What changed in this filing

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Item 1A. Risk Factors

2024-05-16 compared with 2023-05-17 · 122 added, 117 removed, 366 unchanged (40% of the section changed)

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These are not all the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur.

See also the other information set forth in this Annual Report on Form 10-K, including in Part I, Item 1 "Business," Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and the related Notes.

See also the other information set forth in this Annual Report on Form 10-K, including in Part I, Item 1 "Business," Part II, Item 1C "Cybersecurity", Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and the related Notes.

Summary of Risk Factors

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• If we fail to innovate and develop new products in a timely and cost-effective manner for our new and existing product categories, our business and operating results could be adversely affected.

• We use artificial intelligence ("AI") in our business, and challenges relating to the development and use of AI, including generative AI, could result in competitive harm, reputational harm, and legal liability, and adversely affect our results of operations.

• If we do not successfully execute on our growth opportunities, or if our growth opportunities are more limited than we expect, our operating results and future growth could be adversely affected.

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• Our business depends in part on access to third-party platforms or technologies, and if access thereto is withdrawn, denied, or is not available on terms acceptable to us, or if the platforms or technologies change without notice to us, our business and operating results could be adversely affected.

• Our success largely depends on our ability to manage, hire, retain, integrate and motivate sufficient numbers of qualified personnel, including senior leadership.

Our strategy and our ability to innovate, design

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and produce new products, sell products, maintain operating margins and control expenses depend on key personnel that may be difficult to replace.

• As we focus on growth opportunities, we are divesting or discontinuing non-strategic product categories, or pursuing strategic acquisitions and investments, which could have an adverse impact on our business.

• As we continue our efforts to lower our costs and improve our operational efficiency, we may not fully realize our goals.

• Our success largely depends on our ability to manage, hire, retain, integrate and motivate sufficient numbers of qualified personnel, including senior leadership.

Our strategy and our ability to innovate, design and produce new products, market and sell products, maintain operating margins and control expenses depend on key personnel that may be difficult to replace.

• As we focus on growth opportunities, we may divest or discontinue non-strategic product categories, or pursue strategic acquisitions and investments, which could have an adverse impact on our business.

• As we continue our efforts to scale, lower our costs and improve our operational efficiency, we may not fully realize our goals.

• Product quality issues could adversely affect our reputation, business and operating results.

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• The collection, storage, transmission, use and distribution of personal data could give rise to liabilities and additional costs of operation as a result of laws, governmental regulation and risks of data breaches and security incidents.

• Claims by others that we infringe their proprietary technology could adversely affect our business.

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• Claims by others that we infringe their proprietary technology could adversely affect our business.

• We may be unable to protect our proprietary rights.

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• Anticipate technology, market trends and consumer preferences;

• Develop innovative, high-quality, and reliable new products and enhancements in a cost-effective and timely manner;

• Develop innovative, high-quality, and reliable new software-enabled hardware products and enhancements in a cost-effective and timely manner;

• Distinguish our products from those of our competitors;

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There are significant initial expenditures for research and development, tooling, manufacturing processes, inventory and marketing, and we may not be able to recover those investments.

If we fail to accurately anticipate technological trends or our users’ needs or preferences, are unable to complete the development of products and services in a cost-effective and timely fashion or are unable to appropriately increase production to fulfill customer demand, we will be unable to successfully introduce new products and services into the market or compete with other providers.

If we fail to accurately anticipate technological trends or our users’ needs or preferences, are unable to complete the development of software-enabled hardware products and services in a cost-effective and timely fashion or are unable to appropriately increase production to fulfill customer demand, we will be unable to successfully introduce new products and services into the market or compete with other providers.

Even if we complete the development of our new products and services in a cost-effective and timely manner, they may not be competitive with products developed by others, they may not achieve acceptance in the market at anticipated levels or at all, they may not be profitable or, even if they are profitable, they may not achieve margins as high as our expectations or as high as the margins we have achieved historically.

As we introduce new or enhanced products, integrate new technology into new or existing products, or reduce the overall number of products offered, we face risks including, among other things, disruption in customers’ ordering patterns, excessive levels of new and existing product inventories, revenue deterioration in our existing product lines, insufficient supplies of new products to meet customers’ demand, possible product and technology defects, and a potentially different sales and support environment.

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compete, shortening the period of differentiation based on our product innovation, straining relationships with our partners or increasing market expectations for the results of our new products before we have had an opportunity to demonstrate the market viability of the products.

defects, and a potentially different sales and support environment.

Premature announcements or leaks of new products, features or technologies may exacerbate some of these risks by reducing the effectiveness of our product launches, reducing sales volumes of current products due to anticipated future products, making it more difficult to compete, shortening the period of differentiation based on our product innovation, straining relationships with our partners or increasing market expectations for the results of our new products before we have had an opportunity to demonstrate the market viability of the products.

Our failure to manage the transition to new products and services or the integration of new technology into new or existing products and services could adversely affect our business, results of operations, operating cash flows and financial condition.

We use artificial intelligence (“AI”) in our business, and challenges relating to the development and use of AI, including generative AI, could result in competitive harm, reputational harm, and legal liability, and adversely affect our results of operations.

We use AI solutions internally for business purposes and also in certain offerings, and we may in the future incorporate AI solutions, including generative AI, into our offerings.

We also may make third-party generative AI tools available in our applications.

AI technologies are complex and evolving rapidly, and we face significant competition from other companies.

If our competitors or others are able to use or leverage AI more rapidly or more successfully than us, our ability to compete effectively could be impaired, as a result of which our business and financial results could be adversely affected.

AI solutions may use algorithms, datasets or training methodologies that are incomplete, reflect biases, or contain other flaws or deficiencies.

AI solutions, including generative AI, may create output that appears correct but is inaccurate, biased or otherwise flawed, or that infringes or otherwise violates intellectual property or other rights.

The use of AI may result in cybersecurity incidents that implicate the personal data of users of AI solutions as well as disclosure of our financial information or other confidential information.

We, and third-party providers of any AI solutions we may make available in our applications, may lack sufficient rights with respect to data or other material or content used in or produced by AI solutions.

We may not be able to control the development, maintenance or behavior of third-party AI solutions or how their providers obtain or otherwise process training or other data, and these AI solutions may be used inappropriately or irresponsibly.

There is no guarantee that any contractual or other protections we seek to implement will be sufficient to protect us from risks presented by these solutions.

The rapid evolution of AI and its regulatory and policy landscape also present numerous risks.

Several jurisdictions around the world have introduced or enacted legislation relating to AI, and regulators have issued policy statements relating to the use and development of AI.

New laws and regulations, or existing laws and regulations, may be interpreted in ways that conflict with or otherwise impact our approach to AI and use of AI solutions.

While we have worked to take a responsible approach to the development and use of AI, we anticipate that it will require significant resources going forward.

We could be required to modify our approach to AI, including our development practices, user consent methods, other policies or practices, or third-party AI solutions we may offer within our solutions.

More generally, our approach to AI, including any AI solutions that we may incorporate or otherwise make available within our offerings, may expose us to claims, demands and litigation, regulatory inquiries, enforcement actions or other proceedings, fines, penalties and other liabilities, negative publicity, reputational harm and competitive harm.

Any of these may adversely affect our business, results of operations, operating cash flows and financial condition.

See also "Risks Related to Confidential Information, Cybersecurity, Privacy, and Intellectual Property” below.

If we do not successfully execute on our growth opportunities, or if our growth opportunities are more limited than we expect, our operating results and future growth could be adversely affected.

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Our growth opportunities and those we may pursue are subject to constant and rapidly changing and evolving technologies and evolving industry standards and may be replaced by new technology concepts or platforms.

Some of these growth categories and opportunities are also characterized by short product cycles, frequent new product introductions and enhancements and rapidly changing and evolving consumer preferences with respect to design and features that require calculated risk-taking and fast responsiveness and result in short opportunities to establish a market presence.

Some of these growth categories and opportunities are also characterized by short product cycles, frequent new product

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introductions and enhancements and rapidly changing and evolving consumer preferences with respect to design and features that require calculated risk-taking and fast responsiveness and result in short opportunities to establish a market presence.

In addition, some of these growth categories and opportunities are characterized by price competition, erosion of premium-priced segments and average selling prices, commoditization, and sensitivity to general economic conditions and cyclical downturns.

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We purchase certain products and key components from a limited number of sources.

If the supply of these products or key components were to be delayed or constrained, impacted by global shortages of semiconductor chips, or if one or more of our single-source suppliers experience disruptions or go out of business as a result of adverse global economic conditions, natural disasters or regional or global pandemics, including COVID-19, we might be unable to find a new supplier on acceptable terms, or at all, and our product shipments to our customers could be delayed, which could adversely affect our business, financial condition and operating results.

If the supply of these products or key components were to be delayed or constrained, impacted by global shortages of semiconductor chips, or if one or more of our single-source suppliers experience disruptions or go out of business as a result of adverse global economic conditions, adverse global or regional geopolitical conditions, natural disasters or regional or global pandemics, such as COVID-19, we might be unable to find a new supplier on acceptable terms, or at all, and our product shipments to our customers could be delayed, which could adversely affect our business, financial condition and operating results.

Lead times for materials, components and products ordered by us or by our contract manufacturers can vary significantly and depend on factors such as contract terms, demand for a component, and supplier capacity.

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Shortages or interruptions in the supply of components or subcontracted products, or our inability to procure these components or products from alternate sources at acceptable prices in a timely manner, could delay shipment of our products or increase our production costs, which could adversely affect our business and operating results.

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Our principal manufacturing operations and third-party contract manufacturers are located in China and Southeast Asia, which exposes us to risks associated with doing business in that geographic area as well as potential tariffs, adverse trade regulations, adverse tax consequences and pressure to move or diversify our manufacturing locations.

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Interpretation and enforcement of China’s laws and regulations continue to evolve, and we expect differences in interpretation and enforcement to continue in the foreseeable future.

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Our manufacturing operations at third-party contractors could be adversely affected by contractual disagreements, by labor unrest, by natural disasters, by regional or global pandemics, such as the COVID-19 pandemic, by wars and armed conflicts, by strains on local communications, trade, and other infrastructures, by competition for the available labor pool or manufacturing capacity, by increasing labor and other costs, and by other trade customs and practices that are dissimilar to those in the United States and Europe.

Further, we have been exposed in the past and may be exposed to fluctuations in the value of the local currency in the countries in which manufacturing occurs.

Further, we have been exposed in the past and may in the future be exposed to fluctuations in the value of the local currency in the countries in which manufacturing occurs.

Future appreciation of these local currencies could increase our component and other raw material costs.

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Maintaining and enhancing our brands will require significant investments and will depend largely on our future design, products and marketing, which may not be successful and may damage our brands.

Our brands and reputation are also dependent on third parties, such as suppliers, manufacturers, distributors, retailers, product

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reviewers and the media as well as online consumer product reviews, consumer recommendations and referrals.

Our brands and reputation are also dependent on third parties, such as suppliers, manufacturers, distributors, retailers, product reviewers and the media as well as online consumer product reviews, consumer recommendations and referrals.

It can take significant time, resources and expense to overcome negative publicity, reviews or perception.

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As we shift the focus of our marketing efforts in certain categories from a push model to a demand-generating pull model, the pressures from this competition and from our distribution channels, combined with the implementation risks of such a strategy shift, could adversely affect our competitive position, market share and business.

In addition, our competitors may offer customers terms and conditions that may be more favorable than our terms and conditions and may require us to take actions to maintain or increase our customer incentive programs, which could impact our revenues and operating margins.

In addition, our competitors may offer customers terms

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and conditions that may be more favorable than our terms and conditions and may require us to take actions to maintain or increase our customer incentive programs, which could impact our revenues and operating margins.

In addition, because of the continuing convergence of the markets for computing devices and consumer electronics, we expect greater competition in the future from well-established consumer electronics companies in our developing categories as well as in future categories we might enter.

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This ability could provide Microsoft, Apple, Google, Amazon or other competitors with significant lead-time advantages.

In addition, Microsoft, Apple, Google, Amazon or other competitors may be able to control distribution channels or offer pricing advantages on bundled hardware and software products that we may not be able to offer, and maybe financially positioned to exert significant downward pressure on product prices and upward pressure on promotional incentives in order to gain market share.

In addition, Microsoft, Apple, Google, Amazon or other competitors may be able to control distribution channels or offer pricing advantages on bundled hardware and software products that we may not be able to offer, and may be financially positioned to exert significant downward pressure on product prices and upward pressure on promotional incentives in order to gain market share.

If we are not able to increase our software and services capability to enhance hardware product experiences and offer attractive product pricing, our results of operations and financial condition may be adversely affected.

For additional information, see "Competition” in Item 1 of this Annual Report on Form 10-K.

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The sales and business practices of all such sales channel partners, their compliance with laws and regulations, and their reputations - of which we may or may not be aware - may affect our business and our reputation.

While our overall distribution relationships are diffuse, in fiscal year 2023 and 2022 our gross sales were concentrated with three customers - Amazon Inc., Ingram Micro and TD Synnex - and their affiliated entities.

While our overall distribution relationships are diffuse, in fiscal years 2024 and 2023 ou r gross sales were concentrated with three customers - Amazon, Ingram Micro and TD Synnex - and their affiliated entities.

We do not have long-term commitments with those customers.

If online sales grow as a percentage of overall sales, we expect that we will become even more reliant on Amazon.

If online sales grow as a percentage of overall sales, we expect that our reliance on Amazon would increase.

While we believe that we have good relationships with Amazon, Ingram Micro and TD Synnex, any adverse change in those relationships could have an adverse impact on our results of operations and financial condition.

The impact of economic conditions, labor issues, natural disasters, regional or global pandemics, evolving consumer preferences, and purchasing patterns on our distribution partners, or competition between our sales channels, could result in sales channel disruption.

Any loss of a major partner or distribution channel or other

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channel disruption could make us more dependent on alternate channels, increase pricing and promotional pressures from other partners and distribution channels, increase our marketing costs, or adversely impact buying and inventory patterns, payment terms or other contractual terms, sell-through or delivery of our products to consumers, our reputation and brand equity, or our market share.

Any loss of a major partner or distribution channel or other channel disruption could make us more dependent on alternate channels, increase pricing and promotional pressures from other partners and distribution channels, increase our marketing costs, or adversely impact buying and inventory patterns, payment terms or other contractual terms, sell-through or delivery of our products to consumers, our reputation and brand equity, or our market share.

Our sales channel partners also sell products offered by our competitors and, in the case of retailer house brands, may also be our competitors.

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If we are unable to maintain successful relationships with these sales channel partners or to maintain our distribution channels, our business will suffer.

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As we expand into new product categories and markets in pursuit of growth, we will have to build relationships with new channel partners and adapt to new distribution and marketing models.

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In addition, we rely on channel inventory data from our sales channel partners.

If we do not receive this information on a timely and accurate basis, if this information is not accurate, or if we do not properly interpret this information, our results of operations and financial condition may be adversely affected.

If we do not receive this information on a timely basis, if this information is not accurate, or if we do not properly interpret this information, our results of operations and financial condition may be adversely affected.

If we do not accurately forecast market demand for our products, our business and operating results could be adversely affected.

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If our sales channel partners have excess inventory of our products or decide to decrease their inventories for any reason, they may decrease the number of products they acquire in subsequent periods, which could cause disruption in our business and adversely affect our forecasts and sales.

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In addition, market demand remains less predictable and more volatile than pre-COVID-19, partially due to the current macroeconomic and geopolitical conditions.

In addition, market demand remains less predictable and more volatile than before the COVID-19 pandemic.

As a result, we have experienced in the past and may continue experiencing large differences between our forecasts and actual demand for our products that may result in excess inventory or product unavailability, inventory and restructuring reserves, increases in operational logistics and other costs, damaged relationships with suppliers or customers, opportunities for our competitors, and lost market share and revenue.

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Our business depends in part on access to third-party platforms or technologies, and if access thereto is withdrawn, denied, or is not available on terms acceptable to us, or if the platforms or technologies change without notice to us, our business and operating results could be adversely affected.

Our product portfolio includes current and future products designed for use with third-party platforms or software, such as the Apple iPad, iPod, iPhone and Siri, Android phones and tablets, Google Assistant and Amazon Alexa .

Our product portfolio includes current and future products designed for use with third-party platforms or software, such as the Apple iPad, iPhone and Siri, Android phones and tablets, Google Assistant, Zoom, Microsoft Teams and Amazon Alexa .

Our business in these categories relies on our access to the platforms of third parties, some of whom are our competitors.

Platform owners that are competitors have a competitive advantage in designing products for their platforms and may produce peripherals or other products that work better, or are perceived to work better, than our products in connection with those platforms.

As we expand the number of platforms and software applications with which our products are compatible, we may not be successful in launching products for those platforms or software applications, we may not be successful in establishing strong relationships with the new platform or software owners, or we may negatively impact our ability to develop and produce high-quality products on a timely basis for those platforms and software applications or we may otherwise adversely affect our relationships with existing platform or software owners.

If we expand the number of platforms and software applications with which our products are compatible, we may not be successful in launching

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products for those platforms or software applications, we may not be successful in establishing strong relationships with the new platform or software owners, or we may negatively impact our ability to develop and produce high-quality products on a timely basis for those platforms and software applications or we may otherwise adversely affect our relationships with existing platform or software owners.

Our access to third-party platforms may require paying a royalty, which lowers our product margins or may otherwise be on terms that are not acceptable to us.

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Our success largely depends on our ability to manage, hire, retain, integrate and motivate sufficient numbers of qualified personnel, including senior leadership.

Our strategy and our ability to innovate, design and produce new products, sell products, maintain operating margins and control expenses depend on key personnel that may be difficult to replace.

Our success depends on our ability to attract and retain highly skilled personnel, including senior leadership and international personnel.

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We may find it difficult to provide competitive equity incentives, and our ability to hire, retain and motivate key personnel may suffer.

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As we focus on growth opportunities, we are divesting or discontinuing non-strategic product categories, or pursuing strategic acquisitions and investments, which could have an adverse impact on our business.

As we focus on growth opportunities, we may divest or discontinue non-strategic product categories, or pursue strategic acquisitions and investments, which could have an adverse impact on our business.

We regularly review our product portfolio and update our non-strategic product categories and products.

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If we fail to successfully integrate acquisitions, our business could be harmed.

Acquisitions could also result in the assumption of known and unknown liabilities, product, regulatory and other compliance issues, dilutive issuances of our equity securities, the incurrence of debt, disputes over earn-outs or other litigation, and adverse effects on relationships with our and our target’s employees, customers and suppliers.

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employees, customers and suppliers.

Moreover, our acquisitions may not be successful in achieving our desired strategy, product, financial or other objectives or expectations, which would also cause our business to suffer.

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If these investments are unsuccessful, this could have an adverse impact on our results of operations, operating cash flows and financial condition.

As we continue our efforts to lower our costs and improve our operational efficiency, we may not fully realize our goals.

As we continue our efforts to scale, lower our costs and improve our operational efficiency, we may not fully realize our goals.

Our ability to achieve the desired and anticipated cost savings and other benefits from simplification, cost-cutting and restructuring activities, and within our desired and expected timeframes, are subject to many estimates and assumptions, and the actual savings and timing for those savings may vary materially based on factors such as local labor regulations, negotiations with third parties, and operational requirements.

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Failure to do so could result in product recalls, product liability claims and litigation, product redesign efforts, lost revenue, loss of reputation, and significant warranty and other expenses to remedy.

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While we maintain reserves for reasonably estimable liabilities and purchase liability insurance, our reserves may not be adequate to cover such claims and liabilities and our insurance is subject to deductibles and may not be adequate to cover such claims and liabilities.

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Such conditions, including but not limited to inflation, slower growth or recession, new or increased tariffs, trade restrictions, changes to fiscal and monetary policy, higher interest rates and currency fluctuations, and other conditions that are susceptible to impact consumer confidence and spending could adversely affect demand for our products.

In fiscal year 2023, we were impacted by adverse mac roeconomic and geopolitical conditions including but not limited to inflation, foreign currency fluctuations, and slowdown of economic activity around the world, in part due to changes in interest rates, and lower consumer and enterprise spending.

In addition, the war in Ukraine increased global supply chain, logistics, and inflationary challenges.

In the fourth quarter of fiscal year 2022, we indefinitely ceased all sales and shipments to Russia.

Our sales in Ukraine have also been halted due to the ongoing military operations on the Ukrainian territory.

We had no revenues from Russia and Ukraine in fiscal year 2023.

In fiscal year 2024, we were impacted by adverse macroeconomic and geopolitical conditions including

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but not limited to inflation, foreign currency fluctuations, and slowdown of economic activity around the world, in part due to changes in interest rates, and lower consumer and enterprise spending.

Global or regional economic and political conditions also have an impact on our suppliers, contract manufacturers, logistics providers, and distributors, causing volatility in cost of materials and shipping and transportation rates, and as a result impacting the pricing of our products.

Price increases may not successfully offset cost increases or may cause us to lose market share and in turn adversely impact our operations.

All these and other global and regional economic and geopolitical factors can materially adversely affect our business, results of operations and financial condition.

We conduct operations in a number of countries and have invested significantly in growing our sales and marketing activities in China, and the effect of business, legal and political risks associated with international operations could adversely affect us.

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• Exposure to political, economic and financial instability, including due to the uncertainty associated with the ongoing sovereign debt issues in certain Euro zone countries, which may lead to reduced sales, currency exchange losses and collection difficulties or other losses;

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• Import or export restrictions or licensing requirements that could affect some of our products, including those with encryption technology;

• Trade protection measures, custom duties, tariffs, import or export duties, and other trade barriers, restrictions and regulations, including recent and ongoing United States - China tariffs and trade restrictions, including China's 2021 Anti-Foreign Sanctions Law;

• Lack of infrastructure or services necessary or appropriate to support our products and services;

• Effects of the COVID-19 pandemic that may be more concentrated where we operate internationally;

• Lack of adequate infrastructure or services necessary or appropriate to support our long-term business strategy, digital transformation and operational efficiency;

• Exposure to fluctuations in the value of local currencies;

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• Higher credit risks;

• Current and future international regulation of AI;

• Variations in VAT (value-added tax) or VAT reimbursement;

• Imposition of currency exchange controls;

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• Delays from customs brokers or government agencies;

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Any of these risks could adversely affect our business, financial condition and operating results.

In addition, the increasingly strict and numerous regulations in China may create a more challenging environment for foreign companies operating in the region.

As a result, such regulations may have the effect of limiting our growth and market share in China, and disrupting manufacturing and operations in the region.

In addition, changes in relations between China and the United States could lead to further policy changes that in turn could prevent or limit us from procuring, developing, building, and/or selling our products in China.

Sales growth in key markets, including China, is an important part of our expectations for our business.

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Changes in trade policy and regulations in the United States and other countries, including changes in trade agreements and the imposition of tariffs and the resulting consequences, may have adverse impacts on our business, results of operations and financial condition.

In recent years, the U.S.

government has instituted or proposed changes to international trade policy through the renegotiation, and potential termination, of certain existing bilateral or multilateral trade agreements and treaties with, and the imposition of tariffs on a wide range of products and other goods from, China, countries in EMEA and other countries.

As previously disclosed, we have invested significantly in manufacturing facilities in China and Southeast Asia.

Given our manufacturing principally in those countries, and our lack of manufacturing elsewhere, policy or regulations changes in the United States or other countries present particular risks for us.

As discussed in this Annual Report on Form 10-K, we have invested significantly in manufacturing facilities in China and Southeast Asia.

Given our manufacturing principally in those countries, policy or regulations changes in the United States or other countries present particular risks for us.

We are constantly evaluating our manufacturing footprint globally including beyond Asia.

In addition, the current Chinese administration has imposed an increased volume of regulation creating a more challenging environment for non-Chinese companies operating in the region, including in the areas of intellectual property, trade, contract enforcement, data privacy, capital markets and human rights.

As a result, such regulations may have the effect of limiting our growth and market share in China, and disrupting manufacturing and operations in the region.

For example, on June 10, 2021, the National People’s Congress Standing Committee of the People’s Republic of China passed China's new Anti-Foreign Sanctions Law.

The Anti-Foreign Sanctions Law took immediate effect and allows China to take “retaliatory action” against any “discriminatorily restrictive measures” imposed by foreign countries against Chinese organizations and citizens.

As a result, China may impose countermeasures against government and private entities and/or persons that formulate, implement or comply with any regulation deemed a

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“discriminatorily restrictive measure.” Penalties may include denial of entry to China, prohibition of doing business in or with China, freezing of assets and “any other necessary measures.”

New or increased tariffs could adversely affect more or all of our products.

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If we deem it necessary to alter all or a portion of our activities or operations in response to such policies, agreements or tariffs, our capital and operating costs may increase.

In addition, as a result of Russia’s invasion of Ukraine in February 2022, sanctions and trade restrictions have been imposed on Russia, including banks, businesses, and individuals, by the U.S., the European Union and Switzerland.

This conflict has driven and could continue to drive economic uncertainty, including inflation, and component availability, among other things.

Our ongoing efforts to address these risks may not be effective and may have long-term adverse effects on our operations and operating results that we may not be able to reverse.

Such efforts may also take time to implement or to have an effect and may result in adverse quarterly financial results or fluctuations in our quarterly financial results.

As a result, changes in trade policy and regulations in the United States and other countries as well as changes in trade agreements and tariffs and sanctions imposed on Russia could adversely affect our business, results of operations and financial condition.

As a result, changes in trade policy and regulations in the United States and other countries as well as changes in trade agreements and tariffs could adversely affect our business, results of operations and financial condition.

Our financial performance is subject to risks associated with fluctuations in currency exchange rates.

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Dollar adversely affects the U.S.

Dollar value of our non-U.S.

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value of our non-U.S.

Dollar-denominated sales and earnings.

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Moreover, these exposures may change over time.

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We are subject to risks related to our environmental, social and governance ("ESG") activities and disclosures.

Concerns over climate change have resulted and may in the future result in new or additional legal, legislative and regulatory requirements to reduce or mitigate the effects of climate change on the environment, which could result in future tax, transportation and other cost increases that could adversely affect our business.

Concerns over climate change have resulted in increased regulatory requirements and reporting frameworks designed to reduce or mitigate the effects of climate change on the environment.

However, the lack of harmonized regulatory requirements and reporting frameworks exposes companies to navigate myriad different requirements, which has led to challenges in ESG reporting.

As a result, companies are required to develop an expanded set of metrics and measures, as well as data collection, controls, and reporting processes in order to meet regulatory requirements and stakeholder expectations.

Failure by us to promptly and accurately meet these expectations and requirements may expose us to reputational and brand damage, regulatory penalties and litigation among other things.

Compliance with such requirements will also require additional expenditures by us or our suppliers, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

In addition, ESG reporting and disclosure requirements continue to evolve, with increasing global regulation and heightened investor expectations.

Companies must develop an expanded set of metrics and measures, data collection and processing, controls, and reporting processes in order to meet regulatory requirements and stakeholder expectations.

Failure to promptly and accurately meet these expectations and requirements may result in reputational and brand damage, regulatory penalties and litigation among other things.

As a company operating in many markets and jurisdictions, expanding into new growth categories, and engaging in acquisitions, and as a Swiss, dual-listed company, we are subject to risks associated with new, existing and potential future laws and regulations.

As we expand into new markets and product categories and acquire companies, businesses and assets, we must comply with a wide variety of laws, standards and other requirements governing, among other things, health and safety, hazardous materials usage, product-related energy consumption, conflict minerals, packaging, recycling, sustainability, environmental, child labor and human rights matters.

As we expand into new markets and product categories and acquire companies, businesses and assets, our operations and products must comply with a wide variety of laws, standards and other requirements governing, among other things, health and safety, hazardous materials usage, product-related energy consumption, conflict minerals, packaging, recycling, sustainability, environmental, child labor and human rights matters, among others.

Our products may be required to obtain regulatory approvals and satisfy other regulatory concerns in the various jurisdictions where they are manufactured, sold or both.

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As a Swiss company with shares listed on both the SIX Swiss Exchange and the Nasdaq Global Select Market, we are also subject to both Swiss and United States corporate governance and securities laws and regulations.

In addition to the extra costs and regulatory burdens of our dual regulatory obligations, the two regulatory regimes may not always be compatible and may impose disclosure obligations, operating restrictions or tax effects on our business to which our competitors and other companies are not subject.

In addition to the extra costs and regulatory burdens of our dual regulatory obligations, the two regulatory regimes may

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not always be compatible and may impose disclosure obligations, operating restrictions or tax effects on our business to which our competitors and other companies are not subject.

For example, on January 1, 2023, subject to certain transitional provisions, the revised Swiss Corporate Law incorporating the Swiss Federal Council Ordinance Against Excessive Compensation at Public Companies, became effective.

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New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future which may have a significant effect on our financial results or our compliance with regulations.

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As a result of changes in tax laws, treaties, rulings, regulations or agreements, or their interpretation, of Switzerland or any other country in which we operate, the loss of a major tax dispute or a successful challenge to our operating structure, intercompany pricing policies or the taxable presence of our key subsidiaries in certain countries, or other factors, our effective income tax rates may increase, which could adversely affect our net income and cash flows.

As a result of the Federal Act on the Tax Reform and AHV Financing (“TRAF”), the canton of Vaud in Switzerland, where we are incorporated, enacted tax reforms on March 10, 2020 that took effect as of January 1, 2020.

As a result of the reform, Logitech will incur cash income taxes that will increase over time as the deferred income tax benefit established in connection with the reform diminishes.

The canton’s tax authority is primarily delegated by the Swiss federal government and its implementation of TRAF in general or with respect to Logitech is subject to Swiss federal review and challenge.

Implementation of any material change in tax laws or policies or the adoption of new interpretations of existing tax laws and rulings, or termination or replacement of our tax arrangements with the canton of Vaud, by Switzerland or the canton of Vaud could result in a higher effective income tax rate, or a decreased tax asset, a charge to earnings and an accelerated pace of increase in our effective income tax rate, or a combination of such impacts, on our worldwide earnings and any such change will adversely affect our net income.

Changes in our effective income tax rate may also make it more difficult to compare our net income and earnings per share between periods.

We operate in multiple jurisdictions and our profits are taxed pursuant to the tax laws of these jurisdictions.

Our effective income tax rate may be affected by changes in or interpretations of tax laws, treaties, rulings, regulations or agreements in any given jurisdiction, or changes in international tax reform by the Organization for Economic Co-operation and Development and similar organizations, utilization of net operating loss and tax credit carryforwards, changes in geographical allocation of income and expense, and changes in management’s assessment of matters such as the realizability of deferred tax assets.

Our effective income tax rate may be affected by changes in or interpretations of tax laws, treaties, rulings, regulations or agreements in any given jurisdiction, or changes in international tax reform by the Organization for Economic Co-operation and Development (the "OECD") and similar organizations, utilization of net operating loss and tax credit carryforwards, changes in geographical allocation of income and expense, and changes in management’s assessment of matters such as the realizability of deferred tax assets.

In the past, we have experienced fluctuations in our effective income tax rate.

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There is no assurance that our effective income tax rate will not change in future periods.

For example, as a result of the Federal Act on the Tax Reform and AHV Financing (“TRAF”), the canton of Vaud in Switzerland, where we are incorporated, enacted tax reforms that took effect as of January 1, 2020.

As a result of the TRAF reform, Logitech will incur cash income taxes that will increase over time as the deferred income tax benefit established in connection with the reform diminishes.

In addition, the Base Erosion and Profit Shifting Project (the “BEPS Project”) undertaken by the OECD recommended changes to numerous long-standing tax principles, including a proposal to reallocate profits among tax jurisdictions in which companies do business (“Pillar One”) and establishing a minimum tax on global income (“Pillar Two”).

As many countries have proposed or enacted Pillar Two legislation in jurisdictions in which we operate, we continue to monitor the relevant developments.

We file Swiss and foreign tax returns.

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If our effective income tax rate increases in future periods, our net income and cash flows could be adversely affected.

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We maintain cash and cash equivalents at financial institutions and are exposed to credit risk in the event of default by such financial institutions.

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Losses or unauthorized access to or releases of confidential information could adversely affect our business and result in significant reputational, financial and legal consequences.

We use and store confidential information, including but not limited to our business, financial, legal and governance information, as well as personal information about our employees, members of our Board of Directors and customers.

In addition, as a consumer electronics company, our websites are an important presentation of our company, identity and brands and an important means of interaction with and source of information for consumers

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of our products.

We also rely on our centralized information technology systems for product-related information and to store intellectual property and data, forecast our business, maintain financial records, manage operations and inventory, and operate other critical functions.

We allocate significant resources to maintain our information technology systems and deploy network security, data encryption, training and other measures to protect against unauthorized access or misuse.

We allocate significant resources to maintain our information technology systems and implement technical and organizational measures recognized as “best practice” to protect against unauthorized access or misuse.

Nevertheless, our websites and information technology systems have been and could continue to be subject to or threatened with, and are susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, structural or operational failures, computer viruses, ransomware and other malware, attacks by computer hackers and other third parties, employee error or malfeasance, phishing and other means of social engineering, other data security issues, telecommunication failures, user error, employee or contractor negligence or malfeasance, catastrophes, downtime due to system or software upgrades, integration or migration, or other foreseeable and unforeseen events.

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Moreover, there is an increased risk that we may experience security breaches or incidents as a result of our employees, service providers and third parties working remotely.

In addition, our growth and increased frequency and sophistication of cyber and product security attacks may increase the likelihood of our becoming a target of complex and damaging attacks that substantially disrupt operations and expose sensitive data.

While we have developed and implemented security measures and processes designed to protect against cyber and other security threats, such measures cannot provide absolute security and may not be successful in preventing future security breaches.

Moreover, we may need to implement additional protective measures to reduce the risk of potential security breaches and security incidents, which could cause us to incur significant additional expenses.

In addition, our growth and increased frequency and sophistication of cyber and product security attacks, especially leveraging "deepfakes" and other AI techniques may increase the likelihood of us becoming a target of complex and damaging attacks that substantially disrupt operations and expose sensitive data.

Security incidents or breaches impacting the information we or our third-party service providers process or maintain, or our products, websites or information technology systems may result in loss, unavailability, corruption, or unauthorized collection, use, disclosure or other processing of personal data and other confidential information that we and our service providers maintain and otherwise process.

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Any of these may adversely affect our business, results of operations and financial condition, potentially in a material manner.

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In addition, while we carry cyber insurance, we cannot be certain that our insurance will be sufficient to cover losses and liabilities resulting from cyberattacks, security breaches and incidents, or other interruptions, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim, any of which could have a material adverse effect on our business, including our financial condition, results of operations and reputation.

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Compliance with the GDPR's international transfer rules has been made more difficult by the invalidation of the European Union-U.S.

Privacy Shield and we are now required to put in place additional privacy

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protective measures for transfer of data of people in the European Union to certain countries outside of the European Economic Area.

Privacy Shield and we are now required to put in place additional privacy protective measures for transfer of data of people in the European Union to certain countries outside of the European Economic Area.

In the United States, several states have adopted broad privacy laws.

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We expect to continue to enter new categories and markets.

As we do so, we face an increased risk that claims alleging we infringe the patent or other intellectual property rights of others, regardless of the merit of the claims, may increase in number and significance.

As we do so, we face an increased risk that claims alleging we infringe the patent or other intellectual property rights of others, including as a result of our use of AI, and regardless of the merit of the claims, may increase in number and significance.

This risk is heightened by the persistent lawsuits brought by holders of patents that do not have an operating business or are attempting to license broad patent portfolios Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we will be successful in defending ourselves against intellectual property claims.

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Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately not be successful.

Any claims or proceedings against us, whether meritorious or not, could be time consuming, result in costly litigation or the diversion of significant operational resources, or require us to enter into royalty or licensing agreements, any of which could materially and adversely affect our business and results of operations.

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royalty or licensing agreements, any of which could materially and adversely affect our business and results of operations.

We may be unable to protect our proprietary rights.

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Any of these events could adversely affect our business, financial condition and operating results.

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Risks Related to our Financial Results

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• A significant portion of our quarterly retail sales typically occurs in the last weeks of each quarter, further increasing the difficulty in predicting quarterly revenues and profitability.

• Our sales are impacted by consumer demand and current and future global economic and political conditions, including inflation, foreign currency fluctuations, slowdown of economic activity around the world, in part due to rising interest rates, and lower consumer and enterprise spending, trade restrictions and tariffs, and can, therefore, fluctuate abruptly and significantly during periods of uncertain economic conditions or geographic distress, as well as from shifts in distributor inventory practices and consumer buying patterns.

• Our sales are impacted by consumer demand and current and future global economic and political conditions, including inflation, interest rate and foreign currency fluctuations, slowdown of economic activity around the world, and lower consumer and enterprise spending, trade restrictions and tariffs, and can, therefore, fluctuate abruptly and significantly during periods of uncertain economic conditions or geographic distress, as well as from shifts in distributor inventory practices and consumer buying patterns.

• We must incur a large portion of our costs in advance of sales orders because we must plan research and production, order components, buy tooling equipment, and enter into development, sales and marketing, and other operating commitments prior to obtaining firm commitments from our customers.

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The effectiveness of our marketing and sales efforts is uncertain and it is difficult to predict whether our marketing and sales efforts will result in increased sales.

• The COVID-19 pandemic has led to evolving changes in our supply, operations, logistics and related expenses and use patterns and demand for certain of our products that may not recur or be sustainable in future periods.

• We engage in acquisitions and divestitures, and such activity varies from period to period.

Such variance may affect our growth, our previous outlook and expectations, and comparisons of our operating results and financial statements between periods.

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• We are continuously attempting to simplify our organization, to control operating costs through expense and global workforce management, to reduce the complexity of our product portfolio, and to better align costs with our current business.

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Because our operating results are difficult to predict, our results may be below the expectations of financial analysts and investors, which could cause the price of our shares to decline.

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Our gross margins can vary significantly depending on multiple factors, which can result in unanticipated fluctuations in our operating results.

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Share repurchases and dividends diminish our cash reserves.

In July 2022, our Board of Directors approved a $500 million increase to our current 2020 repurchase program of our registered shares up to $1.5 billion.

The Swiss Takeover Board approved this increase and it became effective on August 19, 2022.

As of March 31, 2023, $505.8 million was available for repurchase under the 2020 repurchase program.

We have also paid cash dividends and increased the size of our dividend, each year since fiscal year 2013.

Our share repurchase programs and dividend policy may be affected by many factors, including general business and economic conditions, our financial condition and operating results, our views on potential future capital requirements, restrictions imposed in any future debt agreements, the emergence of alternative investment or acquisition opportunities, changes in our business strategy, legal requirements, changes in tax laws, and other factors.

Our share repurchase programs do not obligate us to repurchase all or any of the dollar value of shares authorized for repurchase.

The programs could also increase the volatility of the trading price of our shares.

Our share repurchase program and dividend policy may be affected by many factors, including general business and economic conditions, our financial condition and operating results, our views on potential future capital requirements, restrictions imposed in any future debt agreements, the emergence of alternative investment or acquisition opportunities, changes in our business strategy, legal requirements, changes in tax laws, and other factors.

Our share repurchase program does not obligate us to repurchase all or any of the dollar value of shares authorized for repurchase.

The program could also increase the volatility of the trading price of our shares.

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Similarly, we are not obligated to pay dividends on our registered shares.

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If we do not pay a regular dividend, we may lose the interest of investors that focus their investments on dividend-paying companies, which could create downward pressure on our share price.

Any announcement of termination or suspension of our share repurchase programs or dividend may result in a decrease in our share price.

The share repurchase programs and payment of cash dividends could also diminish our cash reserves that may be needed for investments in our business, acquisitions or other purposes.

Any announcement of termination or suspension of our share repurchase program or dividend may result in a decrease in our share price.

The share repurchase program and payment of cash dividends could also diminish our cash reserves that may be needed for investments in our business, acquisitions or other purposes.

Without dividends, the trading price of our shares must appreciate for investors to realize a gain on their investment.

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UNRESOLVED STAFF COMMENTS

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