ITEM 1A. RISK FACTORS
You should consider carefully the risks and uncertainties described below in addition to the other information included or incorporated by reference in this Annual Report on Form 10-K in evaluating our company and our business. Our future operating results involve a number of risks and uncertainties, and actual events or results may differ materially from those discussed in this Annual Report on Form 10-K. Factors that could cause or contribute to such differences include, but are not limited to, the factors discussed below, as well as those factors discussed elsewhere herein. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results, prospects, and stock price. The disclosures below reflect our beliefs and opinions as to factors that could materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
Our business lines are highly attractive and highly competitive. Our failure to successfully execute certain strategies in this competitive environment could have a material negative impact on our future growth and profitability
The companion animal healthcare industry is highly competitive, and we anticipate increasing competition from both existing competitors and new sector entrants given our performance and the industry’s strong growth and returns. Maintaining or enhancing our growth rates and profitability depends on successful execution of many elements of our strategy, including:
• Developing, manufacturing, and marketing innovative new or improved and cost competitive point-of-care laboratory analyzers that drive sales of IDEXX VetLab instruments, grow our installed base of instruments, and increase demand for related recurring sales of consumable products, services, and accessories;
• Developing and introducing new or improved innovative diagnostic tests and services for both our reference laboratories and point-of-care applications that provide valuable medical information to our customers and effectively differentiate our products and services from those of our competitors;
• Developing and introducing new or improved innovative, data-insightful software solutions that enable our veterinary customers to improve practice management and efficiency, staff productivity, and client engagement and communications and that increase the value to our customers of our other companion animal products and services by enhancing the integration of the information and transactions of these products and services and supporting the interpretation and management of diagnostic information derived from these products and services;
• Maintaining premium pricing, including by effectively implementing price increases, for our products and services through, among other things, effective communication and promotion of their value in an environment where many of our competitors promote, market, and sell lesser offerings at lower prices;
• Providing our veterinary customers with the medical and business tools, information, and resources that enable them to grow their practices and increase utilization of our diagnostic products and services through increased pet visits and preventive care protocol use, enhanced practice of real-time care, and improved practice efficiency;
• Achieving cost improvements in our worldwide reference laboratory network by implementing global best practices, including lean processing techniques, technological enhancements (e.g., automation and a global laboratory information management system), purchasing strategies that maximize leverage from our global scale, increasing the leverage of existing infrastructure, and consolidating testing in high volume laboratory hubs;
• Achieving cost improvements in the manufacture and service of our point-of-care laboratory analyzers by employing the benefits of economies of scale in both negotiating supply contracts and leveraging manufacturing overhead, and by improving reliability of our instruments;
• Continuing to expand, develop, and advance the effectiveness and productivity of our companion animal diagnostic sales, marketing, customer support, and logistics organizations in the U.S. and international regions in support of, among other things, our all-direct sales strategies and best-in-class customer experience goals;
• Attracting, developing, and retaining key leadership and talent necessary to support all elements of our strategy;
• Strengthening our sales and marketing activities to reach customers and expand diagnostic and software use both in and outside the U.S.;
• Identifying, completing, and integrating acquisitions that enhance our existing businesses, create new businesses for us, or expand the geographic areas in which we do business;
• Continuing to responsibly incorporate AI, machine learning, and automation into our products and services and associated business processes, such as customer support and software development;
• Developing and implementing new technology and licensing strategies; and
• Continuing to effectively manage our growth and expansion on a global scale through, among other things, designing and implementing cost-effective improvements to our processes, procedures, and infrastructure.
If we are unsuccessful in implementing and executing on some or all of these strategies, our rate of growth or profitability may be negatively impacted.
Our dependence on third-party suppliers could negatively affect our ability to sell certain products or deliver our cloud-based software solutions, which could negatively affect our operating results
We rely on third-party suppliers to provide components and raw materials (including biological materials) for our manufactured products, manufacture some of the products that we sell, provide the cloud-based infrastructure through which we deliver our cloud-based software solutions, and perform certain services, including package-delivery services. Actions taken by third-party suppliers in operating their business, as well as any disruptions to their business operations (or their suppliers' business operations), could disrupt our supply chain or operations and materially negatively impact our ability to supply the market or deliver our cloud-based software solutions, substantially decrease sales, lead to higher costs, and damage our reputation with our customers. Longer-term disruptions could potentially result in the permanent loss of our customers, which could reduce our recurring revenues and long-term profitability.
Our supply chain and our cost of goods also may be adversely impacted by unanticipated price increases due to factors such as inflation (including wage inflation), supply restrictions beyond our control or the control of our suppliers, the imposition of tariffs or duties, or regulatory requirements regarding the importation, exportation, composition, or production processes of the goods or materials provided by our suppliers. If current suppliers fail to supply sufficient goods or materials that comply with applicable regulatory requirements to us on a timely basis, or at all, or are unable to comply with any due diligence requests that may be required pursuant to applicable law or regulation, we could experience inventory shortages and disruptions in our supply of goods or materials.
For examples of some of the events that could result in disruption to our supply chain or operations, and negatively impact our operating results, refer to “Various U.S. and foreign government regulations could limit or delay our ability to market and sell our products or otherwise negatively impact our business,” “We depend on the continuous and reliable operation and security of our information technology systems and our products and services that incorporate or rely on information technology, and any disruption or significant cybersecurity breach or other incident could adversely affect our business” and “Factors and events beyond our control could disrupt our operations, supply chain, and logistics network and adversely affect our business” below.
In addition, we currently purchase many products, components, and materials from sole or single sources, such as Ortho. Some of these products are proprietary and, therefore, cannot be readily or easily replaced by alternative sources. These products, components, and materials are used in our instruments, consumables and accessories; livestock and poultry diagnostic tests, dairy testing products; and water testing products. Even if products, components, and materials were to become available to us from alternative suppliers, we likely would incur additional costs and delays in identifying and qualifying replacement materials, and there can be no assurance that replacements would be available to us on acceptable terms, or at all. In certain cases, we may be required to obtain regulatory approval to use alternative suppliers, and this process of approval could delay production of our products or development of product candidates indefinitely.
We seek to mitigate sole and single-source supplier risks on a risk-prioritized basis and in a variety of ways, including, when possible, by identifying and qualifying alternative suppliers, developing applicable in-house manufacturing capabilities and expertise, entering into escrow arrangements for manufacturing information for certain single or sole-sourced products, and strategically maintaining safety stock. We also seek to enter into long-term contracts that provide for an uninterrupted supply of products at predictable or fixed prices. However, there can be no assurance that we will successfully implement any of these mitigating activities or that, if implemented, any of them will be effective in preventing any delay or other disruption in our ability to supply our customers. In addition, suppliers may decline to enter into long-term contracts for any number of reasons, which would require us to purchase products, components, or raw materials via short-term contracts or on a purchase order basis. There can be no assurance that suppliers with which we do not have long-term contracts will continue to supply our requirements, will always fulfill their obligations under those contracts, or will not experience disruptions in their ability to supply our requirements. In cases where we purchase sole and single-source products, components, or raw materials under purchase orders, we are more to cost increases or changes in other terms of supply. In addition, under
some contracts with suppliers we have minimum purchase obligations, and our failure to satisfy those obligations may result in loss of some or all of our rights under these contracts or require us to compensate the supplier. If we are unable to obtain adequate quantities of products, components, or raw materials in the future from sole and single-source suppliers, or if such sole and single-source suppliers are unable to obtain the components or other materials required to manufacture the products, we may be unable to supply our customers, which could have a material adverse effect on our results of operations and damage our reputation, and any longer-term disruptions could potentially result in the permanent loss of customers, which could reduce our recurring revenues and long-term profitability.
Our biologic products are complex and difficult to manufacture, which could negatively affect our ability to supply our customers
Many of our rapid assay, livestock and poultry diagnostic, water, and dairy products are biologic products that include biological materials, such as antibodies, cells, and sera. Manufacturing biologic products is highly complex due to the inherent variability of biological materials and the difficulty of controlling the interactions of these materials with other components of the products, samples, and the environment. There can be no assurance that we will be able to maintain adequate sources of biological materials or that we will be able to consistently manufacture biologic products that satisfy applicable product release criteria and regulatory requirements. Further, products that meet release criteria at the time of manufacture may fall out of specification while in customer inventory, which could require us to incur expenses associated with recalling products and providing customers with new products, either of which could damage customer relations and our reputation. Our inability to produce or obtain necessary biological materials or to successfully manufacture biologic products that incorporate such materials could result in our inability to supply our customers with these products, which would have an effect on our results of operations and our reputation.
Issues in our use of AI may result in reputational harm or liability and adversely affect our business
We have built, and expect to continue to build, AI into many of our product and service offerings, and we expect this element of our business to grow. We also use and are investing in AI tools for our internal business operations, including to generate code, develop products and services, and increase operational efficiency. We envision a future in which responsible AI operating in our devices, applications, and the cloud helps our customers be more productive in their business activities and interactions with consumers, and we effectively use AI in our operations to improve innovation, efficiency, and customer experience and value. As with many disruptive innovations, AI presents risks and challenges. AI algorithms and models may be flawed. Datasets may be insufficient or contain information that is non-representative, infringing, or otherwise subject to legal challenge. Our competitors may incorporate AI into their products, services, and operations more quickly, more and more cost-effectively than us, which could our ability to compete. Existing and potential government regulation related to AI use may also certain areas of AI use, cause us to modify how we use AI, and increase the and cost of research and development and compliance in this area, and there is uncertainty around the validity and enforceability of intellectual property rights related to the use, development, and deployment of AI. Our use of AI may also lead to novel cybersecurity or privacy risks, which may affect our operations and reputation. to properly remediate AI usage issues may cause public confidence in AI to be , which could adoption of AI in our offerings. The rapid evolution of AI combined with the evolving and unharmonized legal and regulatory landscape will require the application of resources to develop, test, and maintain our products and services to help ensure that AI is implemented in a manner to minimize , impact and to comply with applicable law. Although we continue to invest in AI, those investments may be substantial, and there can be no assurance that our investments will be to our business. Further, while we strive to develop and use AI responsibly and in compliance with law, including through implementing governance processes, there can be no assurance that we will address all AI-related issues that may arise. The to address such issues could our reputation, give rise to legal and/or regulatory action, or otherwise affect our business.
Various U.S. and foreign government regulations could limit or delay our ability to market and sell our products or otherwise negatively impact our business
As a global business, we sell products and services in more than 175 countries and operate in an increasingly complex legal and regulatory environment. In the U.S., the manufacture and sale of certain of our products are regulated by federal agencies, such as the USDA, the FDA, and the EPA. Our diagnostic tests for animal health applications that involve the detection of infectious diseases, including most rapid assay canine and feline SNAP tests and livestock and poultry diagnostic tests, must be approved by the USDA prior to sale in the U.S. Our dairy testing products require approval by the FDA before they may be sold commercially in the U.S. The methods used by our water testing products must be approved by the EPA, as a part of its water quality monitoring program, before they can be used by customers in the U.S.
Delays by government agencies in approving new products or product upgrades or taking action with respect to other regulatory matters could have a negative impact on our growth and profitability. The ability of government agencies to review and approve new products or product upgrades or take other actions can be affected by various factors, including government budget and funding levels, ability to hire and retain key and other personnel, staffing shortages, public health emergencies, and statutory, regulatory, and policy changes. If a prolonged government shutdown or other disruption of normal business operations occurs, it could significantly impact the ability of the USDA, FDA, EPA, and other agencies to timely review and process our regulatory submissions, including with respect to new product candidates, which could have a material adverse effect on our business. Similarly, a prolonged government shutdown or other disruption could prevent the timely review of patent applications by the U.S. Patent and Trademark Office, which could the issuance of U.S. patents to which we would otherwise be entitled.
We are also subject to chemical regulation in the U.S., such as California’s Proposition 65, which requires businesses to provide warnings to California residents about significant risk of exposures to chemicals in products that are known to cause cancer, birth defects, or other reproductive harm. In addition, governmental authorities in the U.S. are increasingly focused on preventing environmental contamination from per- and polyfluoroalkyl substances (“PFAS”), which may be contained in certain IDEXX products. For example, current law in Maine prohibits the sale in Maine of non-exempt products containing intentionally-added PFAS after January 1, 2032, unless the Maine Department of Environmental Protection has made an unavoidable use determination, and requires reporting after the applicable sales ban takes effect of the presence of PFAS in products that have received unavoidable use determinations. However, these bans and reporting requirements in Maine are currently subject to statutory exemptions for veterinary products and medical devices regulated by or under the jurisdiction of the FDA, USDA, or EPA, as well as products that are used for public health, or for environmental or water quality testing. In addition, federal and state governments and agencies are in various stages of considering and/or implementing laws and regulations requiring the reporting, restriction, and/or phase-out of PFAS in products.
The manufacture, import, and sale of our products, as well as our research and development processes, are subject to similar and sometimes more stringent laws in many foreign countries. For example, the European Union regulates the use of certain substances that we currently use in our products or processes. These regulations include, but are not limited to, the Biocidal Products Regulation, which requires the use of approved biocides in our products prior to being manufactured, used, or sold in the European Union; the European Regulation for Registration, Evaluation, Authorization and Restriction of Chemical Substances, or REACH, which regulates and restricts the use of chemicals in the European Union; the Restriction of Hazardous Substances (“RoHS”) Directive, which regulates and restricts certain hazardous substances in electrical and electronic equipment; the Electromagnetic Compatibility Directive; and the Waste Electrical and Electronic Equipment Directive. In addition, European Union regulatory authorities and certain European countries are contemplating regulations to restrict and phase-out PFAS. Other countries have proposed similar regulations, including Australia, Canada, and Brazil.
Compliance with these and similar laws, directives and regulations in the U.S. and abroad may require registration of the applicable substances, performance of due diligence across our supply chain and reporting thereon, and/or the redesign or reformulation of our products, and may reduce or eliminate the availability of certain parts and components used in our products and services or lead us to change our suppliers in the event our suppliers are unable to comply with our due diligence requests or the applicable regulations in a timely and cost-effective manner. In extreme situations, compliance with these laws, directives and regulations may require us to eliminate or discontinue the use of a part or component in one or more products, but the redesign or reformulation of such products without such parts or components may not be possible, or cause us to relocate the production of certain products. Any redesign or reformulation, change in our suppliers, restrictions in our supply of parts and components, or relocation may negatively affect the availability or performance of our products and services, add testing lead-times for products and reformulated products, reduce our margins, result in additional costs, or have other similar effects. Any inability to redesign or reformulate one or more of our products may us from marketing and selling such products in the applicable regions. In addition, the costs to comply with these regulations may be significant. Any of these could affect our business, financial condition, or results of operations. These legal and regulatory requirements are complex and subject to change, and we continue to evaluate their impact.
In addition, some foreign governments require us to register or certify our products before they can be distributed or sold, and these product registration requirements, which vary among the applicable jurisdictions and change from time to time, are often complex and require us to engage in lengthy and costly processes and provide confidential, proprietary information about those products to foreign regulatory agencies. For example, compliance with extensive country-specific regulatory processes is required in connection with importing, marketing, and selling our diagnostic products in Japan, Germany, Canada, Brazil, the Netherlands, China, and many other countries. There can be no assurance that we will be able to obtain or maintain any product registration required by one or more foreign governments. Any inability to obtain or maintain a required product registration in a jurisdiction could adversely affect our ability to market and sell the applicable product in that jurisdiction, which could have a negative effect on our business, financial condition, and results of operations. There can also be no
assurance that confidential, proprietary information provided to foreign regulatory agencies may not be accessed by unauthorized persons or otherwise stolen, which could negatively impact our ability to protect our proprietary rights in our innovative products and our future success. For more information about the risks related to the protection of our proprietary rights in our products and services, refer to “Our success is heavily dependent on our continued differentiated product and service innovation” below.
There has been a recent focus in the U.S. on laws and regulations related to AI, which cover, among other things, algorithm accountability, privacy, and transparency. For example, use of AI and machine learning may be subject to laws and evolving regulations regarding, among other things, data bias and anti-discrimination. For example, the Federal Trade Commission (“FTC”) enforces consumer protection laws such as Section 5 of the FTC Act, which prohibits unfair and deceptive practices. AI-related legislation has also been introduced in a number of U.S. state legislatures and enacted in some states, such as California and Colorado, but the current U.S. administration issued an executive order in December 2025 to establish a federal policy aimed at curbing the proliferation of state-level AI-related legislation. In August 2024, the European Union Artificial Intelligence Act, which establishes requirements for the provision and use of products that leverage AI, machine learning, and similar technologies was enacted and will become fully effective in August 2026, with some provisions effective February 2025. Additionally, other countries have proposed legal frameworks to regulate AI, which is a trend that may continue to increase, and Japan enacted AI-related legislation in May 2025. Any failure or perceived by us to comply with such requirements could have an impact on our business.
We are also subject to a variety of federal, state, local, and international laws and regulations governing our global business practices. For example, jurisdictions in which we operate prohibit bribery and corruption, anti-competitive behavior, and money laundering; impose trade compliance requirements and restrictions, such as prohibitions on doing business with certain entities or individuals; determine rules impacting the importation and exportation of our products; and regulate immigration and travel. These legal, regulatory, and sometimes politically motivated requirements differ among jurisdictions around the world and are rapidly changing and increasingly complex. The costs associated with compliance with these legal and regulatory requirements and adjusting to changing legal and political environments are significant and likely to increase in the future.
Any failure by us to comply with applicable legal and regulatory requirements, or to adjust to changing legal and political environments, could result in fines, penalties, and sanctions; product recalls; suspensions or discontinuations of, or limitations or restrictions on, our ability to design, manufacture, market, import, export or sell our products; and damage to our reputation. Any of these could negatively impact our business.
Our success is heavily dependent on our continued differentiated product and service innovation
We believe our future success significantly depends on our ability to continue, on a cost-effective and timely basis, to enhance our existing differentiated product and service offerings, to continue to incorporate AI, machine learning and automation into our products and services and associated business processes and to develop and introduce new and innovative differentiated products and services. As a result, we invest substantial funds and efforts into research and development, investigating new products and technologies being developed by third parties, and obtaining certain such new products and technologies through licenses or acquisitions. There can be no assurance that our research and development, licensing, or acquisition efforts will achieve expected results, when or whether any of our products or services now under development will be launched, or whether we may be able to develop, license or otherwise acquire new products or technologies or successfully incorporate AI capabilities into our products, services or associated business processes. We also cannot predict whether any product or service offering, once launched, will market acceptance, or sales and revenue consistent with our expectations.
We rely on a combination of patent, trademark, copyright, and trade secret laws to protect our proprietary rights. We also license patents and technologies from third parties to enable the use of third-party technologies in the development, production, and provision of our products and services. If we do not have adequate protection of our proprietary rights or are unable to license third-party patents and technologies on reasonable terms, our business may be restricted or adversely affected by competitors who utilize substantially equivalent technologies to compete with us.
We cannot ensure that we will obtain issued patents, that any patents issued or licensed to us will remain valid, or that any patents owned or licensed by us will provide protection against competitors with similar technologies. Even if our patents cover products or services sold by our competitors, the time and expense of litigating to enforce our patent rights could be substantial and could have an adverse effect on our results of operations. In addition, expiration of patent rights could result in substantial new competition for products or services previously covered by those patent rights.
In the past, we have received notices claiming that our products or services infringe third-party patents, and we may receive such notices in the future. Patent litigation is complex and expensive, and the outcome of patent litigation can be difficult to predict. We cannot ensure that we will be successful in a patent litigation or be able to negotiate an acceptable resolution of such a case. If unsuccessful, we may be prohibited from selling certain products or services and/or we may be required to pay damages and/or ongoing royalties as a result of the lawsuit. Any such result could have an adverse effect on our results of operations.
Increased competition from and technological advances by our competitors could negatively affect our operating results
We face intense competition, and we expect that competition will further intensify as new products, services and technologies become available, the use of AI and machine learning expands, and new competitors enter the space. Our competitors in the veterinary diagnostic sector in the United States and abroad include companies that develop, manufacture, and sell veterinary diagnostic tests; commercial veterinary reference laboratories; certain large and well-funded animal health pharmaceutical companies; and corporate hospital chains that operate reference laboratories that serve both their hospitals and unaffiliated hospitals, such as VCA Inc., which is wholly-owned by Mars, Incorporated, another operator of corporate hospital chains that also sells veterinary point-of-care diagnostic instruments. Consolidation among our competitors and our customers may intensify the competition we face. While we believe that our offerings are competitively differentiated due to our innovative products and services that offer an integrated, comprehensive diagnostic solution and the quality of our technical and customer service, there can be no assurance that increased consolidation among our competitors or customers (as well as any resulting veterinary diagnostic vertical integration among our customers) would not have a negative impact on our ability to compete successfully. For more information regarding the risks presented by consolidation and reference laboratory vertical integration among our customers, refer to “Consolidation in our customer base, including through increased corporate hospital ownership, and prevalence of buying consortiums could affect our business” below.
Competition could negatively affect our sales and profitability in a number of ways. New competitors may emerge through the development of innovative new technology (such as the use of AI and machine learning), the acquisition of rights to use existing technologies or the use of existing technologies when patents protecting such existing technologies expire. New or existing competitors may introduce new, innovative, and competitive products and services more quickly, successfully, and effectively, and these products and services could be superior, or be perceived by our customers to be superior, to our products and services or lead to the obsolescence of one or more of our products or services. Business combinations and mergers among our competitors may result in competitors that are better positioned to create, market, and sell more compelling product and service offerings. While an important aspect of our strategy is to continue, on a cost-effective and timely basis, to our existing products and services (including through the incorporation of AI capabilities) and to develop and introduce new and products and services, there can be no assurance that we will be to develop or introduce such products and services or that those products or services will be to our competitors’ products or services or otherwise customer acceptance. Some of our competitors and potential competitors may choose to differentiate themselves by offering products and services perceived in the eyes of customers as similar, at substantially lower sales prices, which could have an effect on our results of operations through of sales and/or revenues or a decision to lower our own sales prices to remain competitive. In addition, our ability to attract and retain customers depends on the effectiveness of our customer marketing and incentive programs, and multiple competitors could bundle product and service offerings through co-marketing or other arrangements, which could their ability to compete with our broad product and service offerings. Certain of our competitors and potential competitors, including large diagnostic and pharmaceutical companies, also have substantially financial and managerial resources than us, as well as experience in manufacturing, marketing, research and development, and obtaining regulatory approvals than we do.
Consolidation in our customer base, including through increased corporate hospital ownership, and prevalence of buying consortiums could negatively affect our business
Veterinarians are our primary customers for our CAG products and services, and the veterinary services industry in the U.S. and abroad has become increasingly consolidated. In the United States, the number of owners of veterinary hospitals has been declining, and an increasing percentage of veterinary hospitals are owned by corporations. Major corporate hospital owners in the U.S. include Mars, Incorporated (owner of Banfield Pet Hospitals, Blue Pearl Veterinary Partners, and VCA Inc.) and National Veterinary Associates. A similar trend exists in other regions such as Canada, the United Kingdom, Europe, Australia, New Zealand, China, and Brazil. Furthermore, an increasing percentage of individually owned veterinary hospitals in the U.S. participate in buying consortiums. Corporate owners of veterinary hospitals and buying consortiums often seek to improve profitability by leveraging the buying power they derive from their scale to obtain favorable pricing from suppliers,
which could have a negative impact on our profitability and results of operations. While we have strong supplier relationships with several corporate hospital groups and buying consortiums, decisions by larger corporate owners and buying consortiums to shift their purchases to a competitor would have a negative impact on our results of operations from the loss of future business. Under these circumstances, we may receive customer contract resolution payments, which would generally be recorded in other operating income in the period received. Nonetheless, the loss of future revenue may still be significant and adversely affect our future revenue growth rate and profitability. In addition, certain corporate owners also operate reference laboratories that serve both their hospitals and unaffiliated hospitals and, in some cases, sell veterinary point-of-care diagnostic instruments. Any hospitals acquired by these companies generally attempt to shift all or a large portion of their testing to the reference laboratories operated by these companies, and may attempt to shift their point-of-care diagnostic testing, as well, and there can be no assurance that hospitals that otherwise become affiliated with these companies would not shift all or a portion of their diagnostic testing. Furthermore, hospitals acquired by these companies or those that establish other affiliations with these companies may to be customers or potential customers of our other companion animal products and services, which would cause our sales of these products and services to .
Changes in testing patterns could negatively affect our operating results
Demand for our companion animal, livestock and poultry diagnostic tests and our dairy and water testing products could be negatively impacted by factors impacting testing practices. The introduction or broad market acceptance of vaccines or preventatives for the diseases and conditions for which we sell diagnostic tests and services could result in a decline in testing. Changes in accepted medical protocols regarding the diagnosis of certain diseases and conditions could have a similar effect. Eradication or substantial declines in the prevalence of certain diseases also could lead to a decline in diagnostic testing for such diseases. Our livestock and poultry products business in particular is subject to fluctuations resulting from changes in disease prevalence. The outbreak of certain diseases (such as African swine fever) among livestock or poultry, or the adverse impact of climate change-related events (such as hurricanes, earthquakes, fires, and floods), could lead to the widespread death or precautionary destruction of such animals in the affected regions, reducing herd or flock sizes, which could reduce the demand for our testing products for such animals. Changes in government regulations or in the availability of government funds available for monitoring programs could affect sales of our products that are driven by compliance testing, such as our livestock and poultry, dairy, and water products. In addition, changes and trends in local dairy, poultry, or other food sectors around the world could affect the related production markets resulting in a in demand for our testing products. The growth of our CAG business relies in part on a pet population and evolving testing patterns of increasing frequency and depth of diagnostic testing. Significant reductions to the pet population or to veterinary protocols that reduce the frequency of diagnostic testing, due to macroeconomic conditions or other reasons, could have an effect on our results of operations. Actual or perceived economic , whether due to inflation or other factors, may also reduce demand for our companion animal, water, livestock, poultry, and dairy products and services, and public health-related guidance and directives, including stay-at-home orders that may be deployed to combat public health issues, and weather conditions could result in a decrease in companion animal clinical visits, the of elective procedures and wellness visits and of veterinary clinic operations, all of which would have a effect on veterinary service providers and result in in demand for our CAG products and services. in testing for any reason, including the reasons described above, along with associated with a reduction in the pet population or veterinary visits, could have an effect on our results of operations.
We sell many products through distributors, which presents risks that could negatively affect our operating results
Some of our international product sales occur through third-party distributors. As a result, we are dependent on these distributors to promote and create demand for our products. Our distributors often offer products from several different companies, including our competitors, and may promote our competitors’ products over our own products. We have limited ability, if any, to cause our distributors to devote adequate resources to promoting, marketing, selling, and supporting our products or to maintain certain inventory levels, and changes in our distributors’ inventory levels, compared to comparable prior periods, could negatively impact our revenue growth rates. There can be no assurance that we will be successful in maintaining and strengthening our relationships with our distributors or establishing relationships with new distributors who have the ability to market, sell, and support our products effectively. We may rely on one or more key distributors for a product or a region, and the loss of these distributors could reduce our revenue. Distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivable and financial results. While we maintain a rigorous distribution compliance program, of anti- or similar laws by our distributors could have a material impact on our business and reputation, and any of a distributor relationship may result in increased competition in the applicable jurisdiction. to manage the risks associated with our use of distributors may reduce sales, increase expenses, and our competitive position, any of which could have a effect on our operating results.
GENERAL RISKS
We depend on the efforts of key personnel and talent to succeed and compete effectively
Our continued success is substantially dependent on our ability to attract, develop, and retain highly capable and skilled leaders, employees, and other key personnel. Competition for experienced leaders and employees, particularly for persons with specialized skills, such as software and AI, can be intense. Our ability to recruit and retain such talent will depend on a number of factors, including compensation and benefits, work location, flexibility regarding virtual and hybrid work arrangements, work environment, corporate culture, and development opportunities.
The loss of the services of, or our failure to recruit or develop and implement effective succession plans for, our senior leadership, other key personnel, and employees may significantly delay or prevent the achievement of our strategic objectives, disrupt our operations, and adversely affect our business and our future success. In addition, even if we effectively develop and implement succession plans and make key leadership transitions, such as our planned CEO transition in May 2026 that we announced on January 13, 2026, we cannot provide assurances as to whether we may experience management or other challenges in connection with any of those leadership transitions that could adversely affect our future success and could otherwise materially affect our business, reputation, results of operations, and financial condition.
We depend on the continuous and reliable operation and security of our information technology systems and our products and services that incorporate or rely on information technology, and any disruption or significant cybersecurity breach or other incident could adversely affect our business
We rely on our information systems and third-party information systems to provide access to our web-based products and services, keep financial records, analyze results of operations, process orders and shipments, manage inventory, store confidential or proprietary information, and operate other critical functions. In addition, some of our products and services are cloud-based and connect to the “Internet of Things” (“IoT”), including information systems that collect and use data on behalf of customers (e.g., veterinary practice management systems and customer communication tools and services) and our connected IoT devices (e.g., IDEXX VetLab Stations and analyzers) that enable our integrated, comprehensive diagnostic solution for veterinary practices, and these products and services rely on third-party providers for cloud computing and storage. These information systems and networks are susceptible to damage, disruption, or shutdown from multiple factors, including failures during the process of upgrading or replacing software, databases, or components; power outages; telecommunications or system failures; terrorist attacks; natural ; individual or ; server or cloud provider ; computer viruses or cyber security attacks or other or . Although we maintain security policies and measures and internal controls, employ system backup measures, engage in redundancy planning and processes, and invest in our data and information technology infrastructure, such policies, measures, controls, planning processes, and investments, as well as our current recovery plans, have not always been , and there can be no assurance that these (or any future efforts) will be , in any information system or network , , or . The continued use of remote and hybrid work arrangements may additionally result in some increased risk associated with our employees accessing our data and systems remotely. In addition, the use of AI and other emerging technologies by actors is growing, more sophisticated and cybersecurity attacks and phishing and social engineering schemes and further increasing attack volume and frequency.
Our software and some of our other products and services incorporate or rely on information technology and systems that are highly technical and complex, and the timely development, testing, release and deployment of software updates are important for defending against security vulnerabilities. If we or our business partners and suppliers fail to timely develop, test and deploy software updates, the security of our and our customers’ networks and information systems may be at risk. Vulnerabilities may persist even after a software update is released if the update fails to address the vulnerability’s root cause or is otherwise insufficient, testing of the update delays its timely deployment, there is a failure to install the most recent updates, or customers persist in using solutions that are end of life and no longer receive updates. Furthermore, updates or other software changes can lead to software or system inoperability or introduce security , including that had been previously remedied or from code injected in a “supply chain” . In addition, in some cases, we rely on third-party providers to develop, test and release software updates on a timely basis, and there can be no assurance that these third-party providers will timely or effectively remedy .
We, and some of our third-party vendors, have experienced cybersecurity attacks by threat actors (which may include state-sponsored organizations or nation state actors) and other cybersecurity breaches and incidents in the past, including, among other things, computer viruses and malware, ransomware, denial of service actions, phishing schemes, social engineering, the compromise, misappropriation and/or unauthorized access to (or acquisition or disclosure of) confidential or
otherwise protected information, and similar events, and will likely experience further attacks, breaches and incidents in the future, potentially with more frequency. To our knowledge, none have resulted in any material adverse impact to the Company, our business strategy, results of operations or financial condition. We have adopted measures to mitigate potential risks associated with information technology disruptions and cybersecurity threats; however, given the unpredictability of the timing, nature, and scope of such disruptions and the evolving nature of cybersecurity threats, which vary in technique and sources, if we or our business partners or suppliers were to experience a system disruption, attack or security breach or incident that impacts any of our critical functions, or our customers were to experience a system disruption, attack or security or via any of our software or connected IoT products and services, we could be subject to production , operational and/or productivity , other impacts on our operations or ability to provide products and services to our customers, the compromise, and/or access to (or acquisition or disclosure of) confidential or otherwise protected information, or of data, security , other or of our systems or networks, financial and additional costs from remedial actions, repairs to infrastructure, physical systems or data processing systems, increased cybersecurity and information technology protection costs, of business or potential liability, and/or to our reputation, any of which could have a material effect on our business strategy, competitive position, results of operations, cash flows, financial condition, or prospects. We, our customers, and other users of our products and services also may not promptly learn of or have the ability to fully assess the magnitude or effects of a security in connected IoT devices and networks, including the extent, if any, to which a has been . Additionally, we have acquired, and in the future may acquire, companies or assets that have less sophisticated information systems, cybersecurity practices, or training, which may result in an increased risk of cybersecurity attacks, , or . Our customers and/or employees could also face consequences such as the compromise of sensitive or information or systems. Furthermore, access to, public disclosure of, or other of data or information (including any of our confidential or proprietary information or personal data or information) as a result of an attack or security or has given, and in the future may give, rise to notification obligations to individuals, regulators, customers, employees, and others, and could result in governmental actions or private or proceedings, any of which could our reputation, cause a of confidence in our products and services, our ability to develop (and protect our rights to) our differentiated technologies, and have a material effect on the Company, our business strategy, financial condition, results of operations, or prospects. While we maintain a cyber risk insurance policy, it may not cover any or all , costs or associated with all cybersecurity events. For more information regarding personal data and information privacy and data protection risks, refer to “Our operations and reputation may be if we, our products, or our services do not comply with our global privacy policy or evolving laws, regulations, and industry standards regarding data privacy and protection” below.
Factors and events beyond our control could disrupt our operations, supply chain, and logistics network and adversely affect our business
Our business and results of operations could be negatively affected by certain factors and events beyond our control, such as natural disasters, severe weather conditions and/or climate change-related events (such as hurricanes, earthquakes, fires, and floods); public health issues (such as outbreaks, epidemics, or pandemics); civil or military unrest; geopolitical conditions and developments; war, terrorism, armed conflict, or other man-made disasters (including cyberwar, cyberterrorism, or state-sponsored attacks); disruption or loss of service from our cloud service providers; inflationary pressures, which may increase costs for materials and finished goods; adverse or uncertain macroeconomic conditions, including fears of a global economic downturn or recession; increases in wages that drive up prices; rising interest rates; workforce disruptions; labor or ; the imposition of regulations, trade protection measures, tariffs, duties, import/export restrictions, quotas or on key components; transportation affecting the supply and shipment of materials and finished goods; and the of raw materials. Any of these events could result in, among other things, to or the temporary of one or more of our manufacturing or distribution facilities or reference laboratories ( to one of our facilities or the manufacturing equipment we use could be and may require substantial lead-time to repair or replace); to or of one or more facilities of our third-party business partners or suppliers on which we rely; a temporary of an adequate work in one or more sites; an in power supply; a temporary or long-term in our supply chain or logistics network (including a to our ability to obtain components for the manufacture of our products); a temporary in our ability to deliver (or in the delivery of) our products or services; and short- or long-term to our customers’ businesses (which would impact customer demand for our products and services). For our veterinary customers, these events may affect the number of patient visits and elective procedures, and the volume of diagnostic utilization, and may otherwise clinical operations, which could affect our revenues. For more information regarding the risks presented by to our suppliers’ operations and supply chain, refer to “Our dependence on third-party suppliers could affect our ability to sell certain products or deliver our cloud-based software solutions, which could affect our operating results” above.
We manufacture many of our significant companion animal products, including our rapid assay products and certain instruments and consumables, many of our water testing products and certain of our livestock, poultry, and dairy testing products in Southern Maine. Certain of our companion animal products, as well as our human point-of-care products, are manufactured in Roswell, Georgia. We also manufacture certain of our livestock and poultry testing products in Bern, Switzerland and Montpellier, France. In addition, we maintain major distribution facilities in North America and in the Netherlands and reference laboratories in multiple locations, including Memphis, Tennessee; Kornwestheim, Germany; West Sacramento, California; Elmhurst, Illinois; North Grafton, Massachusetts; Brisbane, Australia; Markham, Ontario; Wetherby, U.K.; and Tokyo, Japan. Interruption of operations at any of our facilities, including the ones described above, due to the occurrence of one or more of the events described above could have an adverse effect on our results of operations.
While we maintain plans to continue business under such circumstances, there can be no assurance that such plans will be successful in fully or partially mitigating the effects of such events. We also maintain property and business interruption insurance to insure against the financial impact of certain events of this nature. However, this insurance may be insufficient to compensate us for the full amount of any losses that we may incur. In addition, such insurance will not compensate us for potential long-term competitive or reputational effects of being out of the market for the period of any interruption in operations.
Since our business is global in nature, geopolitical risks and other risks associated with doing business internationally could negatively affect our business, financial condition, and operating results
For the year ended December 31, 2025, approximately 36% of our overall revenue and approximately 34%, 81% and 50% of our CAG, LPD, and Water revenues, respectively, were attributable to sales of products and services to customers outside the U.S. Although we intend to continue to expand our international operations and business, we may not be able to successfully promote, market, import, export, sell, or distribute our products and services outside the U.S. Various risks associated with foreign operations may impact our international sales and operations, including, but not limited to, disruptions in transportation of our products or our supply chain; fluctuations in oil prices; increased border protection and restriction on travel; the differing product and service needs of foreign customers; difficulties in building, staffing, and managing foreign operations (including a geographically dispersed workforce); differing protection of intellectual property; trade protection measures, quotas, embargoes, import/export restrictions, capital controls, tariffs, duties, and regulatory and licensing requirements; natural and other disasters; public health issues (such as outbreaks, epidemics, or the prospect of a pandemic); ongoing instability or changes in a country’s or region’s regulatory, economic, or political conditions, including inflation, , interest rate fluctuations, and actual or anticipated military or political ; geopolitical , including terrorism, war, armed , or civil or military ; other geopolitical conditions; security ; and local business and cultural factors that differ from our normal standards and practices, including business practices prohibited by the Foreign Practices Act and other anti- laws and regulations.
In addition, to market and sell many of our products outside the U.S., we are subject to product approval and registration requirements that often require us to provide confidential, proprietary information about those products to foreign regulatory agencies. There can be no assurance that the confidential, proprietary information provided to foreign regulatory agencies to comply with product approval and registration requirements may not be accessed by unauthorized persons or otherwise stolen, which could negatively affect our ability to protect our proprietary rights in our innovative products and our future success. We also may forgo marketing and selling some of our products in certain foreign jurisdictions due to the risk of intellectual property theft, which could negatively affect our ability to expand our international operations and business. For more information about the risks related to the protection of our proprietary rights in our products and services, refer to “Our success is heavily dependent on our continued differentiated product and service innovation” above.
Further, prices that we charge to foreign customers may be different than the prices we charge for the same products in the U.S. due to competitive, market or other factors, or changes in foreign currency exchange rates. Our results of operations are also susceptible to changes in foreign currency exchange rates. As a result, the mix of domestic and international sales in a particular period could have an adverse impact on our results of operations for that period.
A weak worldwide economy, or actual or perceived economic weakness in any significant geography, could result in reduced demand for our products and services or increased customer credit risk
A substantial percentage of our sales are made worldwide to the companion animal veterinary industry. Demand for our companion animal diagnostic products and services is driven in part by the number of patient visits to veterinary hospitals and the practices of veterinarians with respect to the recommendations for diagnostic testing, as well as pet owner compliance with these recommendations. Pet owners generally pay cash out of pocket for health care services for their pets from veterinary
practices. Actual or perceived economic weakness, whether due to inflation or other factors, in any of our significant geographies could cause pet owners in those regions to forgo or defer visits to veterinary hospitals or affect their willingness to approve certain diagnostic tests, comply with a treatment plan or, even more fundamentally, continue to own a pet. In addition, concerns about the financial resources of pet owners could cause veterinarians to be less likely to recommend certain diagnostic tests, and concerns about the economy may cause veterinarians to defer purchasing capital items such as our instruments and systems. These conditions, if they continue, could result in a decrease in sales or decrease in sales growth, of diagnostic products and services, which could have an adverse effect on our results of operations.
Demand for our water products is driven in part by the availability of funds at government laboratories, water utilities, and private certified laboratories that utilize our products. Availability of funds also affects demand by government laboratories and cattle, swine and poultry producers that utilize our livestock and poultry diagnostic products. Actual or perceived economic weakness and the other factors described above have caused and could continue to cause our customers to reduce their investment in such testing, which could have an adverse effect on our results of operations.
A weak economy may also cause deterioration in the financial condition of our distributors and customers, which could inhibit their ability to meet their performance obligations or pay us amounts owed for products delivered or services provided in a timely fashion or at all.
We are subject to risks associated with public health issues, including pandemics, which could have a material adverse effect on our financial condition and results of operations
We are subject to risks associated with public health issues, including pandemics and other events beyond our control. Public health issues and crises may adversely impact our operations, supply chain and logistics network if the locations where we operate, manufacture or distribute our products; where our raw materials or product components are sourced, manufactured or distributed; or where our third-party distributors, suppliers and other service providers operate, are disrupted, temporarily closed or experience worker shortages for a sustained period of time. In addition, public health issues and crises may adversely impact our customers’ businesses due to business lockdowns, decreased companion animal clinical visits, labor shortages, the delay of elective procedures and wellness visits, and disruption of veterinary clinic and other customer operations, all of which could cause a decline in demand for our products and services. These could also cause economic or increased economic uncertainty.
A future public health issue, pandemic, or outbreak could lead to delays in the manufacturing and supply of products, or adversely affect the ability of the USDA, FDA, EPA, or other government agencies to timely review and process our regulatory submissions, which could have a material adverse effect on our business and results of operations. Moreover, any future public health issue, pandemic, or outbreak could result in the imposition of new governmental restrictions, quarantine requirements or other public health measures, which could result in closures or other restrictions that significantly disrupt our operations or those of our third-party distributors, suppliers or other service providers, or otherwise adversely affect our customers’ businesses or operations, or result in actual or perceived economic weakness or slowdowns in one or more of our key geographies, any of which could adversely affect our financial condition.
Our operations and reputation may be impaired if we, our products, or our services do not comply with our global privacy policy or evolving laws, regulations, and industry standards regarding data privacy and protection
Our business operations involve the receipt, storage, transmission, and use of information, including personal data, about our customers, pet owners, suppliers, and employees. We collect and use personal data in a variety of ways. We offer products and services that collect and use personal data, including veterinary practice management systems, online customer communication tools and services, VetConnect PLUS, and two-way integration technology. Some of these products and services rely on third-party providers for cloud computing and storage. We also engage in e-commerce through various websites and collect contact and other personal data from our customers and website visitors, and some of our software products and services enable access to point-of-sale credit card processing functionality for our veterinary customers. In addition, we transfer information, including personal data, among IDEXX, our subsidiaries and third parties with which we have commercial relations for business purposes. Our collection, transfer, protection, security, retention, storage, disclosure, sharing and use of personal data are subject to expanding and increasingly complex laws and regulations in the U.S. and abroad. In addition, these laws and regulations continue to develop and are subject to frequent revisions (and generally have become more stringent over time), are subject to differing interpretations, may be applied inconsistently from jurisdiction to jurisdiction and could be deemed to be inconsistent with our current global privacy policy and data protection practices. Further, some of our customer contracts require us to comply with industry standards adopted by industry groups related to the storage, processing, and transmission of individual cardholder data.
While we maintain a program to monitor, assess, and comply with applicable global data privacy laws and relevant industry standards, compliance with these evolving requirements is costly, may require us to change our business practices in a manner adverse to our business, and may delay or impede the development and offering of innovative products and services. Additionally, public perception and standards related to the privacy of personal data can shift rapidly, in ways that may affect our reputation or influence regulators and industry groups in the U.S. and abroad to expand or adopt more stringent regulations, laws, and standards. As a global company, we are tasked with navigating a patchwork of privacy laws, both in the U.S. and abroad, which may have conflicting requirements that can make compliance challenging. Some examples include (but are not limited to) the California Consumer Privacy Act, as amended by the California Privacy Rights Act; various U.S. state consumer privacy laws that apply to our business operations within a respective state and/or a U.S. federal privacy law that may be passed in the future; the European Union’s General Data Protection Regulation (“GDPR”), Switzerland’s Federal Act on Data Protection, and the United Kingdom’s General Data Protection Regulation (“UK GDPR”), which impose operational requirements for controllers and processors of personal data of individuals in the European Economic Area (“EEA”), Switzerland, and the United Kingdom (“UK”); the Brazilian General Data Protection Law; the Chinese Personal Information Protection Law; the Japanese Act on the Protection of Personal Information; and the Australian Privacy Act.
An additional area of complexity concerns the restrictions on transfers of personal data from certain countries to others. We currently rely on a mixture of mechanisms to transfer certain personal data from the EEA, Switzerland, and the UK to the U.S. and other third countries including the EU-U.S. Data Privacy Framework (the “EU-U.S. DPF”), the Swiss-U.S. Data Privacy Framework, and the UK Extension to the EU-U.S. DPF. A challenge to the EU-U.S. DPF adequacy decision, adopted in July of 2023, will be reviewed by the European Court of Justice, and international transfers to the U.S. and other jurisdictions generally continue to be subject to enhanced scrutiny by regulators. Any transfers by us or our vendors of personal data are subject to potential regulatory scrutiny and may increase our exposure under the GDPR, UK GDPR, and similar laws which contain cross-border personal data transfer heightened requirements and restrictions (such as the Chinese government standard contract for cross-border personal data transfers).
Any failure or perceived failure by us, the third parties with whom we work, or our products and services to comply with all applicable privacy-related laws, regulations, and standards, as well as our contractual obligations, could result in damage to our reputation, legal proceedings or actions against us by governmental entities or others, fines and other penalties, damage to our ability to enable access to credit card processing functionality for our veterinary customers, and revenue losses, any of which could have an adverse effect on our business. In addition, concerns about our practices with regard to the collection, use, retention, transmission, disclosure, or security of personal data or other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws, regulations, standards, and contractual obligations, could our reputation and our business.
Failure to meet current or evolving environmental, social, and governance regulations, standards, or expectations or to achieve our environmental, social, or governance goals could adversely affect our business, results of operations, financial condition, reputation, or stock price
Regulators, investors, customers, employees, and other stakeholders are focused on environmental, social, and governance matters, including climate-related issues; human capital matters; and responsible sourcing, human rights, and supply chain. Regulators in the U.S., Europe, and elsewhere are considering or have proposed or adopted various laws, directives or regulations regarding these matters, which include specific, target-driven disclosure requirements or obligations, including the European Union’s Corporate Sustainability Reporting Directive and California’s Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act. Furthermore, our investors, customers, and other stakeholders have additional (and sometimes different or contradictory) expectations.
We strive to align our environmental, social and governance goals with our long-term business-strategy and Purpose. Some stakeholders, however, including government regulators, may disagree with some or all of our goals and initiatives. The focus of our various stakeholders remains inconsistent and may also change and evolve over time, and they continue to have very different (and sometimes contradictory) views on which matters should be prioritized or even undertaken at all. Meeting these emerging and evolving regulations, standards and expectations exposes us to unpredictable reporting obligations or business requirements and will require us to make strategic choices and investments, incur compliance costs, and create new practices, processes, and procedures. We also may be unable to satisfy all stakeholders in light of their varied and sometimes contradictory views and expectations regarding environmental, social, and governance matters. In addition, if we fail (or are perceived to fail) to comply with applicable regulations, or our practices do not meet evolving and sometimes investor, customer or other stakeholder expectations and standards, then our reputation, ability to attract and retain employees, relationships with some customers, and as an investment, business partner, acquiror, or product or service
provider could be negatively impacted, and we may be exposed to government enforcement actions, private litigation, and increased scrutiny from investors, special interest groups, government regulators, and other stakeholders, any of which could adversely affect our business, results of operations, financial condition, reputation, or stock price.
Our ability to achieve any of these goals is subject to numerous risks, many of which are outside of our control and depend in part on third-party performance or data, and there can be no assurance that we will achieve or maintain them. Our failure (actual or perceived) to adequately update, accomplish or accurately track and report on these goals on a timely basis, or at all, could adversely affect our reputation and expose us to increased scrutiny from investors, special interest groups, and enforcement authorities.
Climate change, or legal, regulatory or market measures to address climate change, could adversely affect our business, financial condition, and results of operation
We operate in many regions around the world where our businesses and the activities of our customers and suppliers could be disrupted by climate change. We are exposed to physical risks (such as extreme weather conditions or rising sea levels), risks in transitioning to a low-carbon economy (such as additional legal or regulatory requirements, changes in technology, market risk, and reputational risk) and social and human effects (such as harm to health and well-being) associated with climate change. These risks can be either acute (short-term) or chronic (long-term).
Potential physical risks from climate change may include altered distribution and intensity of rainfall, prolonged droughts or flooding, increased frequency of wildfires and other natural disasters, rising sea levels, and a rising heat index, any of which could cause negative impacts to our and our customers’ and suppliers’ businesses. Increased frequency and severity of extreme weather events could adversely impact our suppliers, manufacturing locations, logistics, and/or customers. Such impacts may include losses incurred as a result of physical damage to facilities, loss or spoilage of inventory, and business interruption and disruption (e.g., decrease in companion animal clinical visits and diagnostic utilization). Other potential physical impacts due to climate change include reduced access to high-quality water in certain regions and the loss of biodiversity, which could impact future product development. These risks could our operations and supply chain, which may result in increased costs, or affect our revenues.
New legal or regulatory requirements may be enacted to prevent, mitigate, or adapt to the implications of a changing climate and its effects on the environment. These regulations, which may differ across jurisdictions, could result in our being subject to new or expanded carbon pricing or taxes, increased compliance costs, restrictions on greenhouse gas emissions, investment in new technologies, increased carbon disclosure and transparency, investments in developing data gathering and reporting systems, upgrade of facilities to meet new building codes, increased energy costs, and the redesign of utility systems, which could increase our operating costs. Our supply chain would likely be subject to these same transitional risks and would likely pass along any increased costs to us, which may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require.
Future operating results could be negatively affected by changes in tax rates, the adoption of new tax legislation or exposure to additional tax liabilities
The nature of our global operations subjects us to local, state, regional, and federal tax laws in jurisdictions around the world. Our future tax expense could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation.
While we have taken, and may take further, actions intended to align our corporate structure and intercompany relationships with supporting our growth in international geographies and maintaining operational and tax efficiency and continue to consider all of these developments within our overall tax strategy, changes in tax law in the U.S. and other countries in which we operate or have a presence may materially and adversely impact our income tax liability, provision for income taxes, effective tax rate and results of operation, and there can be no assurance that any actions we take to maintain operational and tax efficiency will effectively mitigate these impacts. Moreover, these actions may increase our operating costs, and if ineffectual, could increase our income tax liabilities and our global effective tax rate.
Our income tax filings are subject to examination by various tax authorities, and the final determination of tax audits could be materially different from that which is reflected in historical income tax provisions and accruals. Significant judgment is required in determining our worldwide provision for income taxes. We regularly assess our exposures related to our worldwide provision for income taxes to determine the adequacy of our provision for taxes. Any reduction in these contingent liabilities or additional assessments would increase or decrease income, respectively, in the period such determination is made.
If the ultimate determination of taxes owed is for an amount in excess of amounts previously accrued, our business, results of operations and financial condition could be materially adversely affected.
Strengthening of the rate of exchange for the U.S. dollar has a negative effect on our business
We are a global business, with 36% of our revenue during the year ended December 31, 2025, attributable to sales of products and services to customers outside of the U.S. Any strengthening of the rate of exchange for the U.S. dollar against foreign currencies, and in particular the euro, British pound, Canadian dollar, Chinese renminbi, Japanese yen, Australian dollar and Brazilian real, adversely affects our results, as it reduces the dollar value of sales and profits that are made in those currencies. The strengthening of the U.S. dollar has a greater adverse effect on the profits from products manufactured or sourced in U.S. dollars that are exported to international geographies and a lesser effect on profits from foreign sourced products and services due to a natural hedge from international expenses denominated in the corresponding foreign currencies.
For the year ended December 31, 2025, approximately 23% of our consolidated revenue was derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies, compared to 22% and 21% for the years ended December 31, 2024, and December 31, 2023, respectively. A strengthening U.S. dollar could also negatively impact the ability of customers outside the U.S. to pay for purchases denominated in U.S. dollars as well as affect our overall competitiveness in international geographies. The accumulated impacts from any continued, longer-term growth in the value of the U.S. dollar against foreign currencies may have a material adverse effect on our operating results. Refer to “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” included in this Annual Report on Form 10-K for additional information regarding currency impact.
Our foreign currency hedging activities (refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 19. Hedging Instruments” in the accompanying Notes to consolidated financial statements), which are designed to minimize and delay, but not to eliminate, the effects of foreign currency fluctuations, may not sufficiently offset the adverse financial effect of unfavorable movements in foreign exchange rates on our financial results over the limited time the hedges are in place. In addition, our hedging activities involve costs and risks, such as transactions costs and the risk that our hedging counterparties will default on their obligations.
We primarily hedge intercompany product purchases and sales denominated in the euro, British pound, Canadian dollar, Japanese yen, and Australian dollar. Other foreign currency exposures related to foreign sourced services and emerging markets may not be practical to hedge. In certain cases, these exposures are not offset by foreign currency denominated costs. As we primarily use foreign currency exchange contracts with durations of less than 24 months and enter into contracts to hedge incremental portions of anticipated foreign currency transactions on a quarterly basis for the current and following year, the effectiveness of our foreign currency hedging activities to offset longer-term appreciation in the value of the U.S. dollar against non-U.S. currencies may be limited. Factors that could affect the effectiveness of our hedging activities include accuracy of sales and other forecasts, volatility of currency markets, and the cost and availability of hedging instruments. Since our hedging activities are designed to minimize volatility, they not only temporarily reduce the negative impact of a stronger U.S. dollar, but they also temporarily reduce the positive impact of a weaker U.S. dollar. Our future financial results could be significantly affected by a value of the U.S. dollar in relation to the foreign currencies in which we conduct business. The degree of this effect for any given time period will depend in part upon our hedging activities.
Restrictions in our debt agreements or our inability to obtain financing on favorable terms may increase our cost of borrowing and limit our activities
Our ability to make scheduled payments and satisfy our other obligations under our Credit Facility and senior notes depends on our future operating performance and on economic, financial, competitive, and other factors beyond our control. Our business may not generate sufficient cash flows to meet these obligations or generate sufficient levels of earnings to satisfy the applicable affirmative, negative, and financial covenants. Our failure to comply with these covenants and the other terms of the Credit Facility and senior notes could result in an event of default and acceleration of our obligations under these agreements, which may require us to seek additional financing or restructure existing debt on unfavorable terms. In addition, adverse changes in credit markets could increase our cost of borrowing and make it more difficult for us to obtain financing, which could limit our ability to execute certain strategies and have an adverse effect on our revenue growth and .
Our senior notes require payment of a prepayment penalty in the event that we elect to repay the notes prior to their stated maturity dates. Should we elect to repay some or all of the outstanding principal balance on our senior notes prior to their stated maturity dates, the prepayment penalty we incur could adversely affect our results of operations and cash flows.
We fund our operations, capital purchase requirements, and strategic growth needs through cash on hand, funds generated from operations, amounts available under our Credit Facility and senior note financings. If we are unable to obtain financing on favorable terms, we could face restrictions that would limit our ability to execute certain strategies, which could have an adverse effect on our revenue growth and profitability.
Borrowings under our Credit Facility bear interest at variable rates, including rates based on the Secured Overnight Financing Rate (“SOFR”), exposing us to interest rate risk. If interest rates were to increase, our debt service obligations under our variable-rate Credit Facility would increase even if the principal amount borrowed remained the same.
RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES
Fluctuations in our quarterly or annual results may cause our stock price to decline
Our prior operating results have fluctuated due to a number of factors, many of which are beyond our control, including seasonality of certain product lines; changes in our accounting estimates; the impact of acquisitions; timing of distributor purchases, product launches, operating expenditures, and customer marketing and incentive programs; changes in the number and type of competitors and their product and service offerings; changes in our sales and distribution model; changes in the economy affecting consumer spending; and other matters. Similarly, our future operating results may vary significantly from quarter to quarter or year to year due to these and other factors. If our operating results or projected operating results do not meet the expectations of securities analysts or investors in future periods, our stock price may decline.
The market price of our common stock may be volatile, and you may not be able to resell your shares at or above the price you paid
The trading price of our common stock may be volatile. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as other general economic, market, or political conditions, could reduce the market price of our common stock rapidly and unexpectedly, in spite of our operating performance as demonstrated during 2025 where the range of our stock price was from a low of $361.04 to a high of $766.68. Factors that may impact the market price of our common stock include the factors described in this “Risk Factors” section and elsewhere in this Form 10-K, as well as:
• Our stock repurchase program and changes in our capital structure or cost of capital, including the issuance of additional debt or equity;
• Public announcements (including the timing of these announcements) regarding our business, financial performance and prospects or new products or services, product enhancements or technological advances by our competitors or us;
• Trading activity in our stock, including portfolio transactions in our stock by the company, our executive officers and directors, and significant stockholders; trading activity that results from the ordinary course rebalancing of stock indices in which we may be included, such as the S&P 500 Index; trading activity related to our inclusion in, or removal from, any stock indices; and short interest in our common stock, which could be significant from time to time;
• Investor perception of the company and the industry and sectors in which we operate, including changes in earnings estimates or buy/sell recommendations by securities analysts; and whether or not we meet earnings estimates of securities analysts; and
• General financial, domestic, international, economic, and market conditions, including overall fluctuations in the U.S. equity and credit markets, which may experience extreme volatility that, in some cases, is unrelated or disproportionate to the operating performance of particular companies.
