What changed in this filing

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Item 1A. Risk Factors

2025-12-11 compared with 2025-09-04 · 35 added, 30 removed, 345 unchanged (16% of the section changed)

70 unchanged sentences

These involve various inherent risks and the benefits sought may not be realized.

Our future success is substantially dependent on the service of our senior management and our ability to maintain our culture and to attract, manage, and retain highly qualified individuals.

The performance of our senior management team and other key employees and contractors may not meet our needs and expectations.

Also, the loss of services of any of these key individuals, or any negative public perception with respect to these individuals, may be disruptive to, or cause uncertainty in, our business and could have a negative impact on our ability to manage and grow our business effectively.

Such disruption could have a material adverse impact on our financial performance, financial condition, and the market price of our stock.

If we are unable to successfully maintain and evolve our unique culture, offer competitive compensation and benefits, and a desirable work model, we may be unable to attract and retain highly qualified individuals to support our business and continued growth.

Our work model may not meet the needs and expectations of our employees and may not be perceived as favorable compared to other companies.

We also face risks related to employee engagement and productivity which could result in increased headcount and lead to increased labor costs.

In December 2025, we announced that our Chief Executive Officer will step down effective January 31, 2026, and appointed interim co-Chief Executive Officers to lead during a transition period while we conduct a search for a permanent Chief Executive Officer.

In addition, one of our other senior executives recently resigned.

These changes may create uncertainty and divert management’s attention and resources.

We may not identify or attract a permanent successor on a timely basis, and a prolonged search could extend uncertainty and heighten the risks described in this paragraph.

leadership model may not align with expectations of employees, vendor partners, or other external stakeholders, and could negatively affect our operations, strategic initiatives, employee engagement, and retention.

These changes may also lead to negative public perception, including among consumers and our brand community.

Any resulting disruption could have a material adverse impact on our business, financial performance, or the market price of our stock.

We may not be able to effectively manage our growth and the increased complexity of our business and as a result our brand image and financial performance may suffer.

7 unchanged sentences

We operate a combination of physical retail locations and e-commerce services via our websites, other region-specific websites, digital marketplaces, and mobile apps.

Our physical retail locations remain a key part of our growth strategy and we view them as a valuable tool in helping us build our brand and product line as well as enabling our omni-

channel capabilities.

Our physical retail locations remain a key part of our growth strategy and we view them as a valuable tool in helping us build our brand and product line as well as enabling our omni-channel capabilities.

We plan to continue to expand square footage and open new company-operated stores to support our growth objectives.

11 unchanged sentences

We also lease the majority of our distribution centers and our inability to secure appropriate real estate or lease terms could impact our ability to deliver our products to the market.

Our future success is substantially dependent on the service of our senior management and our ability to maintain our culture and to attract, manage, and retain highly qualified individuals.

The performance of our senior management team and other key employees and contractors may not meet our needs and expectations.

Such disruption could have a material adverse impact on our financial performance, financial condition, and the market price of our stock.

Our work model may not meet the needs and expectations of our employees and may not be perceived as favorable compared to other companies.

We also face risks related to employee engagement and productivity which could result in increased headcount and lead to increased labor costs.

Our business is affected by seasonality, which could result in fluctuations in our operating results.

1 unchanged sentence

Our annual net revenue is typically weighted more heavily toward our fourth fiscal quarter, reflecting our historical strength in sales during the holiday season, while our operating expenses are more equally distributed throughout the year.

This seasonality, along with other factors that are beyond our control, including weather conditions and the effects of climate change, could adversely affect our business and cause our results of operations to fluctuate.

This seasonality, along with other

factors that are beyond our control, including weather conditions and the effects of climate change, could adversely affect our business and cause our results of operations to fluctuate.

Risks related to information security and technology

6 unchanged sentences

Attacks may be targeted at us, our vendors or customers, or others who have entrusted us with information.

In addition, despite taking measures to safeguard our information security and privacy environment from security breaches, our customers and our business could

still be exposed to risk.

In addition, despite taking measures to safeguard our information security and privacy environment from security breaches, our customers and our business could still be exposed to risk.

Actual or anticipated attacks may cause us to incur increasing costs including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.

17 unchanged sentences

A significant privacy breach or failure or perceived failure by us or our third-party service providers to comply with privacy or data protection laws, regulations, policies or regulatory guidance might have a materially adverse impact on our reputation, business operations and our financial condition or results of operations.

(1) PRC includes China Mainland, Hong Kong SAR, Taiwan, and Macau SAR.

Disruption of our technology systems or unexpected network interruption could disrupt our business.

7 unchanged sentences

Any significant disruption in our technology systems or websites could harm our reputation and credibility, and could have a material adverse effect on our business, financial condition, and results of operations.

(1) PRC includes China Mainland, Hong Kong SAR, Taiwan, and Macau SAR.

Our technology-based systems that give our customers the ability to shop with us online may not function effectively.

12 unchanged sentences

The removal of this exemption increases the cost of fulfilling those orders.

As a result, more shipments are now subject to duties, taxes, and customs procedures, which we expect to increase product costs beginning in the second half of 2025 and continuing into 2026 and beyond.

As a result, more shipments are now subject to duties, taxes, and customs procedures, which increased product costs during the third quarter of 2025, and which we expect to continue in the fourth quarter of 2025 and into 2026 and beyond.

We are taking steps designed to mitigate some of the financial impact, although we expect the tariff and de minimis changes to adversely affect product costs, gross profit, and income from operations.

35 unchanged sentences

Although we believe that these transactions reflect the accurate economic allocation of profit and that proper transfer pricing documentation is in place, the profit allocation and transfer pricing terms and conditions may be scrutinized by local tax authorities during an audit and any resulting changes may impact our mix of earnings in countries with differing statutory tax rates.

At the end of 2020, our Advance Pricing Arrangement ("APA") with the Internal Revenue Service and the Canada Revenue Agency expired.

At the end of 2020, our bilateral Advance Pricing Arrangement ("APA") with the Internal Revenue Service and the Canada Revenue Agency expired.

This APA stipulated the allocation of certain profits between the U.S.

We are currently in the process of negotiating the renewal of this arrangement and the final agreed upon terms and conditions thereof could impact our effective tax rate.

During 2020, we entered into bilateral negotiations with the Internal Revenue Service ("IRS") and Canada Revenue Agency ("CRA") to renew the APA, and in October 2025, we were notified by the CRA they have withdrawn from the APA process.

We continue to apply the transfer pricing methodology that was outlined in the withdrawn APA for the years 2021 through 2025, but this methodology may be subject to audit, and which could result in a change to the profit allocation and impact our effective tax rate.

We are also in the process of negotiating an APA with China Mainland's State Tax Administration and any final agreed upon terms and conditions thereof could impact our effective tax rate.

2 unchanged sentences

Tax Cuts and Jobs Act, and in 2020 with the passage of the Coronavirus Aid, Relief, and Economic Security Act.

Certain provisions of the Inflation Reduction Act passed in 2022, including a 15% corporate alternative minimum tax, as well as the similar 15% global minimum tax under the Organization for Economic Cooperation and Development's Pillar Two Global Anti-Base Erosion Rules, may impact our income tax expense, profitability, and capital allocation decisions in the future.

Certain provisions of the One Big Beautiful Bill Act that was passed on July 4, 2025 and the Inflation Reduction Act passed in 2022, including a 15% corporate alternative minimum tax, as well as the similar 15% global minimum tax under the Organization for Economic Cooperation and Development's Pillar Two Global Anti-Base Erosion Rules, may impact our income tax expense, profitability, and capital allocation decisions in the future.

Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity.

1 unchanged sentence

These include federal agencies such as the Federal Trade Commission, Consumer Product Safety Commission and state attorneys general in the United States, the Competition Bureau and Health Canada in Canada, the State Administration for Market Regulation of the PRC, General Administration of Customs of the PRC, as well as other federal, state, provincial, local, and international regulatory authorities in the countries in which our products are distributed or sold.

Our ability to track and respond to regulations may not be

sufficient to meet the increased number and complexity of regulations we are subject to globally.

Our ability to track and respond to regulations may not be sufficient to meet the increased number and complexity of regulations we are subject to globally.

If we fail to comply with any of these regulations, we could become subject to enforcement actions or the imposition of significant penalties or claims, which could harm our results of operations or our ability to conduct our business.

16 unchanged sentences

dollar affect the reported amounts of net revenue, expenses, assets, and liabilities.

Foreign currency exchange differences which arise on translation of our international subsidiaries' balance sheets into U.S.

Foreign currency exchange differences

which arise on translation of our international subsidiaries' balance sheets into U.S.

dollars are recorded as other comprehensive income (loss), net of tax in accumulated other comprehensive income or loss within stockholders' equity.

9 unchanged sentences

The occurrence or resurgence of global or regional health events such as the COVID-19 pandemic, and the related governmental, private sector and individual consumer responses, could contribute to a recession, depression, or global economic downturn, reduce store traffic and consumer spending, result in temporary or permanent closures of retail locations, offices, and factories, and could negatively impact the flow of goods.

Such events could cause health officials to impose restrictions and recommend precautions to mitigate the health crisis such as the temporary closure of our stores, limitations on the number of guests allowed in our stores at any single time, minimum physical distancing requirements, and

limited operating hours.

A health event such as the COVID-19 pandemic could also negatively impact our employees, guests, and brand by reducing consumer willingness to visit stores, malls, and lifestyle centers, and employee willingness to staff our stores.

22 unchanged sentences

We have experienced, and may in the future experience, a significant disruption in the supply of fabrics or raw materials and may be unable to locate alternative suppliers of comparable quality at an acceptable price, or at all.

In addition, if we

experience significant increased demand, or if we need to replace an existing supplier or manufacturer, we may be unable to locate additional supplies of fabrics or raw materials or additional manufacturing capacity on terms that are acceptable to us, or at all, or we may be unable to locate any supplier or manufacturer with sufficient capacity to meet our requirements or fill our orders in a timely manner.

In addition, if we experience significant increased demand, or if we need to replace an existing supplier or manufacturer, we may be unable to locate additional supplies of fabrics or raw materials or additional manufacturing capacity on terms that are acceptable to us, or at all, or we may be unable to locate any supplier or manufacturer with sufficient capacity to meet our requirements or fill our orders in a timely manner.

Identifying a suitable supplier is an involved process that requires us to become satisfied with its quality control, responsiveness and service, financial stability, and labor and other ethical practices.

10 unchanged sentences

Our products also include silver and natural fibers, including cotton.

Our costs for raw materials are affected by, among other things, weather, consumer demand, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus consumer countries, and other factors that are generally unpredictable and beyond our control.

Our costs for raw materials are affected by, among other things, weather, consumer demand, speculation on the commodities market, the relative valuations and fluctuations of the

currencies of producer versus consumer countries, and other factors that are generally unpredictable and beyond our control.

Any and all of these factors may be exacerbated by global climate change.

9 unchanged sentences

Factors that could negatively affect our business include labor shortages and increases in labor costs, labor disputes, pandemics, the impacts of climate change, difficulties and additional costs in transporting products manufactured from these countries to our distribution centers and significant revaluation of the currencies used in these countries, which may result in an increase in the cost of producing products.

Also, the imposition of trade sanctions or other regulations against products imported by us from, or the loss of "normal trade

relations" status with any country in which our products are manufactured, could significantly increase our cost of products and harm our business.

Also, the imposition of trade sanctions or other regulations against products imported by us from, or the loss of "normal trade relations" status with any country in which our products are manufactured, could significantly increase our cost of products and harm our business.

Risks related to intellectual property

30 unchanged sentences

From time to time, our competitors or other third parties may claim that we are infringing upon or misappropriating their intellectual property rights, and we may be found to be infringing upon such rights.

using certain technologies, force us to implement expensive work-arounds, or impose other unfavorable terms.

Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our platform or services or using certain technologies, force us to implement expensive work-arounds, or impose other unfavorable terms.

We expect that the occurrence of infringement claims is likely to grow as the market for fitness products and services grows and as we introduce new and updated products and offerings.

14 unchanged sentences

We are increasingly subject to scrutiny from institutional investors, advocacy organizations, and other stakeholders regarding our environmental, social, and governance ("ESG") policies, disclosures, and performance.

Some stakeholders advocate for greater transparency and more aggressive ESG-related commitments across areas such as human capital, labor practices, supply chain oversight, and diversity.

Some stakeholders

advocate for greater transparency and more aggressive ESG-related commitments across areas such as human capital, labor practices, supply chain oversight, and diversity.

Others, including advocacy organizations and litigation-focused groups, have criticized ESG-related initiatives and have challenged companies, through lawsuits, regulatory investigations, and public campaigns, for implementing ESG strategies they deem inconsistent with fiduciary duties or legal obligations.

29 unchanged sentences

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

What changed 10-Q

Item 1A. Risk Factors