What changed in this filing

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Item 1A. Risk Factors

2026-02-20 compared with 2025-02-21 · 137 added, 19 removed, 509 unchanged (23% of the section changed)

21 unchanged sentences

• Our customers generally require that they qualify our engineering, documentation, manufacturing and quality control procedures.

• We may be subject to interruptions or failures in our information technology systems.

• We may be subject to interruptions, failures, or cybersecurity breaches in our information technology systems.

• Certain of our customers require that we consult with them in connection with specified fundamental changes in our business.

3 unchanged sentences

• Our business is subject to the risks of catastrophic events.

• We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S.

federal income tax consequences for U.S.

Legal and Regulatory Risks

7 unchanged sentences

• We are subject to numerous environmental laws and regulations.

• We previously identified material weaknesses in our internal control over financial reporting, and the failure to maintain an effective system of internal controls and procedures may cause investors to lose confidence in our financial reporting.

• If we fail to maintain an effective system of internal controls and procedures, it may cause investors to lose confidence in our financial reporting.

• Changes in tax laws, tax rates or tax assets and liabilities could materially adversely affect our financial condition and results of operations.

2 unchanged sentences

• We are subject to interest rate risk associated with variable rates on our outstanding indebtedness.

• If one or more of our counterparty financial institutions default on their obligations to us or fail, we may incur significant losses.

Ordinary Share Ownership Risks

3 unchanged sentences

• Our shareholders may face difficulties in protecting their interests under the laws of the Cayman Islands compared to the laws of the U.S.

• There can be no assurance that we will not be a passive foreign investment company for any taxable year.

person is treated as owning at least 10% of our shares, such person may be subject to adverse U.S.

9 unchanged sentences

Even as the industry recovers from periods of downturns, inventory digestion at our customers and the relative spending levels within our primary served markets, in particular lower spending levels for deposition and etch equipment, may result in decreased demand from our customers, such as in 2023 and early 2024.

Our revenue exposure to specific end markets and technology nodes may amplify cyclicality, and downturns with respect to the demand for certain of our products may disproportionately impact our results even when other products are experiencing growth.

We anticipate that we will continue to experience significant fluctuations in customer orders for our products and services as a result of such fluctuations and cycles, which may have a material adverse effect on our business, financial condition and results of operations.

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We may be forced to reduce our prices during periods of decreasing demand.

During the fourth quarter of 2022, we initiated labor cost reduction initiatives to better align our resources with the decreased demand environment, which continued through the second quarter of 2024.

During the third quarter of 2025, we initiated the Consolidation Restructuring Plan to better align our footprint with the demand environment.

While we operate under a low fixed cost model, we may not be able to proportionally reduce all of our costs if we are required to reduce our prices.

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If we overbuild inventory in a period of decreased demand, or we expand our operations and workforce too rapidly, or procure excessive resources in anticipation of increased demand for our products, and that demand does not materialize at the pace at which we expect, or declines, our operating results may be adversely affected as a result of underutilization of capacity, charges related to excess or obsolete inventory, asset impairment or inventory write-downs, increased operating expenses or reduced margins.

For example, in the fourth quarter of 2024, gross margin was impacted by costs related to our efforts to ramp headcount and other resources to address expected incremental demand in early 2025, which were unable to be fully absorbed during the quarter.

Further, any future capacity expansion by us or our competitors could also lead to overcapacity and oversaturation in our target markets, which could lead to price erosion that could adversely impact our operating results.

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While inflation has slowed from its peak in 2022 and the U.S.

Federal Reserve decreased the federal funds rate in 2024, the rate continues to be elevated and there can be no assurances that the rate will continue to decrease or that it will not be increased in 2025 or beyond.

Federal Reserve decreased the federal funds rate in 2024 and 2025, the rate continues to be elevated and there can be no assurances that the rate will continue to decrease or that it will not be increased in 2026 or beyond.

Further, difficulties in obtaining capital, uncertain market conditions or reduced profitability may also cause some customers to scale back operations, exit businesses, merge with other manufacturers, or file for bankruptcy protection and potentially cease operations, leading to customers’ reduced research and development funding or capital expenditures and, in turn, lower orders from our customers or additional slow moving or obsolete inventory or bad debt expense for us.

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If we do not obtain orders as we anticipate, we could have excess components for a specific product or finished goods inventory that we would not be able to sell to another customer, likely resulting in inventory write-offs or selling inventory at lower margins, which could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to interruptions or failures in our information technology systems .

We may be subject to interruptions, failures, or cybersecurity breaches in our information technology systems .

We rely on our information technology systems to process transactions, summarize our operating results and manage our business.

2 unchanged sentences

We may be the target of attempted cyber-attacks, computer viruses, malicious code, phishing attacks, denial of service attacks and other information security threats.

In addition, to the extent artificial intelligence capabilities improve and are increasingly adopted, they may be used to identify vulnerabilities and to implement increasingly sophisticated cyber-attacks.

In addition, artificial intelligence technologies are increasingly being used by malicious actors to identify vulnerabilities, automate reconnaissance, generate sophisticated phishing and social engineering attacks, develop polymorphic malware that evades traditional detection methods, and implement coordinated cyber-attacks at scale and speed that exceed human-directed attacks.

As AI capabilities continue to advance, the sophistication, scale, and frequency of AI-enhanced cyber-attacks are expected to increase significantly, potentially outpacing our ability to defend against such threats using conventional cybersecurity measures.

Our cybersecurity defenses may require substantial ongoing investment in AI-powered security tools, threat intelligence, and skilled security personnel to address the evolving AI threat landscape.

To date, cyber-attacks have not had a material impact on our financial condition, results or business;

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Any material disruption in our information technology systems, or delays or difficulties in implementing or integrating new systems or enhancing current systems, could have a material adverse effect on our business, financial condition, and results of operations.

Our customers' adoption of artificial intelligence and machine learning technologies for semiconductor manufacturing process optimization and equipment control may create new technical requirements, interoperability challenges, and competitive risks.

Semiconductor equipment manufacturers and semiconductor device manufacturers are increasingly adopting artificial intelligence and machine learning technologies for process optimization, predictive maintenance, equipment control, yield enhancement, and fab automation.

These AI/ML capabilities may become standard customer requirements for capital equipment and subsystems, requiring real-time data integration, edge computing capabilities, sophisticated sensors and instrumentation, and software interfaces that enable AI-driven process control and optimization.

If we are unable to develop and integrate AI/ML capabilities into our gas and chemical delivery subsystems at the pace required by our OEM customers and their end customers, we may be at a competitive disadvantage relative to suppliers who offer AI-enabled products.

Developing AI/ML capabilities may require significant investments in software engineering, data science, sensor technologies, and computing infrastructure, and we may lack the internal expertise or resources to develop such capabilities as rapidly as the market demands.

We may also face technical challenges in integrating AI/ML capabilities with our existing product architectures, or in ensuring interoperability with our OEM customers' AI platforms and industry-standard protocols.

Additionally, AI-enabled equipment and subsystems may create new data privacy, data security, and intellectual property issues, as process data, recipes, and performance information may be collected, transmitted, and analyzed by AI systems, potentially creating risks of data breaches, unauthorized access to confidential information, or disputes over ownership of AI-generated insights.

Customer requirements for AI capabilities may also increase product complexity, development costs, and time-to-market for new products, and may require ongoing software updates, maintenance, and support that create new service obligations and cost structures.

Our failure to keep pace with customer AI adoption could result in loss of market share, reduced pricing power, or exclusion from next-generation equipment platforms, which could have a material adverse effect on our business, financial condition and results of operations.

Certain of our customers require that we consult with them in connection with specified fundamental changes in our business and that we address any concerns or requests such customer may have in connection with a fundamental change.

22 unchanged sentences

The loss of any of our key executive officers or key engineers and other personnel, including our engineers working at our customers’ sites, or the failure to attract additional personnel as needed, could have a material adverse effect on our business, financial condition and results of operations and could lead to higher labor costs, the use of less-qualified personnel and the loss of customers.

We initiated labor cost reduction initiatives in the fourth quarter of 2022, continuing through the second quarter of 2024, which may adversely affect us as a result of decreased employee morale, the loss of institutional knowledge held by departing employees and the allocation of resources to reorganize and reassign job roles and responsibilities.

We initiated labor cost reduction initiatives in the second quarter of 2025, continuing through the fourth quarter of 2025, which may adversely affect us as a result of decreased employee morale, the loss of institutional knowledge held by departing employees and the allocation of resources to reorganize and reassign job roles and responsibilities.

Furthermore, we do not maintain key person life insurance with respect to any of our employees.

In addition, if any of our key executive officers or other key employees were to join a competitor or form a competing company, we could lose customers, suppliers, know-how and key personnel.

As of December 27, 2024, we had approximately 1,820 full time employees and 560 contract or temporary workers worldwide.

As of December 26, 2025, we had approximately 1,891 full time employees and 557 contract/temporary employees worldwide.

None of our employees are unionized, but in various countries, local law requires our participation in works councils.

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To the extent that natural disasters or other calamities or causalities should result in delays or cancellations of customer orders, or the delay in the manufacture or shipment of our products, our business, financial condition and results of operations would be materially adversely affected.

Government subsidy programs for semiconductor manufacturing may create artificial and unsustainable demand patterns for capital equipment, and subsidy conditions may create competitive distortions or impose indirect obligations on us.

Governments in the United States, European Union, Japan, South Korea, China, and other countries have enacted substantial subsidy and incentive programs to encourage domestic semiconductor manufacturing capacity.

These programs, including the U.S.

CHIPS and Science Act, the EU Chips Act, and similar initiatives, provide grants, tax incentives, loan guarantees, and other financial support to semiconductor manufacturers who build or expand fabrication facilities in specific jurisdictions.

Government subsidy programs may create demand volatility and distortions in the semiconductor capital equipment market:

• Subsidized fabrication facility construction may create a near-term surge in capital equipment demand as multiple subsidized projects proceed simultaneously, followed by a sharp decline in demand once subsidy-driven projects are completed, creating boom-bust cycles that are more severe than normal industry cyclicality;

• Subsidized facilities may not be economically sustainable without ongoing government support, and may operate at low utilization rates or may be curtailed if subsidies are reduced or eliminated, resulting in lower ongoing demand for spare parts, upgrades, or capacity expansions;

• Government subsidy priorities may favor certain types of semiconductor manufacturing (e.g., mature node manufacturing for automotive or industrial applications versus leading-edge logic manufacturing), creating uneven demand across equipment categories and potentially reducing demand for equipment types where we have strong positions;

• Subsidized competitors in foreign markets may gain market share due to government support, while we may not have access to equivalent subsidies, creating competitive disadvantages;

• Political changes or budget constraints may result in subsidy programs being reduced, delayed, or eliminated, causing sudden changes in expected demand.

Additionally, semiconductor manufacturers who receive government subsidies may be subject to various conditions and restrictions that could indirectly affect us:

• "Buy national" or domestic content requirements that encourage or require subsidized manufacturers to source equipment and subsystems from domestic suppliers, potentially disadvantaging us if we do not have manufacturing presence in the subsidy jurisdiction or if our products do not meet domestic content thresholds;

• Restrictions on subsidized manufacturers' ability to expand manufacturing capacity in certain countries, which may limit end-market demand for equipment in regions where we have sales or manufacturing presence;

• Labor, environmental, or social requirements imposed on subsidy recipients that may flow down through the supply chain to us as indirect requirements or customer expectations;

• Transparency and reporting requirements that may require subsidized customers to disclose information about their supply chains, potentially affecting our confidential commercial information or competitive position.

We have limited visibility into how government subsidy programs will ultimately affect equipment demand patterns, customer behavior, or competitive dynamics.

Our inability to accurately forecast subsidy-driven demand could result in capacity mismatches, inventory imbalances, or missed market opportunities.

Subsidy-driven market distortions could have a material adverse effect on our business, financial condition and results of operations.

We may be classified as a passive foreign investment company (“PFIC”), which could result in adverse U.S.

federal income tax consequences for U.S.

Based on the current and anticipated valuation of our assets and the composition of our income and assets, we do not expect to be considered a PFIC, for U.S.

federal income tax purposes for the foreseeable future.

However, we must make a separate determination for each taxable year as to whether we are a PFIC after the close of each taxable year and we cannot assure you that we will not be a PFIC for our 2025 taxable year or any future taxable year.

Under current law, a non-U.S.

corporation will be considered a PFIC for any taxable year if either (1) at least 75% of its gross income is passive income or (2) at least 50% of the value of its assets, generally based on an average of the quarterly values of the assets during a taxable year, is attributable to assets that produce or are held for the production of passive income.

PFIC status depends on the composition of our assets and income and the value of our assets, including, among others, a pro rata portion of the income and assets of each subsidiary in which we own, directly or indirectly, at least 25% by value of the subsidiary's equity interests, from time to time.

Because we currently hold and expect to continue to hold a substantial amount of cash or cash equivalents, and because the calculation of the value of our assets may be based in part on the value of our ordinary shares, which may fluctuate considerably given that market prices of technology companies historically often have been volatile, we may be a PFIC for any taxable year.

If we were treated as a PFIC for any taxable year during which a U.S.

holder held ordinary shares, certain adverse U.S.

federal income tax consequences could apply for such U.S.

Legal and Regulatory Risks

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As a result of recent trade policy changes in the U.S., there may be greater restrictions and economic disincentives on international trade and a resulting impact on our operations, sales and financial condition.

For example, the Bureau of Industry and Security (“BIS") has issued multiple rules in the last several years (the "BIS Rules"), most recently on December 2, 2024, that restrict the export of advanced computing and semiconductor manufacturing items when provided for use in certain semiconductor manufacturing activities in China, which have impacted and may continue to impact our sales and operations.

For example, the Bureau of Industry and Security (“BIS") has issued multiple rules in the last several years (the "BIS Rules") that restrict the export of advanced computing and semiconductor manufacturing items when provided for use in certain semiconductor manufacturing activities in China, which have impacted and may continue to impact our sales and operations.

We have had some delays in export activity as we analyze available emergency authorizations and assess the new licensing requirements for our business.

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To the extent that the BIS or other relevant regulators impose additional export restrictions that apply to our business, it will have an adverse impact on our revenues and operations as well.

This represents a structural, long-term threat to our revenue rather than merely a cyclical or regulatory compliance issue.

Chinese government-backed initiatives to achieve semiconductor self-sufficiency, including substantial state subsidies for domestic equipment manufacturers and semiconductor device manufacturers, may erode our market position in China over a multi-year period even if current export control regulations are not further tightened.

We may experience permanent loss of market share in China as Chinese customers increasingly source equipment and subsystems from domestic suppliers, and we may be unable to offset such losses with growth in other geographic markets due to limited semiconductor manufacturing capacity outside of Asia.

In addition, geopolitical changes in China-Taiwan relations could disrupt the operations of companies in China or Taiwan that are suppliers to, or third-party partners of, the Company, our customers and our customers’ other suppliers.

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We may not succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where we do business and the foregoing factors may cause a reduction in our sales, profitability or cash flows, or cause an increase in our liabilities.

export control regulations apply to "deemed exports" of controlled technology to foreign nationals, and the complexity of re-export controls across our international operations may limit our ability to hire qualified personnel and may create compliance challenges.

export control regulations apply not only to the physical export of products and technology from the United States, but also to "deemed exports," which occur when controlled technology or source code is released to a foreign national within the United States.

A foreign national is any person who is not a U.S.

citizen or lawful permanent resident.

Deemed export rules mean that providing access to controlled technical data, software, or technology to foreign national employees, contractors, or visitors in the United States may require an export license, depending on the person's nationality and the classification of the technology.

Our business depends on our ability to hire and retain highly skilled engineers, many of whom may be foreign nationals, including individuals from China, Taiwan, and other countries that are subject to heightened export control scrutiny.

Deemed export restrictions may limit our ability to:

• Recruit and hire qualified engineering talent, particularly in competitive labor markets where foreign nationals represent a significant portion of available candidates;

• Assign foreign national employees to work on projects involving controlled technologies, potentially creating inefficiencies in resource allocation and project staffing;

• Provide foreign national employees with access to technical information, training, or collaborative work environments necessary for effective performance of their duties;

• Utilize foreign national employees in customer-facing roles where exposure to customer proprietary information or controlled technologies may occur;

• Compete for talent against companies that are not subject to deemed export restrictions or that have more permissive licensing arrangements.

Compliance with deemed export regulations requires careful tracking of employee nationalities, technology classifications, and license authorizations, and violations can result in significant civil and criminal penalties.

We may be required to implement costly administrative controls, facility access restrictions, and information barriers to ensure deemed export compliance, and such measures may negatively impact operational efficiency, employee morale, and our culture of collaboration and innovation.

In addition, our international operations create re-export control complexity.

Products, software, and technology that are manufactured, developed, or stored outside the United States but that incorporate U.S.-origin controlled content or that are produced using U.S.-origin technology may be subject to U.S.

re-export controls.

This means that transfers of items or technology among our foreign subsidiaries, from our foreign subsidiaries to customers or suppliers, or within the operations of our foreign subsidiaries may require U.S.

export licenses or may be subject to U.S.

export restrictions, even though such transfers do not physically touch the United States.

Tracking U.S.-origin controlled content across complex, multi-jurisdictional supply chains and manufacturing operations is administratively burdensome and creates risk of inadvertent violations.

Re-export control requirements may limit our flexibility to optimize our global supply chain, to transfer manufacturing or engineering resources among facilities, or to respond quickly to customer requirements.

Foreign governments may also object to the application of U.S.

export controls to activities occurring outside U.S.

territory, potentially creating conflicting legal obligations.

Our failure to comply with deemed export or re-export control regulations could result in loss of export privileges, significant fines and penalties, reputational damage, and criminal liability for responsible individuals, and could have a material adverse effect on our business, financial condition and results of operations.

We are subject to numerous environmental laws and regulations, including laws and regulations addressing climate change, which could require us to incur environmental liabilities, increase our manufacturing and related compliance costs or otherwise adversely affect our business.

We are subject to a variety of federal, state, local and foreign laws and regulations governing the protection of the environment or addressing climate change.

These environmental laws and regulations include those relating to the use, storage, handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials (such as regulations imposed on the use or sale of PFAS or PFAS-containing products) used in our manufacturing processes.

These environmental laws and regulations include those relating to the use, storage, handling, discharge, emission, disposal and reporting of toxic, volatile or otherwise hazardous materials (such as regulations imposed on the use or sale of polyfluoroalkyl substances ("PFAS") or PFAS-containing products) used in our manufacturing processes.

These materials may have been or could be released into the environment at properties currently or previously owned or operated by us, at other locations during the transport of materials or at properties to which we send substances for treatment or disposal.

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Increased costs of energy or compliance with emissions standards due to legal or regulatory requirements related to climate change may cause disruptions in or increased costs associated with manufacturing our products.

We previously identified material weaknesses in our internal control over financial reporting, and if we fail to maintain an effective system of internal controls, disclosure controls, and procedures, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our share price.

Evolving environmental, social and governance disclosure requirements and stakeholder expectations may increase our compliance costs, expose us to reputational and litigation risks, and affect our ability to attract customers, investors, and employees.

We are subject to increasing requirements and expectations regarding environmental, social, and governance ("ESG") matters from regulators, investors, customers, employees, and other stakeholders.

Securities and Exchange Commission ("SEC") has proposed rules that would require public companies to provide detailed disclosures regarding climate-related risks, greenhouse gas emissions (including Scope 1, Scope 2, and in some cases Scope 3 emissions), climate-related financial impacts, and oversight and governance of climate-related risks.

Although the SEC's proposed climate disclosure rules have faced legal and regulatory challenges and their final form and timing remain uncertain, we may ultimately be required to comply with such rules or with similar disclosure requirements adopted by the SEC or other regulators.

In addition, international ESG disclosure frameworks are creating compliance obligations for companies operating globally.

The European Union's Corporate Sustainability Reporting Directive ("CSRD") requires detailed sustainability reporting covering environmental, social, employee, human rights, anti-corruption, and diversity matters, with requirements that extend to non-EU companies with significant EU operations or revenue.

Other jurisdictions, including the United Kingdom, Singapore, and various other countries where we operate or sell products, have adopted or are considering mandatory ESG disclosure regimes.

These various frameworks are not fully harmonized, creating complexity and potential inconsistency in reporting obligations across jurisdictions.

Compliance with evolving ESG disclosure requirements may require us to:

• Implement new systems, processes, and internal controls to measure, track, and report ESG metrics, including greenhouse gas emissions across our operations and supply chain;

• Engage third-party consultants, auditors, or verification services to validate ESG data and disclosures;

• Dedicate significant management time and attention to ESG strategy, governance, and reporting;

• Make costly changes to operations, supply chain, or business practices to improve ESG performance or to meet stakeholder expectations;

• Disclose information that we have historically treated as confidential or that may be competitively sensitive;

• Subject our ESG disclosures to the same liability standards as financial disclosures, creating potential for securities litigation or regulatory enforcement if disclosures are deemed inaccurate or misleading.

Beyond regulatory compliance, our customers, particularly large OEMs and semiconductor manufacturers, are increasingly requiring their suppliers to meet specific ESG criteria as a condition of doing business.

Customer requirements may include carbon neutrality commitments, renewable energy usage targets, supply chain transparency and due diligence regarding conflict minerals and human rights, diversity and inclusion metrics, and adherence to specific ESG standards or certifications.

Our failure to meet customer ESG requirements could result in disqualification from bids, loss of business, or reduced competitiveness, particularly as ESG performance becomes a more prominent factor in OEM supplier selection processes.

Similarly, investors are increasingly incorporating ESG factors into investment decisions and may penalize companies with unfavorable ESG profiles through lower valuations, reduced access to capital, or higher cost of capital.

Employees and prospective employees, particularly in competitive technology labor markets, may consider our ESG commitments and performance in making employment decisions, and our failure to meet employee expectations on ESG matters could affect our ability to attract and retain talent.

We may also face litigation or reputational risks related to our ESG disclosures or performance.

"Greenwashing" litigation, in which companies are accused of making misleading or unsubstantiated environmental claims, has increased in recent years.

Activist shareholders, non-governmental organizations, or other parties may publicly criticize our ESG performance or disclosures, potentially causing reputational harm.

ESG-related litigation or controversies could be costly to defend, could divert management attention, and could damage our reputation with customers, investors, and other stakeholders.

The evolving and sometimes conflicting nature of ESG disclosure requirements and stakeholder expectations makes it difficult to predict the ultimate costs and operational impacts of ESG compliance.

Our ESG-related investments and commitments may not be sufficient to meet future regulatory requirements or stakeholder expectations, and may not generate commensurate benefits in terms of customer retention, investor support, or competitive advantage.

ESG compliance costs and related business impacts could have a material adverse effect on our business, financial condition and results of operations.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our share price.

As a publicly traded company, we are required to comply with the SEC’s rules implementing Section 302 and 404 of the Sarbanes‑Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and to provide an annual management report on the effectiveness of controls over financial reporting.

Our independent registered public accounting firm is required to attest to the effectiveness of

our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act.

In 2021, we identified material weaknesses related to ineffective information technology general controls in the areas of user access and program change management over certain information technology systems that support our financial reporting processes.

Such weaknesses have since been remediated.

However, we cannot assure that the measures we have taken will be sufficient to avoid additional material weaknesses in future periods and that we will not identify other material weaknesses in the future.

Our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act.

If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process, and report financial information accurately and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation, investigations, or penalties;

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While we are still evaluating the impact of Pillar Two, these rules and/or changes to prior tax treatments and positions may materially and adversely impact our provision for income taxes, net income, and cash flows.

Evolving artificial intelligence regulations may restrict our use of AI technologies, impose compliance costs, create liability risks, and affect our competitiveness.

Governments and regulatory authorities worldwide are developing legal and regulatory frameworks specifically addressing artificial intelligence technologies.

The European Union has adopted the AI Act, which classifies AI systems into risk categories and imposes requirements for high-risk AI systems including conformity assessments, risk management systems, data governance, transparency, human oversight, accuracy, and robustness.

federal government has issued Executive Orders on AI that direct agencies to develop AI regulations and policies, and various U.S.

states have proposed or enacted AI-specific legislation.

Other countries where we operate or sell products, have adopted or are developing AI regulatory frameworks.

AI regulations may impose various requirements and restrictions on our development, deployment, and use of AI technologies, including:

• Prohibitions or restrictions on certain AI applications deemed to be high-risk or unacceptable risk;

• Mandatory impact assessments, testing, validation, and certification of AI systems before deployment;

• Requirements for transparency and explainability of AI decision-making, which may be technically difficult to achieve for certain types of AI models;

• Human oversight and intervention requirements that may limit the efficiency benefits of AI automation;

• Data governance requirements that restrict the types of data that can be used to train or operate AI systems;

• Liability frameworks that impose strict liability or expanded liability for harms caused by AI systems;

• Varying and potentially inconsistent requirements across different jurisdictions, creating compliance complexity for our global operations.

Compliance with AI regulations may require us to implement costly governance structures, conduct extensive documentation and testing, modify or limit our use of AI technologies, or forego certain AI applications altogether.

We may face situations where AI use cases that are permissible in some jurisdictions are prohibited

or heavily restricted in others, forcing us to maintain multiple versions of products or processes or to limit AI deployment to the most restrictive common denominator.

AI regulations may also create competitive dynamics that favor certain companies or technologies.

Large technology companies with greater resources may be better positioned to absorb AI compliance costs, while smaller companies or new entrants may face barriers to AI adoption.

Alternatively, if our competitors are subject to less stringent AI regulations in their home jurisdictions, they may be able to develop and deploy AI capabilities more rapidly or at lower cost than we can.

The rapid pace of AI technology evolution and the nascent state of AI regulation create significant uncertainty regarding future compliance obligations.

Regulatory frameworks adopted today may become outdated as AI technology advances, potentially leading to frequent regulatory changes that require ongoing adaptation.

Our AI-related investments and product development decisions may be adversely affected by regulatory uncertainty, and we may make investments in AI capabilities that are later restricted or prohibited by regulation.

Violations of AI regulations could result in significant fines and penalties, prohibition on AI system deployment, requirements to withdraw products from the market, reputational damage, and potential criminal liability for responsible individuals.

AI-related regulatory enforcement or compliance failures could have a material adverse effect on our business, financial condition and results of operations.

Liquidity and Capital Resources Risks

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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-K

Item 1A. Risk Factors