could place us at a competitive disadvantage relative to competitors with lower levels of indebtedness;
• increasing our exposure to interest rate risk, as a portion of our indebtedness bears interest at variable rates;
• limiting our flexibility to plan for, or respond to, changes in our business or the industries in which we operate;
• restricting our ability to pursue strategic acquisitions or potentially requiring us to undertake non-strategic divestitures; and
• limiting our ability to incur additional indebtedness or to dispose of assets to raise capital, if needed, for working capital, capital expenditures, acquisitions, product development and other corporate purposes.
Although the agreements governing our indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to significant exceptions, and indebtedness incurred in compliance with such provisions could be substantial. If we and our restricted subsidiaries incur additional indebtedness, including under the ABL Facility, the risks associated with our indebtedness could increase.
Servicing our debt requires a significant amount of cash, and we may be unable to generate sufficient cash flow to meet our debt service obligations.
Our ability to service our indebtedness depends on our ability to generate sufficient cash flows from operations, which is subject to numerous business, economic, financial, competitive, legislative and regulatory factors beyond our control. A significant portion of our indebtedness bears interest at variable rates. Increases in interest rates could result in higher debt service obligations, which may not be fully offset by applicable interest rate swap agreements. Based on our variable-rate borrowings outstanding as of December 31, 2025, a 1% increase in the effective interest rate would have resulted in an increase in annual interest rate expense of approximately $3.6 million, net of interest rate swap settlements. Our ability to make scheduled payments on, refinance or otherwise service our indebtedness and to fund planned capital expenditures depends on our future operating performance and cash flows. If we are unable to generate sufficient cash flows from operations to meet our debt service requirements and other obligations, we may be required to refinance all or a portion of our indebtedness, sell assets or operations, delay capital expenditures or raise additional debt or equity capital. We may not be able to pursue any of these actions on acceptable terms, on a timely basis, or at all, and the terms of our existing or future debt agreements may further restrict our ability to do so. In addition, elevated or increased market interest rates have required us to devote a portion of our cash flows to interest payments, which could affect our operations.
The terms of our indebtedness restrict our current and future operations, particularly our ability to respond to change or to take certain actions.
The agreements governing our outstanding indebtedness contain restrictive covenants that impose operating and financial limitations on us and may restrict our ability to take actions that may otherwise be in our long-term best interests, including, among other things, limitations on our ability to:
• incur additional indebtedness;
• create liens on assets;
• declare or pay certain dividends and make other distributions;
• make certain investments, loans, guarantees or advances;
• consolidate, amalgamate, merge, sell or otherwise dispose of all or substantially all of our assets; and
• enter into certain transactions with affiliates.
In addition, our ABL Facility includes a financial covenant requiring us to maintain a specified fixed charge coverage ratio during certain periods. These restrictions could limit our ability to operate our business by, among other things, constraining our ability to pursue financing, merger and acquisition, or other corporate opportunities. See Note 9. “Long-Term Debt” to the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain the required financial ratios. A breach of these covenants could result in an event of default unless a waiver is obtained. If a waiver is not obtained, such a default could permit our lenders to accelerate the related indebtedness and may result in the acceleration of, or default under, other indebtedness to which a cross-acceleration or cross-default provision applies. If our lenders accelerate repayment of our indebtedness, we and our subsidiaries may not have sufficient assets to repay such indebtedness.
Because our operations are conducted through our subsidiaries, we depend on distributions and other payments from our subsidiaries to fund our operations and expenses.
Our operations are conducted through our subsidiaries. As a result, our ability to fund operations and expenses, including the payment of dividends on our common stock, if any, depends on the earnings of our subsidiaries and their ability to make distributions to us in the form of dividends, loans or advances, or through repayment of loans or advances from us. Payments by our subsidiaries are subject to their earnings, business considerations and applicable statutory or contractual restrictions. We do not currently expect to declare or pay dividends on our common stock for the foreseeable future. However, if we were to determine to pay dividends in the future, the ability of our operating subsidiaries to make distributions would be restricted by the credit agreements governing our indebtedness.
Despite our existing indebtedness, we may incur additional debt, which could increase the risks described herein, and we may also require additional capital that may not be available on acceptable terms, if at all.
Despite our existing indebtedness, we may increase our level of indebtedness in the future to finance operations or acquisitions. The agreements governing our indebtedness limit, but do not prohibit, our ability to incur additional debt. Any increase in indebtedness would increase our debt service obligations and our exposure to the risks associated with higher leverage. The ABL Facility permits us to borrow up to $425.0 million, or $475.0 million during certain seasonal periods, subject to compliance with applicable borrowing base requirements and financial covenants. Borrowing availability under the ABL Facility is subject to a borrowing base calculation that may reduce availability from time to time. As of December 31, 2025, we had approximately $124.9 million of available borrowing capacity under the ABL Facility. We periodically evaluate market conditions and our ability to incur indebtedness to refinance existing indebtedness or to fund working capital needs.
We may require additional financing to fund operations or acquisitions, such financing may not be available to on acceptable terms, or at all. If we incur additional debt or issue equity securities, the terms of such financing may provide holders with rights, preferences or privileges senior to those of holders of our common stock, particularly in the event of liquidation. Additional debt may also impose more restrictive covenants than those currently applicable to us. If we issue additional equity, existing stockholders’ ownership interests would be diluted. If we are unable to
obtain additional capital when needed, our financial condition could be adversely affected. In addition, adverse changes in the credit ratings assigned to our indebtedness could limit our access to capital markets and increase our borrowing costs.
Risks Related to our Corporate Structure
Provisions in our certificate of incorporation, bylaws and Delaware law may deter takeover efforts that stockholders may believe to be beneficial to stockholder value.
Provisions in our certificate of incorporation and bylaws, together with provisions of Delaware law, may make it more difficult for a third party to acquire the Company, even if such acquisition may be considered beneficial by our stockholders. These provisions may also make it more difficult for stockholders to elect directors not nominated by the current Board of Directors or to take other corporate actions, including effecting changes in management. These provisions include a classified board of directors and the authority of our Board of Directors to issue shares of preferred stock without stockholder approval, which could be used to dilute the ownership of a potential hostile acquiror. In addition, our certificate of incorporation imposes certain restrictions on mergers and other business combinations between the Company and any person that beneficially owns 15% or more of our outstanding voting stock other than certain specified entities. As a result of these provisions, stockholders may be unable to sell their shares at a price in excess of the prevailing market price, and efforts by stockholders to influence the direction or management of the Company may be unsuccessful.
Our certificate of incorporation designates specific courts as the exclusive forum for certain claims, which could discourage lawsuits against the Company and our directors and officers.
Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware is, to the fullest extent permitted by law, the sole and exclusive forum for certain types of claims. These include any derivative action or proceeding brought on behalf of the Company; any claim asserting a breach of a fiduciary duty owed by any current or former director, officer, employee or stockholder to the Company or its stockholders; any claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, our certificate of incorporation or bylaws; any claim to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; any claim governed by the internal affairs doctrine; and any other claim not subject to exclusive federal jurisdiction and not asserting a cause of action arising under the Securities Act of 1933, as amended (the “Securities Act”). This provision does not apply to claims brought to enforce a duty or liability created by the Exchange Act. Our certificate of incorporation further provides that the federal district courts of the U.S. are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes to be favorable for disputes with the Company or its directors, officers, employees or other stockholders, which could discourage the filing of such claims. In addition, it is possible that a court could find the forum selection provisions in our certificate of incorporation to be inapplicable or unenforceable in a particular action, which could result in additional costs to the Company associated with resolving disputes in multiple jurisdictions.
Risks Related to Ownership of Our Common Stock
Future sales of our common stock, or the perception that such sales may occur, may depress the market price of our common stock.
In the future, we may issue additional shares of our common stock or other equity securities, or securities convertible into or exchangeable for equity securities. Any such issuances could dilute the economic and voting interests of existing stockholders and could reduce the market price of our common stock.
As of December 31, 2025, we had 217,356,414 shares of common stock outstanding and 503,727,217 shares of common stock issuable upon potential exchanges and/or conversions. We also have 30,639,900 shares of our common stock reserved for issuance under the Second Amended and Restated 2017 Equity Incentive Plan, the 2021 Equity Incentive Plan and the 2021 Employee Stock Purchase Plan. The sale of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could have a material adverse effect on the market price of our common stock and could impair our ability to raise capital through future equity offerings.
The market price of our common stock has been, and may continue to be, volatile, and the value of an investment in our common stock could decline.
The market price for our common stock has been, and may in the future be, volatile and subject to significant fluctuations due to a variety of factors, many of which are beyond our control. These factors include, among others, those described elsewhere in these risk factors; guidance, if any, that we provide to the public, changes to or failure to meet such guidance; changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet such estimates, or the failure of analysts to initiate or maintain coverage of our common stock; and general price and volume fluctuations in the equity markets, including as a result of broader economic conditions. In the past, periods of market volatility have led to securities class action litigation against public companies. As discussed in Note 14 . “Commitments and Contingencies” to the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, we are currently subject to a securities class action lawsuit. We may incur substantial costs in connection with this or similar litigation, and such matters could management’s attention and resources away from our business.
Our capital allocation decisions, including share repurchases, may not enhance stockholder value and could adversely affect our liquidity, financial flexibility and the market price of our common stock.
Our Board of Directors has authorized, and may in the future authorize, programs to repurchase shares of our common stock. We are not obligated to repurchase any specific number or dollar amount of shares, and any such program may be suspended, modified or discontinued at any time. The timing, manner, price and amount of any share repurchases will depend on a variety of factors, including market conditions, the trading price of our common stock, available liquidity, alternative uses of capital, corporate and regulatory considerations and other factors outside our control. There can be no assurance that any share repurchases will be consummated, that they will be completed at favorable prices, or that they will enhance long-term stockholder value. The market price of our common stock may decline below the prices at which we repurchase shares, and repurchases may increase the volatility of our stock price or reduce the liquidity of our common stock. In addition, repurchases reduce the amount of cash available to fund operations, capital expenditures, acquisitions, debt repayments or other strategic initiatives, which could limit our financial flexibility and adversely affect our business. More broadly, our capital allocation decisions, including the balance between reinvesting in the business, pursuing acquisitions, returning capital to stockholders and maintaining adequate liquidity, involve significant judgment and are subject to business, economic and market uncertainties. If we do not allocate capital effectively, including with respect to the timing and amount of any share repurchases, we may to optimal financial results, and our business, financial condition, results of operations, cash flows and stockholder value could be affected.
