What changed in this filing

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Item 1A. Risk Factors

2025-07-22 compared with 2025-04-22 · 100 added, 29 removed, 496 unchanged (21% of the section changed)

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The trading price of our common stock could decline due to any of these risks, and investors may lose all or part of their investment.

Summary of Material Risks Associated With Our Business

The principal risks and uncertainties affecting our business include the following:

Business and Operational Risks

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and other governments and resulting impact on customer demand may have a material adverse effect on our business, financial condition and results of operations.

• If we do not successfully execute our business strategy to increase our sales to new and existing BXPs, our operating results, financial condition, cash flows and long-term growth may be negatively impacted.

• We face risks associated with being materially dependent upon third-party vendors;

certain factors that affect our business as a result of those dependencies have and could continue to disrupt our business and adversely impact our gross margin and results of operations.

• Cyberattacks or other security incidents that disrupt our or our third-party providers’ operations or compromise data, may expose us to liability, harm our reputation or otherwise adversely affect our business.

• If we fail to properly develop, invest in, and manage AI Technologies used in our products and services, our business, financial condition, and results of operations could be materially adversely affected.

• If we do not successfully increase our sales through adoption of our platform, cloud and managed service offerings, our operating results, financial condition, cash flows and long-term growth may be negatively impacted.

• Changing market and customer requirements may adversely affect the valuation of our inventory as well as our supplier purchase commitments.

• Business and operational risks associated with expanding our international operations could harm our business.

• We may have difficulty evolving and scaling our business and operations to meet customer and market demand, which could harm our financial results or cause us to fail to execute on our business strategies.

• Litigation and regulatory proceedings could harm our business or negatively impact our results of operations.

• We have a history of fluctuations in our gross margin and operating results, which can make it difficult to predict our future performance and could cause the market price of our stock to decline.

• We are exposed to customer credit risks that could adversely affect our operating results and financial condition.

• If we lose any of our key personnel, or are unable to attract, train and retain qualified personnel, our ability to manage our business and continue our growth would be negatively impacted.

• If we experience disruptions with our enterprise resource planning system, we may not be able to effectively transact business or produce financial statements, which would adversely affect our business, results of operations and cash flows.

Risks Related to Our Products

• Our products are highly technical and may contain undetected hardware or software defects or software bugs, which could harm our reputation and adversely affect our business.

• If we are unable to ensure that our products interoperate properly and as required within our customers’ networks, our business will be harmed.

• Our estimates regarding warranty or product obligations are highly subjective.

If our estimates change, the liability for warranty or product obligations may be increased, impacting future cost of revenue.

• Our business and operations depend on proprietary technologies, and our financial performance may suffer if we cannot protect and enforce our IP rights.

• If we are unable to obtain third-party technology licenses needed for our products and platform solutions, our business and operations will be impaired, and our operating results could be adversely affected.

• Our use of open-source software could impose limitations on our ability to commercialize our products.

Macroeconomic and Industry Risks

• Our business depends upon the capital spending patterns and decisions of BXPs, and any decrease or delay in capital spending by BXPs due to the timing and availability of capital and other causes would reduce our revenue and harm our business.

• Government-sponsored programs and U.S.

federal government shutdowns could impact the timing and buying patterns of BXPs, which may cause fluctuations in our operating results.

• Adverse global economic, market and industry conditions, geopolitical issues and other conditions that impact our increasingly global operations could have a negative effect on our business, results of operations and financial condition and liquidity.

• We face intense competition that could reduce our revenue and adversely affect our financial results.

• Historically, our customer base has been concentrated, and the loss of any of our key customers may adversely impact our revenue and results of operations, and any delays in payment by a key customer could negatively impact our cash flows and working capital.

• Our industry is characterized by rapid technological advancements, and if we fail to develop new products or enhancements that meet changing BXP requirements, we could experience lower sales.

• Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense.

As a result, our sales are difficult to predict and may vary substantially, which may cause our operating results to fluctuate significantly.

Government and Regulatory Risks

• Actual or perceived failure to comply with applicable data privacy and security laws, regulations and standards could impact our business, operations, and expose us to increased liability.

• If we fail to comply with evolving industry standards, sales of our products would be adversely affected.

• Our failure or the failure of our manufacturers to comply with environmental and other legal regulations could adversely impact our results of operations.

• We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in additional international markets.

• Regulatory and physical impacts of climate change and other natural events may affect our customers and our manufacturers, resulting in adverse effects on our operating results.

• Our customers are subject to government regulation, and changes in current or future laws or regulations that negatively impact our customers could harm our business.

Risks Related to Ownership of Our Common Stock and Other Risks

• Our stock price may continue to be volatile, and the value of an investment in our common stock may decline.

• Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of our management and Board of Directors.

• We may need additional capital in the future to finance our business.

• We do not currently intend to pay dividends on our common stock and, consequently, our stockholders’ ability to achieve a return on their investment will depend on appreciation in the price of our common stock.

• Our failure to adequately address and resolve risks and uncertainties associated with acquisitions could have a material adverse impact on our financial condition and results of operations.

• We cannot guarantee that our stock repurchase program will be utilized to the full value approved or that it will enhance long-term stockholder value.

Repurchases we consummate could increase the volatility of the price of our common stock and could have a negative impact on our available cash balance.

General Risks

• As a public company, we are subject to significant accounting, legal and regulatory requirements;

our failure to comply with these requirements may adversely affect our operating results and financial condition.

• If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, which would adversely affect our operating results and our stock price.

Business and Operational Risks

The imposition of new duties, tariffs, trade barriers and retaliatory countermeasures implemented by the U.S.

and other governments and resulting impact on customer demand may have a material adverse effect on our business, financial condition and results of operations.

The implementation of significant changes to U.S.

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The spending patterns of many of these customers are generally less formal than larger service providers and often characterized by small and sporadic purchases, and the potential revenue from any one of these customers is limited.

We rely primarily on channel partners, including value added resellers, internationally and for

We rely primarily on channel partners, including value added resellers, internationally and for certain U.S.

We face fierce competition for business with key channel partners.

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• Manufacturing constraints, shortages and other disruptions.

We do not have internal manufacturing capabilities and rely solely on a small number of contract manufacturers, or CMs, and original design manufacturers, or ODMs, to manufacture and supply our products.

We do not have internal manufacturing capabilities and we rely solely on a small number of contract manufacturers, or CMs, and original design manufacturers, or ODMs, to manufacture and supply our products.

Our business operations and ability to supply our products are highly dependent upon our ability to secure adequate third-party manufacturing capabilities and capacity and to effectively manage those third parties to meet our business needs.

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Our international manufacturing also creates risks and uncertainties associated with regulatory changes or government actions such as local business requirements, trade restrictions and tariffs, economic sanctions or related legislation, which may complicate our export and import activities, be disruptive to the operations of our manufacturers and logistics partners or result in higher product and shipping costs and variability of supply.

Manufacturing in Asia further heightens our risk of meeting customer delivery requirements as we rely upon third-party logistics companies to transport and import significant volumes of products

Manufacturing in Asia further heightens our risk of meeting customer delivery requirements as we rely upon third-party logistics companies to transport and import significant volumes of products to the U.S.

where we generate a substantial majority of our revenue.

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and these countries, which has caused delays in our product supply.

Being dependent upon a limited number of suppliers constrains our ability to mitigate these disruptions in our supply chain, particularly if such disruptions are prolonged.

Being dependent upon a limited number of suppliers constrains our ability to mitigate these disruptions in our supply

chain, particularly if such disruptions are prolonged.

This may adversely affect our ability to obtain components and materials needed to manufacture our products at acceptable prices or at all.

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We rely on our own and third-party hardware, software, technology infrastructure, data centers, digital networks and online sites and services for both internal and customer-facing operations that are critical to our business, or collectively, IT Systems.

In addition, as part of our business operations, we collect, store, process, use and/or disclose information, including sensitive

data relating to our business, our business partners and our customers, and personal information about individuals such as our employees and our customers’ subscribers, or collectively, Confidential Information.

In addition, as part of our business operations, we collect, store, process, use and/or disclose information, including sensitive data relating to our business, our business partners and our customers, and personal information about individuals such as our employees and our customers’ subscribers, or collectively, Confidential Information.

We process Confidential Information to operate our business, including in connection with the provision of our cloud services and by relying on our and our providers’ IT Systems.

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Our cloud-based solutions enable us to host our customers’ subscriber data in third-party data centers.

We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information, including from diverse threat actors such as state-sponsored organizations, opportunistic hackers and hacktivists, as well as through diverse attack vectors such as social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error and, as a result of malicious code embedded in open-source software, bugs, misconfigurations or exploited vulnerabilities in software or hardware that is integrated into our (or our suppliers’ or service providers’) IT Systems, products or services.

malfeasance by insiders, human or technological error and, as a result of malicious code embedded in open-source software, bugs, misconfigurations or exploited vulnerabilities in software or hardware that is integrated into our (or our suppliers’ or service providers’) IT Systems, products or services.

Threat actors could steal Confidential Information related to our business, products, employees, customers and our customers’ subscribers;

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Although we maintain insurance that may apply to cybersecurity risks and liabilities, there can be no guarantee that any or all costs or losses incurred will be partially or fully insured or that we will be able to procure applicable insurance in the future on reasonable terms or at all.

If we fail to properly develop, invest in, and manage AI Technologies used in our products and services, our business, financial condition, and results of operations could be materially adversely affected.

We use artificial intelligence, or AI, machine learning, and automated decision-making technologies, including proprietary AI and machine learning algorithms and models (collectively, AI Technologies) throughout our business, and are making significant investments in this area.

For example, with the implementation of our platform-based agentic AI, we will aim to provide both our customer success team and BXP customers with advanced automated tools to augment their operations, accelerate transformation initiatives, and expand their impact independent of traditional resource constraints.

We expect that increased investment will be required in the future to continuously improve our use of AI Technologies.

As with many technological innovations, there are significant risks involved in developing, maintaining and deploying these technologies and there can be no assurance that the usage of or our investments in such technologies will always enhance our products or services or be beneficial to our business, including our efficiency or profitability.

In particular, if the models underlying our AI Technologies are:

incorrectly designed or implemented;

trained or reliant on incomplete, inadequate, inaccurate, biased or otherwise poor quality data, or on data to which we do not have sufficient rights or in relation to which we and/or the providers of such data have not implemented sufficient legal compliance measures;

used without sufficient oversight and governance to ensure their responsible use;

and/or adversely impacted by unforeseen defects, technical challenges, cybersecurity threats or material performance issues, the performance of our products, services and business, as well as our reputation and the reputations of our customers, could suffer or we could incur liability resulting from the violation of laws or contracts to which we are a party or civil claims.

With respect to our products or services that incorporate AI Technology, including agentic AI, the market for such products and services is rapidly evolving and unproven in many industries, including our own, and important assumptions about the

characteristics of targeted markets, pricing, sales cycles, cost, performance, and perceived value associated with our services or products may be inaccurate.

We cannot be sure that the market will continue to grow or that it will grow in ways we anticipate.

In addition, market acceptance and consumer perceptions of products and services that incorporate AI Technology is uncertain.

If we do not successfully increase our sales through adoption of our platform, cloud and managed service offerings, our operating results, financial condition, cash flows and long-term growth may be negatively impacted.

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Moreover, adoption of our platform, cloud and managed service offerings is dependent upon the success of our customers in investing, marketing, selling and deploying broader services to their subscribers, and our ability to differentiate our products from competing or substitutive product and service offerings.

For example, our SmartLife TM managed services include managed Wi-Fi, network security, parental controls and an ecosystem of services from partners, including Arlo and

For example, our SmartLife TM managed services include managed Wi-Fi, network security, parental controls and an ecosystem of services from partners, including Arlo and Bark.

However, if subscriber demand for such services does not grow as expected or declines, or our customers are unable or unwilling to invest in our platform to deploy and market these services, demand for our products may not grow at rates as we anticipate.

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effects of inflation, currency controls and/or fluctuations in currency exchange rates;

limited, inadequate or non-existent IP protection;

limited, inadequate or non-existent intellectual property, or IP, protection;

and uncertainties associated with political conflicts and instabilities, variable economic conditions, terrorist attacks or acts of war.

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To expand our international operations, we will need to invest resources to attract key talent, build operational infrastructure, execute on our international strategy and drive international market demand for our products.

If we invest substantial resources to expand our international operations and are unable to do so successfully and in a timely manner, our financial condition and results of operations may suffer.

If we invest substantial resources to expand our international operations and are unable to do so successfully or in a timely manner, our financial condition and results of operations may suffer.

We may have difficulty evolving and scaling our business and operations to meet customer and market demand, which could harm our financial results or cause us to fail to execute on our business strategies.

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In the ordinary course of business, we are subject to legal claims, litigation and regulatory proceedings related to disputes over commercial, competition, IP, labor and employment and other matters.

Regardless of the merits of any such claims, litigation

and regulatory proceedings are inherently uncertain, and can be costly, disruptive to our business and operations, harmful to our reputation and distracting to management.

Regardless of the merits of any such claims, litigation and regulatory proceedings are inherently uncertain, and can be costly, disruptive to our business and operations, harmful to our reputation and distracting to management.

In particular, as a technology company, we are subject to IP claims asserting patent, copyright, trademark and/or other infringement claims that are costly to defend and could limit our ability to use some technologies in the future.

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If we are unable to collect our accounts receivable balances as anticipated, our operating results and financial condition will be harmed.

A number of factors contribute to this risk, including our ability to adequately assess a customer’s creditworthiness and financial condition, changes in a customer’s financial condition and/or liquidity, our ability to timely collect our accounts receivable from customers, disagreements with customers on invoiced balances and economic downturns or other unanticipated events impacting a customer’s ability to pay.

A number of factors

contribute to this risk, including our ability to adequately assess a customer’s creditworthiness and financial condition, changes in a customer’s financial condition and/or liquidity, our ability to timely collect our accounts receivable from customers, disagreements with customers on invoiced balances and economic downturns or other unanticipated events impacting a customer’s ability to pay.

Furthermore, some of our international customers operate in countries with developing economies, volatile financial markets or currency regulations that impact their ability to make payments in U.S.

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Our success depends, in large part, on the continued contributions of our key personnel who are highly skilled and would be difficult to replace.

Competition for skilled personnel, particularly in software and cloud development and engineering, is

Competition for skilled personnel, particularly in software and cloud development and engineering, is intense.

We cannot be certain that we will be successful in attracting and retaining qualified personnel, or that newly hired personnel will function effectively, both individually and as a group.

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Furthermore, many IOCs use or expect to use government-supported loan programs or grants, such as U.S.

Department of Agriculture’s Rural Utility Service or NTIA’s BEAD program loans and grants, to finance capital spending.

Department of Agriculture’s Rural Utility Service or National Telecommunications and Information Administration’s, or NTAI, BEAD program loans and grants, to finance capital spending.

These government-supported loan programs and grants generally include conditions such as deployment criteria, domestic preference provisions and other requirements that apply to the project and selected equipment as conditions for funding.

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In accordance with BABA, the U.S.

Department of Commerce has issued a limited, general applicability, nonavailability waiver of the Buy America Preference to recipients of Federal financial assistance under the NTIA’s BEAD Program.

Department of Commerce has issued a limited, general applicability, nonavailability waiver of the Buy

America Preference to recipients of Federal financial assistance under the NTIA’s BEAD Program.

Notwithstanding this waiver, certain of our products will be required to meet BABA domestic content requirements to enable certain customers to qualify for grant funding under the BEAD Program.

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As a global company, our performance is affected by global economic, market and industry conditions as well as geopolitical issues and other conditions with global reach.

In recent years, concerns about the global economic outlook, inflation and

increased interest rates have adversely affected market and business conditions in general.

In recent years, concerns about the global economic outlook, inflation and increased interest rates have adversely affected market and business conditions in general.

Macroeconomic weakness and uncertainty make it more difficult for us to manage our operations and accurately forecast revenue, gross margin and operating expenses.

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Changes in the broadband service provider market, such as financial difficulties, spending cuts or corporate consolidations that impact purchasing decisions by these customers have and may again negatively impact our revenue, and as a result, revenue from such customers may remain flat or decline.

assurances that the demand for our products will remain strong from our key customers, and any decrease or delay in purchases of any of our key customers, particularly if prolonged or sustained, or our inability to grow our sales with them, may have a material negative impact on our revenue and results of operations.

There are no assurances that the demand for our products will remain strong from our key customers, and any decrease or delay in purchases of any of our key customers, particularly if prolonged or sustained, or our inability to grow our sales with them, may have a material negative impact on our revenue and results of operations.

In addition, some larger customers may demand discounts and rebates or desire to purchase their access systems and software from multiple providers.

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We may also have to stop using certain tools and vendors and make other operational changes.

Further, our customers may not use our services in a manner that is compliant with applicable data privacy laws and regulations and our services may not be competitive in certain markets.We and/or our customers are also subject to evolving EU and UK privacy laws on cookies, tracking technologies, e-marketing and electronic communications.

Further, our customers may not use our services in a manner that is compliant with applicable data privacy laws and regulations and our services may not be competitive in certain markets.

We and/or our customers are also subject to evolving EU and UK privacy laws on cookies, tracking technologies, e-marketing and electronic communications.

Recent European court and regulator decisions are driving increased attention to cookies and tracking technologies.

If the trend of increasing enforcement by regulators of the strict approach to opt-in consent for all but essential use cases, as seen in recent guidance and decisions continues, this could lead to substantial costs, require significant systems changes, limit the effectiveness of marketing activities conducted on behalf of our customers, divert the attention of our technology personnel, adversely affect our margins, and subject us to additional liabilities.

In addition, new security regulations, such as the EU’s Network and Information Security 2 Directive (NIS2) and its EU Member State transpositions, and the UK’s Telecommunications (Security) Act 2021 together with its implementing regulations impose

further security obligations, including on electronic communications networks and services.

In addition, security regulations such as the EU’s Network and Information Security 2 Directive (NIS2) and its EU Member State transpositions, and the UK’s Telecommunications (Security) Act 2021 together with its implementing regulations impose further security obligations, including on electronic communications networks and services.

We may be required to implement (and contractually commit to) additional security measures to remain a competitive vendor, as customers will need to ensure their vendors are able to meet the obligations that they are themselves subject to, or customers may choose different vendors due to our security measures.

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Existing and future environmental regulations and other legal requirements may restrict our use of certain materials to manufacture, assemble and test products.

Any of these consequences could adversely impact our results of operations by increasing our expenses and/or requiring us to alter our manufacturing processes.

consequences could adversely impact our results of operations by increasing our expenses and/or requiring us to alter our manufacturing processes.

We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in additional international markets.

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Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management or our Board of Directors.

These provisions include:

These provisions

(i) a classified Board of Directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our Board of Directors;

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and (vii) advance notice procedures that stockholders must comply with in order to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

We are also subject to certain anti-takeover

provisions under Delaware law, which prohibits a corporation, in general, from engaging in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the Board of Directors has approved the transaction.

We are also subject to certain anti-takeover provisions under Delaware law, which prohibits a corporation, in general, from engaging in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the Board of Directors has approved the transaction.

We may need additional capital in the future to finance our business.

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Repurchases we consummate could increase the volatility of the price of our common stock and could have a negative impact on our available cash balance.

We have a common stock repurchase program of which $62.9 million was available as of March 29, 2025.

We have a common stock repurchase program of which $129.4 million was available as of June 28, 2025.

Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements.

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Stock repurchases could have an impact on our common stock trading prices, increase the volatility of the price of our common stock, or reduce our available cash balance such that we will be required to seek financing to support our operations.

The repurchase program does not obligate us to acquire a particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at our discretion, which may result in a decrease in the trading prices of our common stock.

The repurchase program does not

obligate us to acquire a particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at our discretion, which may result in a decrease in the trading prices of our common stock.

Even if our share repurchase program is fully implemented, it may not enhance long-term stockholder value.

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We incur significant accounting, legal and other expenses and must invest substantial time and resources to comply with public company reporting and compliance requirements, including costs to ensure we have adequate internal controls over accounting and financial reporting, proper documentation and testing procedures among other requirements.

certain that the actions we have taken to implement internal controls over financial reporting will be sufficient.

We cannot be certain that the actions we have taken to implement internal controls over financial reporting will be sufficient.

We have in the past discovered, and may in the future discover, areas of our internal financial and accounting controls and procedures that need improvement, particularly as we enhance, automate and improve functionality of our processes and internal applications.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors