ITEM 1A. RISK FACTORS
The risk factors summarized and disclosed below could adversely affect our business, results of operations and financial condition, and may cause volatility in the price of our shares. These are not all the risks we face, and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. See also the other information set forth in this Annual Report on Form 10-K, including in Part I, Item 1 "Business," Part II, Item 1C "Cybersecurity," Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and the related Notes.
Summary of Risk Factors
Risks Related to our Business
• If we fail to innovate and develop new products in a timely and cost-effective manner, our business and operating results could be adversely affected.
• If we do not successfully execute on our growth opportunities, or if our growth opportunities are more limited than we expect, our operating results and future growth could be adversely affected.
• Our principal manufacturing operations and third-party contract manufacturers are located in China and Southeast Asia, which exposes us to risks associated with doing business in that geographic area as well as changes in tariffs, adverse trade regulations, adverse tax consequences and pressure to move or diversify our manufacturing locations.
• If we do not successfully coordinate the worldwide manufacturing and distribution of our products, we could lose sales and our business and operating results could be adversely affected.
• We purchase key components and products from a limited number of sources, and our business and operating results could be adversely affected if supply were delayed or constrained or if there were shortages or significant price increases of required components or materials.
• We use artificial intelligence ("AI") in our business, and challenges relating to the development and use of AI could result in competitive harm, reputational harm, cybersecurity risks, and legal liability, and could adversely affect our results of operations.
• We rely on third parties to sell and distribute our products, and we rely on their information to manage our business. Disruption of, or changes to, our relationship with these channel partners could adversely affect our business, results of operations, and financial condition.
• If we are not able to maintain and enhance our brands, or if our brands or reputation are damaged, our reputation, business and operating results could be adversely affected.
• If we do not compete effectively, demand for our products could decline and our business and operating results could be adversely affected.
• If we do not accurately forecast market demand for our products, our business and operating results could be adversely affected.
• Our business depends in part on access to third-party platforms or technologies, and if access thereto is withdrawn, denied, or is not available on terms acceptable to us, our business and operating results could be adversely affected.
• Our success depends on our ability to manage, hire, integrate and motivate sufficient numbers of qualified personnel, including senior leadership, and to retain key personnel who may be difficult to replace.
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• As we focus on growth opportunities, we may divest or discontinue non-strategic product categories, or pursue strategic acquisitions and investments, which could have an adverse impact on our business.
• As we continue our efforts to scale, lower our costs and improve our operational efficiency, we may not fully realize our goals.
• Product quality issues could adversely affect our reputation, business and operating results.
Risks Related to the Global Nature of our Operations and the Regulatory Environment
• Adverse global and regional economic and geopolitical conditions can materially adversely affect our business, results of operations and financial condition.
• We conduct operations and have invested significantly in growing our sales and marketing activities in a number of countries, and the effect of business, legal and political risks associated with international operations could adversely affect us.
• Changes in trade policy and regulations, including changes in trade agreements, the imposition of tariffs or other trade restrictions, and the resulting consequences, may have adverse impacts on our business, results of operations and financial condition.
• Our financial performance is subject to risks associated with fluctuations in currency exchange rates.
• We are subject to risks related to our environmental, social and governance ("ESG") activities and disclosures.
• As a company operating in many markets and jurisdictions, expanding into new growth categories, and engaging in acquisitions, and as a Swiss, dual-listed company, we are subject to risks associated with new, existing and potential future laws and regulations.
• Our effective income tax rates may increase and we may be subject to additional tax liabilities, which could adversely affect our net income and cash flows.
• We maintain cash and cash equivalents at financial institutions and are exposed to credit risk in the event of default by such financial institutions.
Risks Related to Confidential Information, Cybersecurity, Privacy and Intellectual Property
• Losses or unauthorized access to, or releases of, confidential information could adversely affect our business and result in significant reputational, financial and legal consequences.
• The collection, storage, transmission, use and distribution of personal data could give rise to liabilities and additional costs of operation as a result of laws, governmental regulation and risks of data breaches and security incidents.
• Claims by others that we infringe their proprietary technology could adversely affect our business.
• We may be unable to protect our proprietary rights. Unauthorized use of our technology may result in the development of products that compete with our products.
Risks Related to our Financial Results
• Our operating results are difficult to predict and fluctuations in results may cause volatility in the price of our shares.
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• Our gross margins can vary significantly depending on multiple factors, which can result in unanticipated fluctuations in our operating results.
• There are risks associated with any outstanding and future indebtedness.
• We cannot ensure that our share repurchase programs will be fully utilized or that it will enhance long-term shareholder value. We similarly cannot ensure that we will continue to increase our dividend payments or to pay dividends at all. Share repurchases and dividends diminish our cash reserves.
Risk Factors
Risks Related to our Business
If we fail to innovate and develop new products in a timely and cost-effective manner, our business and operating results could be adversely affected.
Our product categories are characterized by short product life cycles, intense competition, frequent new product and feature introductions, rapidly changing technology, dynamic consumer demand and evolving industry standards. As a result, we must continually innovate in our new and existing product categories, introduce new products and technologies, and enhance existing products to remain competitive.
The success of our product portfolio depends on several factors, including our ability to:
• Identify new features, functionality and opportunities;
• Anticipate technology, market trends and consumer preferences;
• Develop innovative, high-quality, and reliable new software-enabled hardware products and enhancements in a cost-effective and timely manner;
• Distinguish our products from those of our competitors; and
• Offer our products at prices and on terms that are attractive to our customers and consumers.
The development of new products and services can be very difficult and requires high levels of innovation. The development process also can be lengthy and costly. There are significant initial expenditures for research and development, tooling, manufacturing processes, inventory and marketing, and we may not be able to recover those investments. If we fail to accurately anticipate technological trends or our users’ needs or preferences, are unable to complete the development of software-enabled hardware products and services in a cost-effective and timely fashion or are unable to appropriately increase production to fulfill customer demand, we will be unable to successfully introduce new products and services into the market or compete with other providers. Even if we complete the development of our new products and services in a cost-effective and timely manner, they may not be competitive with products developed by others, they may not achieve acceptance in the market at anticipated levels or at all, they may not be profitable or, even if they are profitable, they may not achieve margins as high as our expectations or as high as the margins we have achieved historically.
As we introduce new or enhanced products, integrate new technology into new or existing products, or reduce the overall number of products offered, we face risks including, among other things, disruption in customers’ ordering patterns, excessive levels of new and existing product inventories, revenue deterioration in our existing product lines, insufficient supplies of new products to meet customers’ demand, possible product and technology defects, and a potentially different sales and support environment. Premature announcements or leaks of new products, features or technologies may exacerbate some of these risks by reducing the effectiveness of our product launches, reducing sales volumes of current products due to anticipated future products, making it more difficult to compete, shortening the period of differentiation based on our product innovation, straining relationships with our partners or increasing market expectations for the results of our new products before we have had an opportunity to demonstrate the market viability of the products. Our failure to manage the transition to new products and services or the integration of new technology into new or existing products and services could adversely affect our business, results of operations, operating cash flows and financial condition.
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If we do not successfully execute on our growth opportunities, or if our growth opportunities are more limited than we expect, our operating results and future growth could be adversely affected.
Our future growth depends on growth opportunities and as a result, we are attempting to diversify our product category portfolio. Our investments may not result in the growth we expect, or when we expect it, for a variety of reasons, including but not limited to, changes in growth trends, evolving and changing markets and increasing competition, market opportunities, and product innovation.
The growth opportunities we may pursue are subject to constant and rapidly changing and evolving technologies and evolving industry standards and may be replaced by new technology concepts or platforms. Some of these growth categories and opportunities are also characterized by short product cycles, frequent new product and feature introductions and enhancements and rapidly changing and evolving consumer preferences with respect to design and features that require calculated risk-taking and fast responsiveness and result in short opportunities to establish a market presence. In addition, some of these growth categories and opportunities are characterized by price competition, erosion of premium-priced segments and average selling prices, commoditization, and sensitivity to general economic conditions and cyclical downturns. We are at risk of competitors coming to market with more innovative products that are more attractive to customers than ours or priced more competitively. If we do not develop innovative and reliable product offerings and enhancements in a cost-effective and timely manner that are attractive to consumers in these markets, if we are otherwise unsuccessful entering and competing in these growth categories or responding to our many competitors and to the rapidly changing conditions in these growth categories, if the growth categories in which we invest our limited resources do not emerge as the opportunities or do not produce the growth or profitability we expect, or when we expect it, or if we do not correctly anticipate changes and evolutions in technology and platforms, our business and results of operations could be adversely affected.
In addition, we rely on our go-to-market capability to leverage those growth opportunities, market our products and compete effectively with a goal of strengthening our sales. If we are not able to develop and maintain our go-to-market capabilities and processes, in particular the continued development of our enterprise salesforce and strategy, our business and results of operations could be adversely affected.
Our principal manufacturing operations and third-party contract manufacturers are located in China and Southeast Asia, which exposes us to risks associated with doing business in that geographic area as well as changes in tariffs, adverse trade regulations, adverse tax consequences and pressure to move or diversify our manufacturing locations.
We produce approximately 35% of our products at the facilities we own in China. The majority of our other production is performed by third-party contract manufacturers, including original design manufacturers in China, Vietnam, Thailand, Mexico, Malaysia, and Taiwan.
Our manufacturing operations in China have been in the past and could in the future be adversely affected by changes in the interpretation and enforcement of legal standards, strains on China’s available labor pool, changes in labor costs and other employment dynamics, high turnover among Chinese employees, infrastructure issues, import-export issues, cross-border intellectual property and technology restrictions, currency transfer restrictions, natural disasters, regional or global pandemics, conflicts or disagreements between China and Taiwan or China and the United States, labor unrest, and other trade customs and practices that are dissimilar to those in the United States and Europe. Interpretation and enforcement of China’s laws and regulations continue to evolve, and we expect differences in interpretation and enforcement to continue in the foreseeable future.
Our manufacturing operations at third-party contractors could be adversely affected by contractual disagreements; labor unrest; natural disasters; regional or global pandemics; wars and armed conflicts; strains on local communications; trade; and other infrastructures; competition for the available labor pool or manufacturing capacity; increasing labor and other costs; and other trade customs and practices that are dissimilar to those in the United States and Europe.
Further, we have been exposed in the past and may in the future be exposed to fluctuations in the value of the local currency in the countries in which manufacturing occurs. Future appreciation of these local currencies could increase our component and other raw material costs. In addition, our labor costs could continue to rise as wage rates increase and the available labor pool declines. These conditions could adversely affect our financial results.
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If we do not successfully coordinate the worldwide manufacturing and distribution of our products, we could lose sales and our business and operating results could be adversely affected.
If we do not successfully coordinate the timely manufacturing and distribution of our products, if our manufacturers, distribution logistics providers or transport providers are not able to successfully and timely process our business or if we do not receive timely and accurate information from such providers, and especially if we expand into new product categories or our business grows in volume, we may have an insufficient supply of products to meet customer demand or experience a build-up in inventory. As a result, we could lose sales or incur additional costs which could adversely affect our financial performance.
By locating our manufacturing primarily in China and Southeast Asia, we are reliant on third parties to get our products to distributors around the world. Transportation costs, fuel costs, labor unrest, natural disasters, regional or global pandemics, military conflicts, and other adverse effects on our ability, timing and cost of delivering products can increase our inventory, decrease our margins, adversely affect our relationships with distributors and other customers and otherwise adversely affect our results of operations and financial condition. For example, the recent armed conflict in the Middle East has disrupted the supply to our distribution center in Dubai, which serves the EMEA region, and has impacted our distribution partners' ability to reach customers in the region.
A significant portion of our quarterly retail orders and product deliveries generally occur in the last weeks of the fiscal quarter. This places pressure on our supply chain and could adversely affect our revenues and profitability if we are unable to successfully fulfill customer orders.
We purchase key components and products from a limited number of sources, and our business and operating results could be adversely affected if supply were delayed or constrained or if there were shortages or significant price increases of required components or materials.
We purchase certain products and key components from a limited number of sources and geographic areas and are therefore subject to significant supply and pricing risks. If the supply of these products or key components were to be delayed or constrained or if prices increase significantly, impacted by increased demand and/or by global shortages, including of semiconductor chips, or if one or more of our single-source suppliers experience disruptions or go out of business as a result of adverse global economic conditions, adverse global or regional geopolitical conditions, natural disasters or regional or global pandemics, we might be unable to find a new supplier on acceptable terms or at acceptable prices, or at all, and our product shipments to our customers could be delayed or product costs rise, which could adversely affect our business, financial condition and operating results.
Lead times for materials, components and products ordered by us or by our contract manufacturers can vary significantly and depend on factors such as contract terms, demand for a component, and supplier capacity. From time to time, we have experienced and may experience again, component shortages and extended lead times on semiconductors, such as microcontrollers and optical sensors, and base metals used in our products. We have been impacted by the increases in demand for memory chips and other components caused by the build out of new AI technologies and data centers, leading to a rise in prices for such components and some suppliers transitioning capacity away from certain components utilized in our products. Shortages or interruptions in the supply of components, materials, or subcontracted products, or our inability to procure these components, materials, or products from alternate sources at acceptable prices in a timely manner, could affect availability of our products or increase our production costs, which could adversely affect our business and operating results.
We use artificial intelligence (“AI”) in our business, and challenges relating to the development and use of AI could result in competitive harm, reputational harm, cybersecurity risks, and legal liability, and could adversely affect our results of operations.
We use AI solutions internally for business purposes and also in certain offerings, including making third-party AI tools available in our products, and we may in the future incorporate additional AI solutions into our offerings. AI technologies are complex and evolving rapidly, and we face significant competition from other companies. If our competitors or others are able to use or leverage AI more rapidly or more successfully than us, our ability to compete effectively could be impaired, we may fail to recoup our investments in AI, and our business and financial results could be adversely affected.
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AI solutions may use algorithms, datasets or training methodologies that are incomplete, reflect biases, or contain other flaws or deficiencies. AI solutions may create output that appears correct but is inaccurate, biased or otherwise flawed, or that infringes or otherwise violates intellectual property or other rights. Our integration of AI solutions internally for business purposes and into our offerings also introduces unique cybersecurity risks, including gaining unauthorized access to our products, adversarial attacks intended to deceive or 'poison' AI models, and model extraction attempts to steal our proprietary algorithms. We also face risks of employees using unauthorized AI tools that have not been vetted and approved by us and inadvertently disclosing confidential information to such third-party AI platforms. As AI-driven threats become more automated and sophisticated, they may bypass traditional security controls at a speed and scale that exceeds our ability to respond, potentially leading to significant operational disruption or the loss of sensitive intellectual property. We may not be able to control the development, maintenance or behavior of third-party AI solutions, including the autonomous actions of AI agents or the security of third-party foundational models, and these AI solutions may be used inappropriately or introduce novel vulnerabilities into our software via AI-generated code. We, and third-party providers of any AI solutions we may make available in our applications, may lack sufficient rights with respect to data or other material or content used in or produced by AI solutions. There is no guarantee that any contractual or other protections we seek to implement will be sufficient to protect us from risks presented by these solutions.
The rapid evolution of AI and the regulatory and policy landscapes concerning AI also present numerous risks. Several jurisdictions around the world have introduced or enacted legislation relating to AI, and regulators have issued policy statements relating to the use and development of AI. New laws and regulations, or existing laws and regulations, may be interpreted in ways that conflict with or otherwise impact our approach to AI and use of AI solutions.
While we have worked to take a responsible approach to the development and use of AI, we anticipate that it will require significant resources going forward. We could be required to modify our approach to AI, including our development practices, user consent methods, other policies or practices, or third-party AI solutions we may offer within our solutions. More generally, our approach to AI, including any AI solutions that we may incorporate or otherwise make available within our offerings, may expose us to claims, demands and litigation, regulatory inquiries, enforcement actions or other proceedings, fines, penalties and other liabilities, negative publicity, reputational harm and competitive harm. Any of these may adversely affect our business, results of operations, operating cash flows and financial condition.
We rely on third parties to sell and distribute our products, and we rely on their information to manage our business. Disruption of, or changes to, our relationship with these channel partners could adversely affect our business, results of operations, and financial condition.
We primarily sell our products to a variety of distributors, retailers, e-tailers and enterprise customers (together with our channel partners). We are dependent on our distributors to distribute and sell our products to indirect sales channel partners who will ultimately resell to businesses, vertical customers and consumers. The sales and business practices of all such sales channel partners, their compliance with laws and regulations, and their reputations - of which we may or may not be aware - may affect our business and our reputation.
While our overall distribution relationships are diffuse, in fiscal years 2026 and 2025 ou r gross sales were concentrated with three customers - Amazon, Ingram Micro and TD Synnex - and their affiliated entities. We do not have long-term commitments with those customers. If online sales grow as a percentage of overall sales, we expect that our reliance on Amazon would increase. While we believe that we have good relationships with Amazon, Ingram Micro and TD Synnex, any adverse change in those relationships could have an adverse impact on our results of operations and financial condition.
The impact of economic conditions, labor issues, natural disasters, regional or global pandemics, evolving consumer preferences, and purchasing patterns on our distribution partners, or competition between our sales channels, could result in sales channel disruption. Any loss of a major partner or distribution channel or other channel disruption could make us more dependent on alternate channels, increase pricing and promotional pressures from other partners and distribution channels, increase our marketing costs, or adversely impact buying and inventory patterns, payment terms or other contractual terms, sell-through or delivery of our products to consumers, our reputation and brand equity, or our market share.
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Our sales channel partners also sell products offered by our competitors and, in the case of retailer house brands, may also be our competitors. If product competitors offer our sales channel partners more favorable terms, have more products available to meet their needs, or utilize the leverage of broader product lines sold through the channel, or if our sales channel partners show preference for their own house brands, our sales channel partners may de-emphasize or decline to carry our products. In addition, certain of our sales channel partners could decide to de-emphasize the product categories that we offer in exchange for other product categories that they believe provide them with higher returns. If we are unable to maintain successful relationships with these sales channel partners or to maintain our distribution channels, our business could suffer.
As we expand into new product categories and markets in pursuit of growth, we will have to build relationships with new channel partners and adapt to new distribution and marketing models. These new partners, practices and models may require significant management attention and operational resources and may affect our accounting, including revenue recognition, gross margins, and the ability to make comparisons from period to period. Certain product categories, such as Video Collaboration, also require that we further build and scale our own enterprise sales force. Several of our competitors already have large enterprise sales forces and experience and success with that sales model. If we are unable to build successful distribution channels, build and scale our own enterprise sales force, or successfully market our products in these new product categories, we may not be able to take advantage of the growth opportunities, and our business and our ability to grow our business could be adversely affected.
We reserve for cooperative marketing arrangements, incentive programs and pricing programs with our sales channel partners. These reserves are based on judgments and estimates, using historical experience rates, inventory levels in distribution, current trends and other factors. There could be significant differences between the actual costs of such arrangements and programs and our estimates.
We use sell-through data, which represents sales of our products by our direct retailer and e-tailer customers to consumers, and by our distributor customers to their customers, along with other metrics, to assess consumer demand for our products. Sell-through data is subject to limitations due to collection methods and the third-party nature of the data and thus may not be an accurate indicator of actual consumer demand for our products. The customers supplying sell-through data vary by geographic region and from period to period, but typically represent a majority of our retail sales. In addition, we rely on channel inventory data from our sales channel partners. If we do not receive this information on a timely basis, if this information is not accurate, or if we do not properly interpret this information, our results of operations and financial condition may be adversely affected.
If we are not able to maintain and enhance our brands, or if our brands or reputation are damaged, our reputation, business and operating results could be adversely affected.
We have developed long-term value in our brands and have invested significantly in design and in our existing and new brands over the past several years. We believe that our design and brands have significantly contributed to the success of our business and that maintaining and enhancing our brands is important to our future growth and success. Maintaining and enhancing our brands will require significant investments and will depend largely on our future design, products and marketing, which may not be successful and may damage our brands. Our brands and reputation are also dependent on third parties, such as suppliers, manufacturers, distributors, retailers, product reviewers and the media as well as online consumer product reviews, consumer recommendations and referrals. It can take significant time, resources and expense to overcome negative publicity, reviews or perception. Any negative effect on our brands, regardless of whether it is in our control, could adversely affect our reputation, business and results of operations.
If we do not compete effectively, demand for our products could decline and our business and operating results could be adversely affected.
The industry in which we operate is intensely competitive. Our product categories are dynamic; highly competitive and characterized by large, well-financed competitors with strong brand names and highly effective research and development, marketing and sales capabilities; short product life cycles; constantly evolving industry standards and perpetual new demands for features and performance; continual performance enhancements; and rapid adoption of technological and product advancements by competitors in our retail markets. We have experienced aggressive price competition and other promotional activities from our primary competitors and less-established brands, including brands owned by some retail customers known as house brands. As we shift the focus of our marketing efforts in certain categories from a push model to a more demand-generating, pull-driven
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approach, the pressures from this competition and from our distribution channels, combined with the implementation risks of such a strategy shift, could adversely affect our competitive position, market share and business. In addition, our competitors may offer customers terms and conditions that may be more favorable than our terms and conditions and may require us to take actions to maintain or increase our customer incentive programs, which could impact our revenues and operating margins.
Microsoft, Apple, Google and Amazon are leading producers of operating systems, hardware, platforms and applications with which our mice, keyboards, wireless speakers and other products are designed to operate. As a result, Microsoft, Apple, Google and Amazon each may be able to improve the functionality of its own products, if any, or may choose to show preference to our competitors' products, to correspond with ongoing enhancements to its operating systems, hardware and software applications before we are able to make such improvements. This ability could provide Microsoft, Apple, Google, Amazon or other competitors with significant lead-time advantages. In addition, Microsoft, Apple, Google, Amazon or other competitors may be able to control distribution channels or offer pricing advantages on bundled hardware and software products that we may not be able to offer, and may be financially positioned to exert significant downward pressure on product prices and upward pressure on promotional incentives to gain market share. If we are not able to increase our software and services capability to enhance hardware product experiences and offer attractive product pricing, our results of operations and financial condition may be adversely affected. For additional information, see "Competition” in Item 1 of this Annual Report on Form 10-K.
If we do not accurately forecast market demand for our products, our business and operating results could be adversely affected.
We use forecasts of product demand to make decisions regarding investments of our resources and production levels of our products. Although we receive forecasts from our customers, many are not obligated to purchase the forecasted demand. Also, actual sales volumes for individual products in our retail distribution channel can be volatile due to changes in macroeconomic and geopolitical conditions, consumer and business spending, consumer preferences and other reasons. In addition, our products have short product life cycles, so a failure to accurately predict high demand for a product can result in lost sales that we may not recover in subsequent periods, or higher product costs if we meet demand by paying higher costs for materials, production and delivery. Our failure to predict low demand for a product can result in excess inventory, lower cash flows and lower margins if we are required to reduce product prices to reduce inventories.
If our sales channel partners have excess inventory of our products or decide to decrease their inventories for any reason, they may decrease the number of products they acquire in subsequent periods, which could cause disruption in our business and adversely affect our forecasts and sales.
In addition, market demand remains less predictable and more volatile than before due to uncertainty about tariffs, war, and volatile energy prices. We have experienced in the past and may continue experiencing large differences between our forecasts and actual demand for our products that may result in excess inventory or product unavailability, inventory and restructuring reserves, increases in operational logistics and other costs, damaged relationships with suppliers or customers, opportunities for our competitors, and lost market share and revenue. If we do not accurately predict product demand, our business and operating results could be adversely affected.
Our business depends in part on access to third-party platforms or technologies, and if access thereto is withdrawn, denied, or is not available on terms acceptable to us, our business and operating results could be adversely affected.
Our product portfolio includes current and future products designed for use with third-party platforms or software, such as the Apple iPad, iPhone and Siri, Android phones and tablets, Zoom, and Microsoft Teams . Our business in these categories relies on our access to the platforms of third parties, some of whom are our competitors. Platform owners that are competitors have a competitive advantage in designing products for their platforms and may produce peripherals or other products that work better, or are perceived to work better, than our products in connection with those platforms. If we expand the number of platforms and software applications with which our products are compatible, we may not be successful in launching products for those platforms or software applications, we may not be successful in establishing strong relationships with the new platform or software owners, or we may negatively impact our ability to develop and produce high-quality products on a timely basis for
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those platforms and software applications or we may otherwise adversely affect our relationships with existing platform or software owners.
Our access to third-party platforms may require paying a royalty, which lowers our product margins or may otherwise be on terms that are not acceptable to us. In addition, the third-party platforms or technologies used to interact with our product portfolio can be delayed in production or can change without prior notice to us, which can result in our having excess inventory, lower margins, lost investment in time and expense, or lost opportunity cost.
If we are unable to access third-party platforms or technologies, or if our access is withdrawn, denied, or is not available on terms acceptable to us, or if the platforms or technologies are delayed or changed without notice to us, our business and operating results could be adversely affected.
Our success depends on our ability to manage, hire, integrate and motivate sufficient numbers of qualified personnel, including senior leadership, and to retain key personnel who may be difficult to replace.
Our success depends on our ability to attract and retain highly skilled personnel, including senior leadership and international personnel. From time to time, we experience turnover in some of our senior leadership positions.
We compensate our employees through a combination of salary, bonuses, benefits and equity compensation. Recruiting and retaining skilled personnel, including software and hardware engineers, is highly competitive. If we fail to provide an attractive working environment and competitive compensation to our employees, it will be difficult to retain, hire and integrate qualified employees and contractors, and we may not be able to maintain and expand our business. If we do not retain or maintain the continuity of our senior leaders or other key employees for any reason, including voluntary or involuntary departure, death or permanent or temporary disability, we risk losing institutional knowledge, experience, expertise and other benefits of continuity as well as the ability to attract and retain other key employees. In addition, we must carefully balance the size of our employee base with our current infrastructure, management resources and anticipated operating cash flows. If we are unable to manage the size of our employee base, including but not limited to our engineers, product managers and designers and other functions, we may fail to achieve our strategic and operational goals, including developing and introducing new products successfully and in a cost-effective and timely manner. If our revenue growth or employee levels vary significantly, our operating cash flows and financial condition could be adversely affected. Volatility or lack of positive performance in our stock price may also affect our ability to retain key employees, many of whom have been granted equity incentives. We may find it difficult to provide competitive equity incentives, and our ability to hire, retain and motivate key personnel may suffer.
As we focus on growth opportunities, we may divest or discontinue non-strategic product categories, or pursue strategic acquisitions and investments, which could have an adverse impact on our business.
We regularly review our product portfolio and update our non-strategic product categories and products. Discontinuing products with service components may cause us to continue to incur expenses to maintain services within the product life cycle or may adversely affect our customer and consumer relationships and brand. Divestitures may also involve warranties, indemnification or covenants that could restrict our business or result in litigation, additional expenses or liabilities. In addition, discontinuing product categories, even categories that we consider non-strategic, reduces the size and diversification of our business and causes us to be more dependent on a smaller number of product categories.
As we attempt to grow our business in strategic product categories and emerging market geographies, we evaluate acquisition opportunities that could provide us with additional product or service offerings or with additional industry expertise, assets and capabilities. Acquisitions could result in difficulties in integrating acquired operations, products, technology, internal controls, personnel and management teams and result in the diversion of capital and management’s attention away from other business issues and opportunities. If we fail to successfully integrate acquisitions, our business could be harmed. Acquisitions could also result in the assumption of known and unknown liabilities, product, regulatory and other compliance issues, dilutive issuances of our equity securities, the incurrence of debt, disputes over earn-outs or other litigation, and adverse effects on relationships with our and our target’s employees, customers and suppliers. Moreover, our acquisitions may not be successful in achieving our desired strategy, product, financial or other objectives or expectations, which would also cause our business to suffer.
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Acquisitions can also lead to large non-cash charges that can have an adverse effect on our results of operations as a result of write-offs for items such as future impairments of intangible assets and goodwill, restructuring charges, inventory write downs or the recording of share-based compensation.
If we divest or discontinue product categories or products that we previously acquired, or if the value of those parts of our business become impaired, we may need to evaluate the carrying value of our goodwill. Additional impairment charges could adversely affect our results of operations. Several of our past acquisitions have not been successful and have led to significant impairment charges. Acquisitions and divestitures may also cause our operating results to fluctuate and make it difficult for investors to compare operating results and financial statements between periods. In addition, from time to time we make strategic venture investments in other companies that provide products and services that are complementary to ours. If these investments are unsuccessful, this could have an adverse impact on our results of operations, operating cash flows and financial condition.
As we continue our efforts to scale, lower our costs and improve our operational efficiency, we may not fully realize our goals.
Our ability to achieve the desired and anticipated cost savings and other benefits from simplification, cost-cutting and restructuring activities, and within our desired and expected timeframes, are subject to many estimates and assumptions, and the actual savings and timing for those savings may vary materially based on factors such as local labor regulations, negotiations with third parties, and operational requirements. These estimates and assumptions are also subject to significant economic, competitive and other uncertainties, some of which are beyond our control. There can be no assurance that we will fully realize the desired and anticipated benefits from these activities. To the extent that we are unable to improve our operational efficiency, further restructuring measures may be required in the future. Furthermore, we are expecting to be able to use the anticipated cost savings from these activities to fund and support our current growth opportunities and incremental investments for future growth. If the cost savings and other benefits from restructuring activities do not materialize as anticipated, or within our expected timeframes, our ability to invest in growth may be limited and our business and operating results may be adversely affected.
Product quality issues could adversely affect our reputation, business and operating results.
The products that we sell or third-party components included therein could contain defects in design or manufacture. There can be no assurance we will be able to detect and remedy all defects in the hardware and software we sell. Failure to do so could result in product recalls, product liability claims and litigation, product redesign efforts, lost revenue, loss of reputation, and significant warranty and other expenses to remedy.
While we maintain reserves for reasonably estimable liabilities and purchase liability insurance, our reserves may not be adequate to cover such claims and liabilities and our insurance is subject to deductibles and may not be adequate to cover such claims and liabilities. Furthermore, our contracts with distributors and retailers may contain warranty, indemnification and other provisions related to product quality issues, and claims under those provisions may adversely affect our business and operating results.
Risks Related to the Global Nature of our Operations and the Regulatory Environment
Adverse global and regional economic and geopolitical conditions can materially adversely affect our business, results of operations and financial condition.
We conduct operations internationally and as a result, adverse global and regional economic and geopolitical conditions have in the past and can in the future materially adversely affect our business, results of operations and financial condition.
Such conditions, including but not limited to inflation, slower growth or recession, changes in tariffs, trade restrictions, changes to fiscal and monetary policy, higher interest rates, government shutdowns, and currency fluctuations, as well as other conditions susceptible to impacting consumer confidence and spending could adversely affect demand for our products. In fiscal year 2026, we were impacted by adverse macroeconomic and geopolitical conditions including but not limited to inflation, foreign currency fluctuations, uncertainty about tariffs, availability of memory chips, war, and volatile energy prices.
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Global or regional economic and political conditions may also have an impact on our suppliers, contract manufacturers, logistics providers, and distributors, causing volatility in cost of materials, transportation costs, transit times and component availability, and as a result, impacting the pricing of our products, product availability and our results of operations. The recent armed conflict in the Middle East has impacted the availability and price of crude oil, increasing transportation costs. A prolonged conflict also could affect the availability and cost of plastics and other byproducts of petroleum used in our products.
We conduct operations and have invested significantly in growing our sales and marketing activities in a number of countries, and the effect of business, legal and political risks associated with international operations could adversely affect us.
We conduct operations and have invested significantly in growing our personnel and sales and marketing activities in a number of countries. We may also increase our investments to grow sales in emerging markets, such as Latin America, Eastern Europe, the Middle East and Africa. There are risks inherent in doing business in international markets, including:
• Changes in economic, political or business conditions resulting in changes in trade protection measures, tariffs, and other trade barriers, restrictions and regulations, and any successor measures, restrictions, laws and regulations;
• Compliance with current and future laws and regulations, including AI, environmental, tax, import/export and anti-corruption laws, which vary by country, and region, and over time, increasing the costs of compliance and potential risks of non-compliance, uncertain and varying enforcement of those laws and regulations, dependence on local authorities, and the importance of local networks and relationships;
• Varying accounting, auditing and financial reporting standards, accountability and protections, including risks related to the lack of access by the Public Company Accounting Oversight Board (United States) ("PCAOB") to inspect PCAOB-registered accounting firms in emerging market countries such as China;
• Exposure to political, economic and financial instability, which may lead to reduced sales, higher credit risks, currency exchange losses, exposure to fluctuations in the value of local currencies, impositions of currency exchange controls and collection difficulties or other losses;
• Import or export restrictions or licensing requirements that could affect some of our products, including those with encryption technology;
• Lack of adequate infrastructure or services necessary or appropriate to support our long-term business strategy, digital transformation and operational efficiency, including delays from customs brokers or government agencies and difficulties in staffing and managing international operations;
• Difficulties and increased costs in establishing sales and distribution channels in unfamiliar markets, with their own market characteristics and competition, including entrenched local competition;
• Weak protection of our intellectual property rights;
• A broad range of customs, consumer trends, and more.
Any of these risks could adversely affect our business, financial condition and operating results.
In addition, the increasingly strict and numerous regulations in China may create a more challenging environment for foreign companies operating in the region. As a result, such regulations may have the effect of limiting our growth and market share in China and disrupting manufacturing and operations in the region. In addition, changes in relations between China and the United States are currently expected to continue to lead to further policy changes that in turn are expected to prevent or limit us from procuring, developing, building, and/or selling our products in China.
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Changes in trade policy and regulations, including changes in trade agreements, the imposition of tariffs or other trade restrictions, and the resulting consequences, may have adverse impacts on our business, results of operations and financial condition.
The U.S. government has instituted or proposed changes to international trade policy through the renegotiation, and potential termination, of certain existing bilateral or multilateral trade agreements and treaties with, and the imposition of tariffs on a wide range of products and other goods from China, countries in EMEA and other countries. We have invested significantly in manufacturing facilities in China and Southeast Asia. Given our manufacturing is principally in those countries, policy or regulations changes in the United States or other countries present particular risks for us. Our business has been and continues to be impacted by the expansion of tariffs on goods imported from other countries. While the full extent of tariff changes remains uncertain, the risk of significant trade policy shifts could materially impact our operations, costs, and financial results.
Changes in tariffs or other trade restrictions, or other changes to trade policies and regulations, could adversely affect more or all of our products. There also are risks associated with retaliatory policies and resulting trade wars. We cannot predict future trade policy and regulations in the United States and other countries, the terms of any renegotiated trade agreements or treaties, or tariffs and their impact on our business. A trade war could have a significant adverse effect on world trade and the world economy. Tariffs and other trade restrictions have in the past increased and could in the future increase the price of, limit the amount of, or cause significant delays in our procurement of certain products or components or materials used in our products. For example, certain materials are primarily available in a limited number of countries, including rare earth elements, minerals and metals. Trade disputes, geopolitical tensions, economic circumstances, political conditions, or public health issues may limit our ability to obtain such materials. Although these rare earth and other materials are generally available from multiple suppliers, China is a predominant producer of these materials. China has in the past restricted export of certain of these materials and may in the future further expand restrictions or stop exporting these or other materials. As a result, our suppliers’ ability to obtain such supply may be constrained, and we may be unable to obtain sufficient quantities, or obtain supply in a timely manner, or at a commercially reasonable cost. In any such event, the sales, cost or gross margin of our products may be adversely affected and the demand from our customers for products and services may be diminished. Uncertainty surrounding international trade policy and regulations as well as disputes and protectionist measures could also have an adverse effect on consumer confidence and spending. If we deem it necessary to alter all or a portion of our activities or operations in response to such policies, agreements or tariffs and other trade restrictions, our capital and operating costs may increase.
Our ongoing efforts to address these risks may not be effective and may have long-term adverse effects on our operations and operating results that we may not be able to reverse. Such efforts may also take time to implement or to have an effect and may result in adverse quarterly financial results or fluctuations in our quarterly financial results. As a result, changes in trade policy and regulations in the United States and other countries as well as changes in trade agreements and tariffs or other trade restrictions could adversely affect our business, results of operations and financial condition.
Our financial performance is subject to risks associated with fluctuations in currency exchange rates.
A significant portion of our business is conducted in currencies other than the U.S. Dollar. Therefore, we face exposure to movements in currency exchange rates.
Our primary exposure to movements in currency exchange rates relates to non-U.S. Dollar-denominated sales and operating expenses worldwide. A significant portion of our revenue is in non-U.S. denominated currencies. The weakening of currencies relative to the U.S. Dollar adversely affects the U.S. Dollar value of our non-U.S. Dollar-denominated sales and earnings. If we raise international pricing to compensate, it could potentially reduce demand for our products, adversely affecting our sales and potentially having an adverse impact on our market share. Margins on sales of our products in non-U.S. Dollar-denominated countries and on sales of products that include components obtained from suppliers in non-U.S. Dollar-denominated countries could be adversely affected by currency exchange rate fluctuations. In some circumstances, for competitive or other reasons, we may decide not to raise local prices to fully offset the U.S. Dollar’s strengthening, which would adversely affect the U.S. Dollar value of our non-U.S. Dollar-denominated sales and earnings. Competitive conditions in the markets in which we operate may also limit our ability to increase prices in the event of fluctuations in currency exchange rates. Conversely, strengthening of currency rates may also increase our product component costs and other expenses denominated
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in those currencies, adversely affecting operating results. A larger portion of our sales than of our expenses are denominated in non-U.S. denominated currencies.
We use derivative instruments to hedge certain exposures to fluctuations in currency exchange rates. The use of such hedging activities may not offset any, or more than a portion, of the adverse financial effects of unfavorable movements in currency exchange rates over the limited time the hedges are in place and do not protect us from long term shifts in currency exchange rates.
As a result, fluctuations in currency exchange rates could affect and have in the past adversely affected our business, operating results and financial condition. Moreover, these exposures may change over time.
We are subject to risks related to our environmental, social and governance ("ESG") activities and disclosures.
Concerns over climate change have resulted in regulatory requirements and reporting frameworks designed to reduce or mitigate the effects of climate change on the environment. However, the lack of harmonized regulatory requirements and reporting frameworks exposes companies to navigate myriad different requirements, which has led to challenges in ESG reporting. As a result, companies are required to develop an expanded set of metrics and measures, as well as data collection, controls, and reporting processes to meet regulatory requirements and stakeholder expectations. Failure by us to promptly and accurately meet these expectations and requirements may expose us to reputational and brand damage, regulatory penalties and litigation among other things. Compliance with such requirements will also require additional expenditures by us or our suppliers, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
As a company operating in many markets and jurisdictions, expanding into new growth categories, and engaging in acquisitions, and as a Swiss, dual-listed company, we are subject to risks associated with new, existing and potential future laws and regulations.
As we expand into new markets and product categories and acquire companies, businesses and assets, our operations and products must comply with a wide variety of laws, standards and other requirements governing, among other things, health and safety, hazardous materials usage, product-related energy consumption, conflict minerals, packaging, recycling, sustainability, environmental, child labor and human rights matters, among others. Our products may be required to obtain regulatory approvals and satisfy other regulatory concerns in the various jurisdictions where they are manufactured, sold or both. These requirements create procurement and design challenges, which, among other things, require us to incur additional costs identifying suppliers and contract manufacturers who can provide or obtain compliant materials, parts and end products. Moreover, companies, businesses and assets that we acquire may not be in compliance with regulations in all jurisdictions. Failure to comply with such requirements can subject us to liability, additional costs, and reputational harm, and in severe cases, force us to recall products or prevent us from selling our products in certain jurisdictions. We are also subject to the SEC disclosure requirements regarding the use of certain minerals, known as conflict minerals, which are mined from the Democratic Republic of Congo and adjoining countries, as well as procedures regarding a manufacturer’s efforts to identify and prevent the sourcing of such minerals and metals produced from those minerals. The moral and regulatory imperatives to avoid purchasing conflict minerals are causing us to incur additional expenses, could limit the supply and increase the cost of certain metals used in manufacturing our products and could adversely affect the distribution and sales of our products.
As a Swiss company with shares listed on both the SIX Swiss Exchange and the Nasdaq Global Select Market, we are also subject to both Swiss and United States corporate governance and securities laws and regulations. In addition to the extra costs and regulatory burdens of our dual regulatory obligations, the two regulatory regimes may not always be compatible and may impose disclosure obligations, operating restrictions or tax effects on our business to which our competitors and other companies are not subject. For example, Swiss Corporate Law among other things, (a) requires a binding shareholder “say on pay” vote with respect to the compensation of members of our executive management and Board of Directors, (b) generally prohibits the making of severance, advance, transaction premiums and similar payments to members of our executive management and Board of Directors, (c) imposes other restrictive compensation practices, and (d) requires that our articles of incorporation specify various compensation-related matters. Potential future initiatives relating to corporate governance or executive compensation, and Swiss voter sentiment in favor of such regulations may increase our
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non-operating costs and adversely affect our ability to attract and retain executive management and members of our Board of Directors.
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP") which are subject to interpretation or changes by the Financial Accounting Standards Board ("FASB"), the SEC and other various bodies formed to promulgate and interpret appropriate accounting principles. New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future which may have a significant effect on our financial results or our compliance with regulations.
Our effective income tax rates may increase and we may be subject to additional tax liabilities, which could adversely affect our net income and cash flows.
We operate in multiple jurisdictions, and our profits are taxed pursuant to the tax laws of these jurisdictions. Our effective income tax rate may be affected by changes to existing tax laws, enactment of new tax laws, such as the U.S. federal tax legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”) enacted in 2025, or changes to interpretations of tax laws, treaties, rulings, regulations or agreements in any given jurisdiction, or changes in international tax reform by the Organization for Economic Co-operation and Development (the "OECD") and similar organizations, utilization of net operating losses and tax credit carryforwards, changes in geographical allocation of income and expense, and changes in management’s assessment of matters such as the realizability of deferred tax assets. We do not expect the OBBBA to have a material impact on our income taxes, including current and deferred tax balances and the effective tax rate. In the past, we have experienced fluctuations in our effective income tax rate. Our effective income tax rate in a given fiscal year reflects a variety of factors that may not be present in the succeeding fiscal year or years. There is no assurance that our effective income tax rate will not change in future periods.
For example, as a result of the Federal Act on the Tax Reform and AHV Financing (“TRAF”), the canton of Vaud in Switzerland, where we are incorporated, enacted tax reforms that took effect as of January 1, 2020. As a result of the TRAF reform, Logitech will incur cash income taxes that will increase over time as the deferred income tax benefit established in connection with the reform diminishes. Implementation of any material change in tax laws or policies or the adoption of new interpretations of existing tax laws and rulings, or termination or replacement of our tax arrangements with the canton of Vaud may adversely affect our net income.
We are subject to the OECD's Pillar Two Global Anti-Base Erosion rules, which Switzerland has implemented through a Qualified Domestic Minimum Top-Up Tax ("QDMTT") and the Income Inclusion Rule ("IIR"). The IIR may require us to pay a "Top-Up Tax" in Switzerland if the effective tax rate of our subsidiaries in any jurisdiction falls below the 15% minimum. On January 5, 2026, the OECD released a package of "Side-by-Side" Administrative Guidance that impacts our Pillar 2 compliance and reporting. A new permanent safe harbor replaces the transitional Country-by-Country ("CbCR") safe harbor for fiscal years beginning in 2027, and the CbCR safe harbor is extended for an additional year. Any changes in the interpretation of these rules by the Swiss Tax Administration or other local authorities could lead to a higher effective tax rate and increased compliance cost.
We file Swiss and foreign tax returns. We are frequently subject to tax audits, examinations and assessments in various jurisdictions. If any tax authority successfully challenges our operational structure, intercompany pricing policies or the taxable presence of our key subsidiaries in certain countries, if the terms of certain income tax treaties are interpreted in a manner that is adverse to our structure, or if we lose a material tax dispute in any country, our effective income tax rate could increase.
We maintain cash and cash equivalents at financial institutions and are exposed to credit risk in the event of default by such financial institutions.
We maintain cash and cash equivalents with various creditworthy financial institutions and while we have a policy to limit exposure with any one financial institution, we are exposed to credit risk in the event of default by financial institutions to the extent that cash balances with individual financial institutions are in excess of amounts that are insured. If such institutions were to fail, we could lose all or a portion of amounts held in excess of such insurance limits. Any material loss that we may experience in the future as a result could additionally have an adverse effect on our ability to pay or could delay payments of our operational expenses and other payments,
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including in connection with our dividend, share repurchases, payments to our vendors and employees and cause other operational impacts.
Risks Related to Confidential Information, Cybersecurity, Privacy and Intellectual Property
Losses or unauthorized access to, or releases of, confidential information could adversely affect our business and result in significant reputational, financial and legal consequences.
We use and store confidential information, including but not limited to our business, financial, legal and governance information, as well as confidential information, including personal information, about our employees, members of our Board of Directors, customers, and other business partners. In addition, as a consumer electronics company, our websites are an important presentation of our company, identity and brands and an important means of interaction with and source of information for consumers of our products. We also rely on our centralized information technology systems for product-related information and to store intellectual property and data, forecast our business, maintain financial records, manage operations and inventory, and operate other critical functions. We allocate significant resources to maintain our information technology systems and implement technical and organizational measures recognized as “best practice” to protect against unauthorized access or misuse.
Nevertheless, our websites and information technology systems have been and could continue to be subject to or threatened with, and are susceptible to, damage, disruptions or shutdowns due to power outages, hardware failures, structural or operational failures, computer viruses, ransomware and other malware, vulnerabilities in third-party software, attacks by computer hackers and other third parties, including state-sponsored attacks, employee error or malfeasance, phishing and other means of social engineering, other data security issues, telecommunication failures, user error, employee or contractor negligence or malfeasance, catastrophes, downtime due to system or software upgrades, integration or migration, or other foreseeable and unforeseen events. Such risks extend not only to our own products, services, systems and networks, but also to those of customers, suppliers, contractors, business partners, vendors, and other third parties. For example, in the fall of 2025, we experienced a cybersecurity incident relating to the exfiltration of data, which we believe will not have a material adverse effect on our financial condition or results of operations. However, there can be no assurance that any future, or yet undiscovered, incident will not have a material impact on us, individually or in the aggregate.
Moreover, there is an increased risk that we may experience security breaches or other types of incidents as a result of our employees, service providers and third parties working remotely, or as a result of our growth or our adoption of new technologies. For example, our use of AI technologies may increase the risk that we experience certain types of cybersecurity incidents or could amplify the impact of attacks involving more traditional methods. We may also face increased risks of complex and damaging attacks that substantially disrupt operations and expose sensitive data as threat actors adopt increasingly sophisticated technologies, including AI technologies that have the potential to dramatically increase the speed and impact of such attacks. Moreover, the global cybersecurity environment is increasingly influenced by geopolitical fragmentation, and we expect attacks by nation state actors and their agents to intensify during periods of geopolitical conflict. As we operate in multiple jurisdictions, escalating tensions between major powers may result in us becoming a direct or indirect target of sophisticated digital warfare, potentially leading to the loss of proprietary technology, the compromise of our hardware integrity, and long-term damage to our global competitive position. While we have developed and implemented security measures and processes designed to protect against cybersecurity incidents and other security threats; such measures cannot provide absolute security and may not be successful in preventing all security breaches.
Security incidents or breaches impacting the information we or our third-party service providers process or maintain or incidents impacting our products, websites or information technology systems may result in loss, unavailability, corruption, or unauthorized collection, use, disclosure or other processing of personal data and other confidential information that we and our service providers maintain and otherwise process. Any such incidents or breaches, or the belief or perception that any such matters have occurred could result in disruptions of our operations, loss of intellectual property and loss, corruption, unavailability or other unauthorized processing of data. Any such event could also damage our brand and reputation or otherwise harm our business, and could result in government enforcement actions, litigation and potential liability for us. Any of these may adversely affect our business, results of operations and financial condition, potentially in a material manner.
In addition, while we carry cyber insurance, we cannot be certain that our insurance will be sufficient to cover losses and liabilities resulting from cyberattacks, security breaches and incidents, or other interruptions, that
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insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim, any of which could have a material adverse effect on our business, including our financial condition, results of operations and reputation.
The collection, storage, transmission, use and distribution of personal data could give rise to liabilities and additional costs of operation as a result of laws, governmental regulation and risks of data breaches and security incidents.
In connection with our operations, we collect and otherwise process personal data, including that of our consumers. The processing of this information is increasingly subject to legislation, regulations and enforcement in numerous jurisdictions around the world. Global data privacy regulation is increasingly fragmented, with increasing enforcement efforts and penalties. Such fragmentation requires more complex and costly compliance structures, while heightened enforcement increases the cost and reputational risk associated with even minor compliance errors. For example, the General Data Protection Regulation ("GDPR"), which is applicable to us and to all companies processing data of people in the European Union, imposes significant fines and sanctions for violation of the GDPR. The GDPR's international transfer rules are under constant scrutiny by legislators, privacy activists, and law enforcement authorities, and we are now required to put in place additional privacy protective measures for transfer of data of people in the European Union to certain countries outside of the European Economic Area, such as certifying under the Data Privacy Framework program. In the United States, several states have adopted broad privacy laws. Such laws and regulations are typically intended to protect the privacy and security of personal information and its collection, storage, transmission, use, disclosure and other processing. For example, the California Consumer Privacy Act (the “CCPA”), among other things, requires covered companies to provide disclosures to California consumers and afford such consumers abilities to opt-out of certain sales of personal information. Additionally, the California Privacy Rights Act which also forms part of the data privacy framework for California, significantly modified the CCPA and made compliance more uncertain and complex. Additionally, other U.S. states continue to propose, and in certain cases adopt, privacy-focused legislation. Other laws and regulations may follow, at state and federal levels. Other regions also have robust data protection and privacy legislation. For example, the Personal Information Protection Law of the People’s Republic of China, strictly regulates the processing of personal information and the transfer of personal information of Chinese residents to territories outside of China.
In addition, because various jurisdictions have different laws and regulations concerning the use, storage, transmission and other processing of such information, we may face requirements that pose compliance challenges in existing markets as well as new international markets that we seek to enter. The collection and processing of personal data also heighten the risk of security breaches and other data security issues related to our IT systems and the systems of third-party data storage and other service and IT providers. Such laws and regulations, variation between jurisdictions and risks presented by our processing of personal data could limit our ability to use data and develop new features and services, subject us to increased costs, require allocation of additional resources and changes to our policies and practices, which may be difficult to achieve in a commercially reasonable manner or at all. Any actual or perceived failure by us to comply with these laws, regulations, or other actual or asserted obligations relating to privacy or the collection, use or other processing of personal data may lead to significant fines, penalties, regulatory investigations, lawsuits, significant costs for remediation, damage to our reputation, or other liabilities, all of which could adversely affect our business.
Claims by others that we infringe their proprietary technology could adversely affect our business.
We have been expanding the categories of products we sell. We expect to continue to enter new categories and markets. As we do so, we face an increased risk that claims alleging we infringe the patent or other intellectual property rights of others, including as a result of our use of AI, and regardless of the merit of the claims, may increase in number and significance. This risk is heightened by the persistent lawsuits brought by holders of patents that do not have an operating business or are attempting to license broad patent portfolios. Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we will be successful in defending ourselves against intellectual property claims. A successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing certain products or performing certain services. We might also be required to seek a license for the use of such intellectual property, which may not be available on commercially acceptable terms or at all. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately not be successful. Any claims or proceedings against us, whether meritorious or not, could be time
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consuming, result in costly litigation or the diversion of significant operational resources, or require us to enter into royalty or licensing agreements, any of which could materially and adversely affect our business and results of operations.
We may be unable to protect our proprietary rights. Unauthorized use of our technology may result in the development of products that compete with our products.
Our future success depends in part on our proprietary technology, technical know-how and other intellectual property. We rely on a combination of patent, trade secret, copyright, trademark and other intellectual property laws, and confidentiality procedures and contractual provisions, such as nondisclosure terms and licenses, to protect our intellectual property.
We hold various United States patents and pending applications, together with corresponding patents and pending applications from other countries. It is possible that any patent owned by us will be invalidated, deemed unenforceable, circumvented or challenged, that the patent rights granted will not provide competitive advantages to us, or that any of our pending or future patent applications will not be granted, maintained or enforced. In addition, other intellectual property laws or our confidentiality procedures and contractual provisions may not adequately protect our intellectual property. Also, others may independently develop similar technology, duplicate our products, or design around our patents or other intellectual property rights. Unauthorized parties have copied and may in the future attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Any of these events could adversely affect our business, financial condition and operating results.
Risks Related to our Financial Results
Our operating results are difficult to predict and fluctuations in results may cause volatility in the price of our shares.
Our revenues and profitability are difficult to predict due to the nature of the markets in which we compete, fluctuating user demand, the uncertainty of current and future global economic conditions, and for many other reasons, including the following:
• Our sales are impacted by current and future global economic and political conditions, including trade restrictions and tariffs, inflation, interest rate and foreign currency fluctuations, uncertainty in consumer and enterprise demand, low economic growth in certain regions, changes in fiscal policies and geopolitical conflicts, and can, therefore, fluctuate abruptly and significantly during periods of uncertain economic conditions or geographic distress.
• Our operating results are highly dependent on the volume and timing of orders received during the quarter, which are difficult to forecast. Customers generally order on an as-needed basis and we typically do not obtain firm, long-term purchase commitments from our customers. As a result, our revenues in any quarter depend primarily on orders booked and shipped in that quarter.
• We must incur a large portion of our costs in advance of sales orders because we must plan research and production, order components, buy tooling equipment, and enter into development, sales and marketing, and other operating commitments prior to obtaining firm commitments from our customers. This makes it difficult for us to rapidly adjust our costs during the quarter in response to a revenue shortfall, which could adversely affect our operating results.
• From time to time, we engage in opportunistic marketing and sales activities, including advertising and promotional events to enhance our brand awareness. The effectiveness of our marketing and sales efforts is uncertain and it is difficult to predict whether our marketing and sales efforts will result in increased sales.
• We may engage in acquisitions and divestitures, and such activity varies from period to period. Such variance may affect our growth, our previous outlook and expectations, and comparisons of our operating results and financial statements between periods.
• We are continuously attempting to simplify our organization, to control operating costs through expense and global workforce management, to reduce the complexity of our product portfolio, and to better align costs
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with our current business. We may not achieve the cost savings or other anticipated benefits from these efforts, and the success or failure of such efforts may cause our operating results to fluctuate and to be difficult to predict.
• Fluctuations in currency exchange rates can impact our revenues, expenses and profitability because we report our financial statements in U.S. Dollars, whereas a significant portion of our revenues and expenses are in other currencies.
Because our operating results are difficult to predict, our results may be below the expectations of financial analysts and investors, which could cause the price of our shares to decline.
Our gross margins can vary significantly depending on multiple factors, which can result in unanticipated fluctuations in our operating results.
Our gross margins can vary due to consumer demand, trade policy and tariffs, competition, product mix, product pricing, new product and feature introductions, unit volumes, cost of raw materials, supply chain and logistics costs, capacity utilization, foreign currency fluctuations, acquisitions and divestitures, geographic sales mix, product lifecycle, the complexity and functionality of new product innovations and other factors. In particular, if changes in trade policy result in a significant increase in tariffs for our products, if we are not able to introduce new products in a timely manner at the product cost we expect, or if consumer demand for our products is less than we anticipate, or if there are product pricing, marketing and other initiatives by our competitors to which we need to react or that are initiated by us to drive sales that lower our margins, then our overall gross margin will be less than we project.
In addition, our gross margins may vary significantly by product line, sales geography and customer type, as well as within product lines. When the mix of products sold shifts from higher margin product lines to lower margin product lines, to lower margin sales geographies, or to lower margin products within product lines, our overall gross margins and our profitability may be adversely affected.
As we expand within and into new product categories, our products in those categories may have lower gross margins than in our traditional product categories. Consumer demand in these product categories, based on style, color and other factors, may be less predictable and may vary more across geographic markets. As a result, we may face higher up-front investments, inventory costs associated with attempting to anticipate consumer preferences, and increased inventory write-offs. If we are unable to offset these potentially lower margins by enhancing the margins in our more traditional product categories, our profitability may be adversely affected.
The impact of these factors on gross margins can create unanticipated fluctuations in our operating results, which may cause volatility in the price of our shares.
There are risks associated with any outstanding and future indebtedness.
In January 2025, we entered into an unsecured Credit Agreement, which provides for a revolving credit facility in an aggregate principal amount of $750 million. Indebtedness incurred under the Credit Agreement and any indebtedness that we may incur in the future may affect our financial condition and future financial results. We may also be exposed to greater interest rate risk, particularly in a rising interest rate environment.
The agreements governing our indebtedness impose restrictions on us, and, in particular, the Credit Agreement requires us to comply with a financial covenant. Our ability to comply with these restrictions may be affected by events beyond our control. If we breach any of these restrictions and do not obtain a waiver from the lenders, then, subject to applicable cure periods, our related indebtedness (and other unrelated indebtedness) could become due and payable prior to its stated maturity, and we may not be able to repay the indebtedness that becomes due. Moreover, compliance with this covenant may restrict our strategic or operational flexibility in the future, which could harm our business, results of operations and financial condition. Our ability to repay any amounts we borrow under our lines of credit or Credit Agreement will depend on market conditions and our future performance, which is subject to economic, financial, competitive and other factors beyond our control. There can be no assurance that any refinancing or additional financing would be available on terms that are favorable or acceptable to us, if at all.
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We cannot ensure that our share repurchase programs will be fully utilized or that it will enhance long-term shareholder value. We similarly cannot ensure that we will continue to increase our dividend payments or to pay dividends at all. Share repurchases and dividends diminish our cash reserves.
Our share repurchase program and dividend policy may be affected by many factors, including general business and economic conditions, our financial condition and operating results, our views on potential future capital requirements, restrictions imposed in any future debt agreements, the emergence of alternative investment or acquisition opportunities, changes in our business strategy, legal requirements, changes in tax laws, and other factors. Our share repurchase program does not obligate us to repurchase all or any of the dollar value of shares authorized for repurchase. The program could also increase the volatility of our share price.
Similarly, we are not obligated to pay dividends on our registered shares. Under Swiss law, we may only pay dividends upon the approval of a majority of our shareholders, which is under the discretion of and generally follows a recommendation by our Board of Directors that such a dividend is in the best interests of our shareholders. There can be no assurance that our Board of Directors will continue to recommend, or that our shareholders will approve, dividend increases or any dividend at all. If we do not pay a regular dividend, we may lose the interest of investors that focus their investments on dividend-paying companies, which could create downward pressure on our share price. Any announcement of termination or suspension of our share repurchase program or dividend, or if we fail to meet expectations regarding dividends or share repurchases, may result in a decrease in our share price. The share repurchase program and payment of cash dividends could also diminish our cash reserves that may be needed for investments in our business, acquisitions or other purposes. Without dividends, the trading price of our shares must appreciate for investors to realize a gain on their investment. Separately, we are part of certain equity indices, and our exclusion from such indices could negatively impact investor perception and adversely affect the price, volatility and trading volume of our shares.
