What changed in this filing

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Item 1A. Risk Factors

2024-05-29 compared with 2023-05-25 · 80 added, 72 removed, 194 unchanged (44% of the section changed)

Columbus McKinnon is subject to a number of risks that could negatively affect our business, financial condition or results from business operations or cause our actual results to differ materially from those projected or indicated in any forward-looking statement.

You should carefully consider the risks described below, as well as the other information contained in this Annual Report on Form 10-K in evaluating your investment in us.

The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing Columbus McKinnon.

You should carefully consider the risks described below, as well as the other information contained in this Form 10-K in evaluating your investment in us.

The risks and uncertainties described below are those that we have identified as material, but are not the only risks or uncertainties facing Columbus McKinnon.

This list is not all-inclusive or necessarily in order of importance.

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Our business is cyclical and is affected by industrial economic and macroeconomic conditions.

Many of the end-users of our products are in highly cyclical industries, such as manufacturing, power generation and distribution, commercial construction, oil and gas exploration and refining, transportation, agriculture, logging, and mining that are sensitive to changes in general economic conditions.

Their demand for our products, and thus our results of operations, is cyclical and directly related to the level of production in their facilities, which changes as a result of changes in general macroeconomic conditions, including, among others, movements in interest rates, inflation, changes in currency exchange rates and higher fuel and other energy costs, and other factors beyond our control, and is vulnerable to economic downturns.

Decreased capital and maintenance spending by these customers could have a material adverse effect on the demand for our products and our business, financial condition, and results of operations.

Decreased capital and maintenance spending by these customers has in the past and could in the future have a material adverse effect on the demand for our products and our business, financial condition, and results of operations.

In particular, higher interest rates could result in decreased demand for our products from end-users, which would have a material adverse effect on our business and results of operations, and concurrently result in higher interest expense related to borrowings under our credit facilities.

In addition, inflation can also result in higher interest rates and negatively impact our results of operation.

During an inflationary period, the costs of capital will often increase, and the purchasing power of our end users’ cash resources will decline, which can negatively affect demand from our customers.

During an inflationary period, the cost of capital will often increase, and the purchasing power of our end users’ cash resources will decline, which can negatively affect demand from our customers.

Current or future efforts by the government to stimulate the economy may increase the risk of significant inflation, which could have a direct and indirect adverse impact on our business and results of operations.

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There can be no assurance that historically improving cycles are representative of actual future demand.

In addition, the cyclical nature of our business could at times also adversely affect our liquidity and ability to borrow under our New Revolving Credit Facility (as defined herein) and limits our ability to make accurate long-term predictions about the performance of our Company.

In addition, the cyclical nature of our business could at times also adversely affect our liquidity and ability to borrow under our Amended and Restated Revolving Credit Facility (as defined herein) and limits our ability to make accurate long-term predictions about the performance of the Company.

Our business, particularly with respect to our material handling and precision conveyance products, is highly competitive and subject to consolidation of competitors.

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Certain competitors may also have the ability to develop product or service innovations that could put us at a disadvantage.

In addition to the general competitive challenges we face, international trade policies could negatively affect the demand for our products and services and reduce our competitive position in such markets.

In addition, through consolidation, some of our competitors have achieved substantially greater market penetration in certain of the markets in which we operate than we have been able to achieve.

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Our historical growth has depended, and our future growth is likely to depend, on our ability to successfully execute our acquisition strategy, and the successful integration of acquired businesses into our existing business.

Such a strategy involves the potential risks inherent in assessing the value, strengths, weaknesses,

contingent or other liabilities, and potential profitability of acquisition candidates and in integrating the operations of acquired companies.

Such a strategy involves the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities, and potential profitability of acquisition candidates and in integrating the operations of acquired companies.

Furthermore, the price we pay for any business acquired may overstate the value of that business or otherwise be too high.

In addition, any acquisitions of businesses with foreign operations or sales may increase our exposure to risks inherent in doing business outside the United States.

In addition, any acquisitions of businesses with foreign operations or sales may increase our exposure to risks inherent in doing business outside the U.S.

We intend to continue to seek additional acquisition opportunities in accordance with our acquisition strategy, both to expand into new markets and to enhance our position in existing markets throughout the world.

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The primary raw materials used in our chain, forging and crane building operations are steel, aluminum, and other raw materials such as motors, electrical and electronic components, castings and machined parts and components.

The industries that produce these critical components and materials are also themselves highly cyclical and at times pricing and availability can be volatile due to a number of factors beyond our control, including general economic conditions, inflation, labor costs, competition, import duties, tariffs, and currency exchange rates.

The industries that produce these critical components and materials are also themselves highly cyclical and at times pricing and availability can be volatile due to a number of factors beyond our control, including general macroeconomic conditions, inflation, labor costs, competition, import duties, tariffs, and currency exchange rates.

This volatility can significantly affect our raw material costs.

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In the future, to the extent we are unable to pass on any steel, aluminum, or other raw material price increases to our customers, our profitability could be adversely affected.

Our results of operations could materially suffer if we are unable to obtain sufficient pricing for our products and service to meet our profitability expectations.

If we are unable to obtain favorable pricing for our products and services in a timely manner, our revenues and profitability could materially suffer.

Our results of operations could be materially adversely affected if we are unable to obtain sufficient pricing for our products and service to meet our profitability expectations.

If we are unable to obtain favorable pricing for our products and services in a timely manner, our revenues and profitability could be materially adversely affected.

For example, current conditions in our supply chain have resulted in rapid increases in the prices for the raw materials we use.

Furthermore, the prices we are able to charge for our products and services are affected by a number of other factors, including:

• general economic and political conditions;

• general macroeconomic and political conditions;

• our customers' desires to reduce their costs;

• the competitive environment;

• the competitive environment in our industry;

• our ability to accurately estimate our costs, including our ability to estimate the impact of inflation on our costs over long-term contracts;

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Particularly, the markets for motors, computer chips, and other components are experiencing increased demand, creating substantial uncertainty regarding the availability of key components and raw materials used to manufacture our products.

The COVID-19 pandemic has also contributed to and exacerbated these constraints.

This constrained supply environment has adversely affected, and could further affect, availability, lead times and cost of components and raw material, and has impacted, and could continue to impact, our ability to respond to accelerated or quick-turn delivery requests from customers, or meet customer demand and product delivery dates for our end customers where we cannot timely secure adequate supply of these components and raw materials.

This constrained supply environment has materially adversely affected, and could further materially adversely affect, availability, lead times and cost of components and raw material, and has materially impacted, and could continue to materially impact, our ability to respond to accelerated or

quick-turn delivery requests from customers, or meet customer demand and product delivery dates for our end customers where we cannot timely secure adequate supply of these components and raw materials.

Moreover, if any of our suppliers become financially unstable, or otherwise unable or unwilling to provide us with raw materials or components, we may have to find new suppliers.

It may take several months to locate alternative suppliers, if required, or to redesign our products to accommodate components from different suppliers.

We cannot predict if we will be able to obtain

replacement components within the timeframes that we require at an acceptable cost, if at all.

We cannot predict if we will be able to obtain replacement components within the timeframes that we require at an acceptable cost, if at all.

In addition, we have experienced, and may continue to experience, significant delays in receiving shipments of key component and raw materials and in shipping our completed products to customers.

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While we may attempt to recover the increased costs through price increases to our customers, we may be unable to mitigate the effect on our results of operations.

We have also multi-sourced and pre-ordered components and raw materials inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced.

We also have multi-sourced and pre-ordered components and raw materials inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced.

Despite our attempts to mitigate the impact on our business, these constrained supply conditions are expected to adversely impact our costs of goods sold.

Limits on manufacturing availability or capacity or delays in production or delivery of components or raw materials for our suppliers could further delay or inhibit our ability to obtain supply of components and raw materials and produce finished goods.

These supply chain constraints and their related challenges could result in shortages, increased material costs or use of cash, engineering design changes, and delays in new product introductions, each of which could adversely impact our growth, gross margin and financial results.

These types of negative financial impacts on our business may become more acute as supply chain pressures increase.

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We rely in large part on independent distributors for sales of our products.

For the most part, we depend on independent distributors to sell our products and provide service and aftermarket support to our end-user customers.

We depend on independent distributors to sell our products and provide service and aftermarket support to our end-user customers.

Distributors play a significant role in determining which of our products are stocked at their locations, and hence are most readily accessible to aftermarket buyers, and the price at which these products are sold.

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Failure to attract, develop, engage and retain qualified employees, whether as a result of an insufficient number of qualified applicants, difficulty in recruiting new employees, or inadequate resources to train, integrate and retain qualified employees, could impair our ability to execute our business strategy, and could adversely affect our business, financial condition, results of operations or cash flows.

The importance of recruiting and retaining qualified employees has only become more acute during the COVID-19 pandemic as labor shortages have occurred in many of the regions in which we have operations.

Low rates of unemployment in key geographic areas in which we operate may lead to high rates of turnover and loss of critical talent, which could in turn lead to higher labor costs.

Low rates of unemployment in key geographic areas in which we operate may lead to high rates of turnover and loss of critical talent, which could lead to higher labor costs.

Our ability to understand our customers’ specific preferences and requirements, and to develop, manufacture and market products that meet customer demand as we expand into additional international markets, could significantly affect our business results.

Our ability to match new product offerings to diverse global customers’ anticipated preferences for different types and sizes of equipment and various equipment features and functionality, at affordable prices, is critical to our success.

This requires a thorough understanding of our existing and potential customers on a global basis.

Failure to deliver quality products that meet customer needs at competitive prices ahead of competitors could have a significant adverse effect on our business.

Financial Risks

Changes in the method of determining the London Interbank Offered Rate ("LIBOR"), or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021, although on November 30, 2020 it announced that it had extended the period in which it will continue to publish certain LIBOR tenors, including three-month LIBOR, to December 31, 2024.

It is unclear if at that time LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after December 31, 2024, or whether different benchmark rates used to price indebtedness will develop.

The Alternative Reference Rates Committee, a group of market participants convened by the U.S.

Federal Reserve Board and the Federal Reserve Bank of New York, has recommended the Secured Overnight Financing Rate (“SOFR”), a rate calculated based on repurchase agreements backed by treasury securities, as its recommended alternative benchmark rate to replace LIBOR.

At this time, it is not known whether or when SOFR or other alternative reference rates will attain market traction as replacements for LIBOR.

Any new benchmark rate will likely not replicate LIBOR exactly.

The interest rate on the Company’s Term Loan B (as defined herein) and New Revolving Credit Facility have a variable component that is based on LIBOR.

The phase-out of LIBOR may negatively impact the terms of our outstanding indebtedness.

In addition, the overall financial market may be disrupted as a result of the phase-out or replacement of LIBOR.

Disruption in the financial market could have a material adverse effect on our financial position, results of operations, and liquidity.

In connection with the completion of the acquisitions of Dorner and Garvey, our indebtedness has increased significantly.

We expect to incur additional indebtedness with the acquisition of montratec expected to close on May 31, 2023.

In connection with the completion of the Precision Conveyance acquisitions, our indebtedness has increased significantly.

Our indebtedness could limit our cash flow available for operations and our flexibility.

In connection with the completion of the acquisition of Dorner and Garvey, our indebtedness has increased significantly.

In connection with the Dorner acquisition, we incurred debt of $450,000,000 under the Term Loan B, following our equity offering of $207,000,000 in May 2021.

Additionally, in connection with the completion of the Garvey acquisition, the Company incurred another $75,000,000 of Term Loan B indebtedness through the exercise of an accordion feature under the terms of our First Lien Facilities Credit Agreement.

As of March 31, 2023, we had approximately $100,000,000 available for borrowing under the New Revolving Credit Facility (before deducting approximately $15,104,000 of letters of credit outstanding as of March 31, 2023).

Further, our potential fiscal 2024 acquisition of montratec has increased our indebtedness.

In connection with the montratec acquisition, the Company entered into an Amended and Restated Credit Agreement increasing the size of the Revolving Credit Facility by $75,000,000 to a total of $175,000,000.

The Company subsequently borrowed additional funds in accordance with the Accordion feature under its existing Term Loan B facility to increase the principal amount of the Term Loan B facility by $75,000,000 in both fiscal years 2022 and 2024.

The Company also borrowed an additional $45,000,000 under a new credit agreement secured by the Company's U.S.

accounts receivable balances (the "AR Securitization Facility").

As of March 31, 2024, the outstanding principal balance of the Term Loan B facility was $477,560,000, which includes $75,000,000 in principal balance from the Accordion exercised in the first quarter of fiscal 2024 as described above.

We had $175,000,000 available for borrowing under the Amended and Restated Revolving Credit Facility (before deducting approximately $15,368,000 of letters of credit outstanding as of March 31, 2024).

The degree to which we are leveraged could have important consequences to our shareholders, including the following:

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• we may be at a competitive disadvantage relative to our competitors with less indebtedness;

• inability to comply with covenants in, and potential for default under, our debt instruments

our inability to comply with covenants in, and potential for default under, our debt instruments

• we may be rendered more vulnerable to general adverse economic and industry conditions;

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pose certain risks that may adversely impact sales and earnings.

We have operations and assets located outside of the United States, primarily in China, Mexico, Germany, the United Kingdom, Hungary, Malaysia and Russia.

I n addition, we import a portion of our hoist product line from Asia and sell our products to distributors located in approximately 50 countries.

We have operations and assets located outside of the U.S., primarily in Germany, the United Kingdom, Hungary, Russia, China, Malaysia and Mexico, including our new facility in Monterrey, Mexico.

In addition, we import a portion of our hoist product line from Asia and sell our products to distributors located in approximately 50 countries.

In our fiscal year ended March 31, 2024, approximately 43% of our net sales were derived from non-U.S.

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operations are subject to a number of special risks, in addition to the risks of our U.S.

business, differing protections of intellectual property, trade barriers, labor unrest, geopolitical conflicts, exchange

controls, regional economic uncertainty, differing (and possibly more stringent) labor regulation, risk of governmental expropriation, U.S.

and foreign customs and tariffs, political and economic instability in the jurisdictions in which we operate, foreign receivables collection risk, current and changing regulatory environments, difficulty in obtaining distribution support, difficulty in staffing and managing widespread operations, differences in the availability, and terms of financing, political instability and risks of increases in taxes.

business, including but not limited to differing protections of intellectual property, trade barriers, labor unrest, geopolitical conflicts, exchange controls, regional economic uncertainty, differing (and possibly more stringent) labor regulation, risk of governmental expropriation, U.S.

widespread operations, differences in the availability, and terms of financing, political instability and risks of increases in taxes.

Any of these factors, individually or together, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Also, in some foreign jurisdictions, we may be subject to laws limiting the right and ability of entities organized or operating therein to pay dividends or remit earnings to affiliated companies unless specified conditions are met.

These factors may adversely affect our future profits.

Part of our strategy is to expand our worldwide market share and reduce costs by strengthening our international distribution capabilities and sourcing components in lower cost countries, such as China, Mexico, Hungary and Malaysia.

Implementation of this strategy may increase the impact of the risks described above, and we cannot assure you that such risks will not have an adverse effect on our business, results of operations or financial condition.

Implementation of this strategy may increase the impact of the risks described above, and we cannot assure you that such risks will not have a material adverse effect on our business, results of operations or financial condition.

Other risks of doing business in international markets include the increased risks and burdens of complying with different legal and regulatory standards, difficulties in managing and staffing foreign operations, recruiting and retaining talented direct sales personnel, limitations on the repatriation of funds and fluctuations of foreign exchange rates, varying levels of internet technology adoption and infrastructure and our ability to enforce contracts and our intellectual property rights in foreign jurisdictions.

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While the Company’s business operations relating to Russia constitute an immaterial part of the Company’s overall business, we may decide to, or be required to, exit from our operations in Russia in their entirety, which could result in a loss of revenues from our Russian operations (approximately $1,311,000 for the fiscal year ended March 31, 2024) or may necessitate the need to incur a bad debt reserve or an asset write-off related to our Russian operations.

Furthermore, there is no guarantee that the current Russian invasion of Ukraine will not draw military intervention from other countries or further retaliation from Russia, which, in turn, could lead to a much larger conflict.

If such escalation should occur, supply chain, trade routes and markets currently served by the Company could be adversely affected.

If such escalation should occur, supply chain, trade routes and markets currently served by the Company could be adversely affected and other risks discussed in this Form 10-K may be exacerbated.

In addition, a further escalation could disrupt the supply of oil and natural gas in Europe, impacting our ability to operate our European manufacturing facilities, which, in turn, could materially adversely affect the Company’s business operations and financial performance.

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We are subject to debt covenant restrictions.

Our Term Loan B and New Revolving Credit Facility contain a financial leverage covenant, which will only be tested if any extensions of credit (other than letters of credit) are outstanding under the New Revolving Credit Facility at the end of any fiscal quarter, and other restrictive covenants.

Each of our Term Loan B and Amended and Restated Revolving Credit Facility contains a financial leverage covenant, which will only be tested if any extensions of credit (other than letters of credit) are outstanding under the Amended and Restated Revolving Credit Facility at the end of any fiscal quarter, and other restrictive covenants.

A significant decline in our operating income or cash generating ability could cause us to violate our leverage covenant in our bank credit facilities.

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We believe that the potential additional costs for claims will not have a material effect on the financial condition of the Company or its liquidity, although the effect of any future liabilities recorded could be material to earnings in a future period.

See Note 16 to our March 31, 2023 consolidated financial statements included in Item 8 of this Form 10-K.

See Note 16 to our March 31, 2024 consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.

As indicated above, our self-insurance coverage is provided through our captive insurance subsidiary.

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Over time, we and other predecessor operators of such facilities have generated, used, handled, and disposed of hazardous and other regulated wastes.

Additional environmental liabilities could exist, including clean-up obligations at these locations or other sites at which

materials from our operations were disposed, which could result in substantial future expenditures that cannot be currently quantified and which could reduce our profits or have an adverse effect on our financial condition, operations, or liquidity.

Additional environmental liabilities could exist, including clean-up obligations at these locations or other sites at which materials from our operations were disposed, which could result in substantial future expenditures that cannot be currently

quantified and which could reduce our profits or have a material adverse effect on our financial condition, operations, or liquidity.

We may face claims of infringement on the intellectual property of others, or others may infringe upon our intellectual property.

Our future success depends in part on our ability to prevent others from infringing on our proprietary rights, as well as our ability to operate without infringing upon the proprietary rights of others.

Our efforts to protect our intellectual property through patents, trademarks, service marks, domain names, copyrights, trade secrets and confidentiality agreements may not adequately protect us against infringements, and pending patent or trademark applications may not result in issued patents or trademarks.

Our patents, registered trademarks and patent applications, if any, may not be upheld if challenged, and competitors may develop similar or superior methods or products outside the protection of our patents.

This could reduce demand for our products, reduce our market share and materially decrease our revenues.

We may need to spend significant resources monitoring and enforcing our intellectual property rights and we may not be aware of or able to detect or prove infringement by third parties.

We may be required at times to take legal action to protect our proprietary rights and, despite our best efforts, we may be sued for infringing on the intellectual property rights of others.

Intellectual property-related litigation is costly and, even if we prevail, the cost of such litigation could adversely affect our financial condition.

In addition, we could be adversely affected financially should we be judged to have infringed upon the intellectual property of others.

The protection and enforceability of our intellectual property rights is also subject to uncertainty in certain countries where we operate that have less rigorous intellectual property protection laws than the U.S.

In addition, we could be adversely affected financially should we be judged to have infringed upon the intellectual property of others, and we could be required to modify the design of our products, change the name of our products or obtain a license for the use of some of the technologies used in our products.

We rely on subcontractors or suppliers to perform their contractual obligations.

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Failure by our subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed upon services may materially and adversely impact our ability to perform our obligations as the prime contractor.

A delay in our ability to obtain components and equipment parts from our suppliers may affect our ability to meet our customers' needs and may have an adverse effect upon our profitability.

A delay in our ability to obtain components and equipment parts from our suppliers may affect our ability to meet our customers' needs and may have a material adverse effect upon our profitability.

General Risks

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Such economic developments, like inflationary pressures in the U.S.

and elsewhere, the China trade wars and the war in Ukraine may affect our business in a number of ways.

and elsewhere, the China trade wars, the war between Russia and Ukraine may affect our business in a number of ways.

Reduced demand may drive us and our competitors to offer products at promotional prices, which would have a negative impact on our profitability.

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If demand for our products slows down or decreases, we will not be able to maintain our revenue and we may run the risk of failing to satisfy the financial and other restrictive covenants to which we are subject under our existing indebtedness.

Reduced revenue as a result of decreased demand may also reduce our planned growth and otherwise hinder our ability to improve our performance in connection with our long-term strategy.

Reduced revenue as a result of decreased demand may also reduce our planned growth and otherwise hinder our ability to improve our performance in connection with our long-term business strategy.

Climate change, or legal, regulatory or market measures to address climate change, may materially adversely affect our financial condition and business operations.

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Concern over climate change will likely result in new legal or regulatory requirements designed to reduce greenhouse gas emissions and mitigate the effects of climate change.

For example, the SEC has adopted new climate change disclosure rules aimed at enhancing and standardizing climate change-related disclosures by public companies.

If these new rules are

successfully implemented, our compliance costs could be significant.

Further, our customers and the markets we serve may impose emissions reduction or other environmental standards and requirements.

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While we have been committed to continuous improvements to meet anticipated regulations and preferences, there can be no assurance that our commitments will be successful, that our products will be accepted by the market, that proposed regulations will not have a negative competitive impact or that economic returns will reflect our investments in new product development.

There also continues to be a lack of

consistent climate legislation, which creates economic and regulatory uncertainty.

There also continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty.

These factors may impact the demand for our products, obsolescence of certain products and adversely affect our results of operations.

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Our business operations may be adversely affected by information technology systems interruptions or intrusion.

We depend on various information technology systems throughout our Company to administer, store, and support multiple business activities, including to process the data we collect, store and use in connection with our business.

We depend on various information technology systems throughout the Company to administer, store, and support multiple business activities, including to process the data we collect, store and use in connection with our business.

If these systems are damaged, cease to function properly, or are subject to cyber-security attacks, such as those involving unauthorized access, malicious software and/or other intrusions, we could experience production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems or networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation.

Our information technology systems may be damaged or cease to function properly due to any number of causes, such as catastrophic events, power outages and security breaches (including destructive malware such as ransomware) resulting in unauthorized access or cyber-attacks.

As the breadth and complexity of our information technology systems continue to grow, including as a result of the increasing reliance on, and use of, mobile technologies and cloud-based services, the risk of security incidents and cyberattacks has increased.

While we attempt to mitigate these risks by employing a number of measures, including employee training, technical security controls, and maintenance of backup and protective systems, our systems, networks, products, and services remain potentially vulnerable to known or unknown cybersecurity threats, any of which could have a material adverse effect on our business, financial condition or results of operations.

Furthermore, cybersecurity threats are constantly expanding and evolving, becoming increasingly sophisticated and complex, increasing the difficulty of detecting and defending against them and maintaining effective security measures and protocols.

We are also subject to a variety of laws and regulations in the United States, Europe and around the world, as well as contractual obligations, regarding data privacy, security and protection.

These laws and regulations continue to evolve, are increasing in complexity and number and increasingly conflict among the various countries in which we operate, which has resulted in greater compliance risk and cost for us.

Furthermore, cybersecurity threats are constantly expanding and evolving and becoming increasingly sophisticated and complex, including attacks from highly organized adversaries such as nation state actors, thereby increasing the costs associated with our cyber-security defense measures and procedures and increasing the difficulty of detecting and defending against them and maintaining effective security measures and protocols.

We are also subject to a variety of laws and regulations in the U.S., Europe and around the world, as well as contractual obligations, regarding data privacy, security and protection.

For example, in 2023, the SEC adopted new cybersecurity rules requiring disclosure of material cybersecurity incidents and processes assessing, identifying, and managing material cybersecurity risks and the corporate governance structure designed to address such risks.

In addition, the costs of compliance with, and other burdens imposed by, such data privacy laws and regulations, including those of the European Union (“EU”) and the UK which are, in some respects, more stringent than U.S.

standards, could be significant.

Any failure or perceived failure by us, or any third parties with which we do business, to comply with our posted privacy policies, changing consumer expectations, evolving laws, rules and regulations, industry standards, or contractual obligations to which we or such third parties are or may become subject, may result in actions or other claims against us by governmental entities or private actors, the expenditure of substantial costs, time and other resources or the incurrence of significant fines, penalties or other liabilities.

In addition, any such action, particularly to the extent we were found to be guilty of violations or otherwise liable for damages, could damage our reputation and adversely affect our business, financial condition and results of operations.

In addition, our liability insurance, which includes cyber insurance, might not be sufficient in type or amount to cover us against claims related to security incidents, cyberattacks and other related incidents.

In addition, our liability insurance, which includes cyber insurance, might not be sufficient in type or amount to cover us against claims related to security incidents, cyber-security attacks and other related incidents.

We operate in many different jurisdictions, and we could be adversely affected by violations of the U.S.

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Foreign Corrupt Practices Act (“FCPA”) and similar worldwide anti-corruption laws generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business.

Our internal policies mandate compliance with these anti-corruption laws.

Our internal policies mandate compliance with these anti-corruption laws, and we incur meaningful costs complying with these laws.

We operate in many parts of the world that have experienced corruption to some degree, and in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices.

Despite our training and compliance programs, we cannot assure you that our internal control policies and procedures always will protect us from reckless or criminal acts committed by our employees or agents.

Our continued expansion outside the U.S., including in developing countries, could increase the risk of such violations in the future.

Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations or financial condition.

In the event that we believe or have reason to believe that our employees

or agents have or may have violated applicable anti-corruption laws, including the FCPA, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances.

In addition, we are subject to and must comply with all applicable export controls and economic sanctions laws and embargoes imposed by the U.S.

and certain other governments.

Changes in export control or trade sanctions laws may restrict our business practices, including cessation of business activities in sanctioned countries or with sanctioned entities, and may result in modifications to compliance programs and increase compliance costs, and violations of these laws or regulations may subject us to fines, penalties and other sanctions, such as loss of authorizations needed to conduct aspects of our international business or debarments from export privileges.

Violations of the FCPA or export controls or sanctions laws and regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, financial condition, results of operations, and cash flows.

Our continued expansion outside the U.S., including in developing countries, could increase these risks in the future.

We depend on our management team and the loss of any member could adversely affect our operations.

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We cannot assure you that we will be able to retain our existing management personnel or to attract additional qualified personnel when needed.

Unresolved Staff Comments

The market price of our common stock may be volatile.

The market price of our common stock is volatile and could fluctuate significantly for many reasons, including in response to the risks described in this section and elsewhere in this Form 10-K or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance, as well as industry conditions and general financial, economic and political instability.

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-K

Item 1A. Risk Factors