What changed in this filing

/stocks — the workspaceLOADING

Item 4. Controls and Procedures

2023-11-03 compared with 2023-08-04 · 96 added, 95 removed, 810 unchanged (19% of the section changed)

20 unchanged sentences

Accurately managing our sales channel inventory and product mix within the current environment is challenging, and we have, and may in the future, incur costs associated with excess inventory, or lose sales from having too few products.

To remain competitive and stimulate consumer demand, we must successfully manage new product introductions and transitions of products and services.

Investment in new business strategies could disrupt our ongoing business, present risks not originally contemplated and materially adversely affect our business, reputation, results of operations and financial condition.

We rely on a limited number of traditional and online retailers, wholesale distributors and service provider customers for a substantial portion of our sales, and our net revenue could decline if they refuse to pay our requested prices or reduce their level of purchases, if there are unforeseen disruptions in their businesses, or if there is significant consolidation in our customer base that results in fewer customers for our products.

1 unchanged sentence

We depend substantially on our sales channels, and our failure to maintain and expand our sales channels would result in lower sales and reduced net revenue.

To remain competitive and stimulate consumer demand, we must successfully manage new product introductions and transitions of products and services.

We depend on a limited number of third-party manufacturers for substantially all of our manufacturing needs.

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Product security vulnerabilities, system security risks, data protection breaches, cyber-attacks and improper use of artificial intelligence ("AI") tools, could disrupt our products, services, internal operations or information technology systems, and any such disruption could increase our expenses, damage our reputation, harm our business and adversely affect our stock price.

We make substantial investments in software research and development and unsuccessful investments could materially adversely affect our business, financial condition and results of operations.

If our products contain defects or errors, we could incur significant unexpected expenses, experience product returns and lost sales, experience product recalls, suffer damage to our brand and reputation, and be subject to product liability or other claims.

Our user growth, engagement, and monetization of our subscription services on mobile devices depend upon effective operation with mobile operating systems, networks, technologies, products, and standards that we do not control.

We make substantial investments in software research and development and unsuccessful investments could materially adversely affect our business, financial condition and results of operations.

If we are unable to secure and protect our intellectual property rights, our ability to compete could be harmed.

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Governmental regulations of imports or exports affecting Internet security could affect our net revenue.

If our goodwill and intangible assets become impaired, as occurred in 2022, we may be required to record a significant charge to earnings.

If our goodwill and intangible assets become impaired, as occurred in 2022 and 2023, we may be required to record a significant charge to earnings.

General Risk Factors

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If we are unable to properly monitor and manage our sales channel inventory and maintain an appropriate level and mix of products with our retail partners and wholesale distributors and within our sales channels, we may incur increased and unexpected costs associated with this inventory.

In 2022, many of our retail and service partners began reducing their target inventory levels, and they have continued to further reduce their target inventory levels beyond what they had previously communicated.

In 2022 and the first half of 2023, many of our retail and service provider partners began significantly reducing their target inventory levels which adversely affected our results of operations.

While we see signs of the retail networking market stabilizing, the uncertain macroeconomic environment and high interest rates are also putting pressure on our SMB channel partners, and we expect to continue to experience SMB channel inventory compression at least for the next two to three fiscal quarters.

Low channel inventory levels increase the likelihood that our sales channel customers may not be able to fulfill end user demand, leading to delayed or lost sales, unhappy customers and potential impacts to our brand and reputation.

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Actual demand for our products depends on many factors, which makes it difficult to forecast.

We have experienced differences between our actual and our forecasted demand in the past and expect differences to arise in the future.

We have experienced

differences between our actual and our forecasted demand in the past and expect differences to arise in the future.

If we improperly forecast demand for our products and channel inventory levels, we could end up with too many products and be unable to sell the excess inventory in a timely manner, if at all, or, alternatively we could end up with too few products and not be able to satisfy demand.

This problem is exacerbated because we attempt to closely match inventory levels with product demand leaving limited margin for error.

Also, during the transition from an existing product to a new replacement product, we must accurately predict the demand

for the existing and the new product.

Also, during the transition from an existing product to a new replacement product, we must accurately predict the demand for the existing and the new product.

If we improperly forecast demand for our products and channel inventory levels, we could incur increased expenses associated with writing off excessive or obsolete inventory, lose sales, incur penalties for late delivery or have to ship products by air freight to meet immediate demand incurring incremental freight costs above the sea freight costs and suffering a corresponding decline in gross margins.

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If our wholesale distributors and retailers are unable to sell their inventory in a timely manner, we might lower the price of the products, or these parties may exchange the products for newer products or decrease their purchases of our products in subsequent periods, which would adversely affect our revenue and results of operations.

* To remain competitive and stimulate consumer demand, we must successfully manage new product introductions and transitions of products and services.

We operate in a highly competitive, quickly changing environment, and our future success depends on our ability to develop or acquire and introduce new products and services, enhance existing products and services, effectively stimulate customer demand for new and upgraded products and services, and successfully manage the transition to these new and upgraded products and services.

Our future success will depend in large part upon our ability to identify demand trends in the consumer, business and service provider markets, and to quickly develop or acquire, manufacture and market and sell products and services that satisfy these demands in a cost-effective manner.

In order to differentiate our products from our competitors’

products, we must continue to increase our focus and capital investment in research and development and marketing and sales, including software development for our products and complementary services and applications.

For example, we have made a strategic shift to focus on premium, higher margin products and have committed a substantial amount of resources to the development, manufacture, branding, marketing and sale of our Nighthawk mobile hotspot products, Orbi WiFi systems and ProAV managed switches, and to introducing additional and improved models and services in these lines.

In the third quarter of 2023, we launched our first WiFi 7 products, namely the Orbi 97X mesh system and the Nighthawk RS700 router, and will continue to invest in a strong pipeline of WiFi 7 introductions in 2024 across all our major product lines.

The success of new products and services depends on a number of factors, including timely and successful development either through rapid innovation or acquisition, market acceptance, our ability to manage the risks and costs, such as investment costs and marketing costs, associated with development and introduction of new products and services, the effective management of purchase commitments and channel inventory levels in line with anticipated product demand, availability of products in appropriate quantities and at expected costs to meet anticipated demand, the risk that new products and services may have delays, quality or other defects or deficiencies and our ability to effectively manage marketing and reviews of our products and services.

In addition, we have acquired companies and technologies in the past and as a result, have introduced new product lines in new markets.

We may not be able to successfully manage integration of the new product lines with our existing products.

Selling new product lines in new markets will require our management to learn different strategies in order to be successful.

We may be unsuccessful in launching a newly acquired product line in new markets which requires management of new suppliers, potential new customers and new business models.

Our management may not have the experience of selling in these new markets and we may not be able to grow our business as planned.

For example, in August 2018, we acquired Meural Inc., a leader in digital platforms for visual art, to enhance our Connected Home product and service offerings.

If we are unable to effectively and successfully further develop these new product lines, we may not be able to increase or maintain our sales and our gross margins may be adversely affected.

Accordingly, if we cannot properly drive customer demand, manage future introductions and transitions of products and services, this could result in:

loss of or delay in revenue and loss of market share;

negative publicity and damage to our reputation and brand;

a decline in the average selling price of our products;

adverse reactions in our sales channels, such as reduced shelf space, reduced channel inventory levels, reduced online product visibility, or loss of sales channels;

increased levels of product returns.

In addition, if we are unable to successfully introduce or acquire new products with higher gross margins, or enhance and improve our services and subscription offerings for customer retention or service revenue growth, or if we are unable to improve the margins on our previously introduced and rapidly growing product and services lines, our net revenue and overall gross margin would likely decline.

* Investment in new business strategies could disrupt our ongoing business, present risks not originally contemplated and materially adversely affect our business, reputation, results of operations and financial condition.

We have invested, and in the future may invest, in new business strategies.

Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, greater-than-expected liabilities and expenses, economic, legal and regulatory challenges, inadequate return on capital, potential impairment of tangible and intangible assets, and significant write-offs.

New business strategies are inherently risky and may not be successful.

The failure of any significant investment could materially adversely affect our business, reputation, results of operations and financial condition.

For example, as mentioned in the risk factor above “

To remain competitive and stimulate consumer demand, we must successfully manage new product introductions and transitions of products and services ”, we have made a strategic shift to focus on premium, higher margin products and services.

We continue to hire in key areas and invest in these premium, higher margin products and services, such as ProAV managed switches, premium Orbi WiFi mesh systems, 5G mobile hotspots, and subscription services;

however, such investments may not prove to be successful.

If we fail to develop premium user experience, elevate marketing and branding for customer acquisition, expand our sales channels or otherwise successfully execute on our business strategies, our business, financial condition, results of operations and reputation could be materially adversely affected.

* We rely on a limited number of traditional and online retailers, wholesale distributors and service provider customers for a substantial portion of our sales, and our net revenue could decline if they refuse to pay our requested prices or reduce their level of purchases, if there are unforeseen disruptions in their businesses, or if there is significant consolidation in our customer base that results in fewer customers for our products.

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Some of our customers, such as Amazon and Best Buy, may consider this to be competitive with their own businesses, which could negatively influence their purchasing decisions with respect to our products.

Also, during the COVID-19 pandemic, some channel partners had prioritized the sale and delivery of other categories of products ahead of ours.

Also, during the COVID-19 pandemic, some

channel partners had prioritized the sale and delivery of other categories of products ahead of ours.

Further, we believe the COVID-19 pandemic led to an acceleration of the shift to a greater percentage of products being bought and sold online.

3 unchanged sentences

many of our retail and service provider customers have and continue to

reduce their target inventory levels.

many of our retail and service provider customers have and continue to reduce their target inventory levels.

This shift may have a longer-term impact on the inventory levels our customers choose to carry.

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Other factors which may affect our suppliers’

ability or willingness to supply components to us include internal management product allocation decisions or reorganizational issues, such as roll-out of new equipment which may delay or disrupt supply of previously forecasted components, or industry consolidation and divestitures, which may result in changed business and product priorities among certain suppliers.

certain suppliers.

Also, many standardized components used broadly in electronic devices are manufactured in significant quantities in concentrated geographic regions, particularly in Greater China.

1 unchanged sentence

Additionally, government intervention to curb the consumption of electricity in China could have a disruptive impact on component production and supply availability.

It could be difficult, costly and time consuming to obtain alternative sources for these components, or to change product designs to make use of

alternative components.

It could be difficult, costly and time consuming to obtain alternative sources for these components, or to change product designs to make use of alternative components.

In addition, difficulties in transitioning from an existing supplier to a new supplier could create delays in component availability that would have a significant impact on our ability to fulfill orders for our products.

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If we cannot effectively manage our business and inventory requirements amongst our online customers and traditional retail customers, our business would be harmed.

The recent trend in the consolidation of online retailers and DMR channels has resulted in intensified competition for preferred product placement, such as product placement on an online retailer’s Internet home page.

The recent trend in the consolidation of online retailers and DMR channels has

resulted in intensified competition for preferred product placement, such as product placement on an online retailer’s Internet home page.

Expanding our presence in the VAR channel may be difficult and expensive.

2 unchanged sentences

We also sell products and services directly to consumers from our own e-commerce platforms.

This requires material investment in capital, time and

resources and carries the risk that it may not achieve the expected return on investment that we are expecting, and that it may adversely affect our relationships with our existing channel partners, which ultimately may materially and adversely affect our results of operations.

This requires material investment in capital, time and resources and carries the risk that it may not achieve the expected return on investment that we are expecting, and that it may adversely affect our relationships with our existing channel partners, which ultimately may materially and adversely affect our results of operations.

We also sell products to broadband service providers.

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If we fail to establish a presence in an important developing sales channel, such as sales directly to consumers from our own e-commerce platforms, our business could be harmed.

* To remain competitive and stimulate consumer demand, we must successfully manage new product introductions and transitions of products and services.

In order to differentiate our products from our competitors’

For example, we have made a strategic shift to focus on premium, higher margin products and have committed a substantial amount of resources to the development, manufacture, marketing and sale of our Nighthawk mobile hotspot products and Orbi WiFi system, and to introducing additional and improved models and services in these lines.

The success of new product and services depend on a number of factors, including timely and successful development either through rapid innovation or acquisition, market acceptance, our ability to manage the risks and costs, such as investment costs and marketing costs, associated with development and introduction of new products and services, the effective management of purchase commitments and channel inventory levels in line with anticipated product demand, availability of products in appropriate quantities and at expected costs to meet anticipated demand, the risk that new products and services may have delays, quality or other defects or deficiencies and our ability to effectively manage marketing and reviews of our products and services.

In addition, we have acquired companies and technologies in the past and as a result, have introduced new product lines in new markets.

We may not be able to successfully manage integration of the new product lines with our existing products.

Selling new product lines in new markets will require our management to learn different strategies in order to be successful.

We may be unsuccessful in launching a newly acquired product line in new markets which requires management of new suppliers, potential new customers and new business models.

Our management may not have the experience of selling in these new markets and we may not be able to grow our business as planned.

For example, in August 2018, we acquired Meural Inc., a leader in digital platforms for visual art, to enhance our Connected Home product and service offerings.

If we are unable to effectively and successfully further develop these new product lines, we may not be able to increase or maintain our sales and our gross margins may be adversely affected.

Accordingly, if we cannot properly manage future introductions and transitions of products and services, this could result in:

loss of or delay in revenue and loss of market share;

negative publicity and damage to our reputation and brand;

a decline in the average selling price of our products;

adverse reactions in our sales channels, such as reduced shelf space, reduced channel inventory levels, reduced online product visibility, or loss of sales channels;

increased levels of product returns.

In addition, if we are unable to successfully introduce or acquire new products with higher gross margins, or if we are unable to improve the margins on our previously introduced and rapidly growing product lines, our net revenue and overall gross margin would likely decline.

We have invested, and in the future may invest, in new business strategies.

New business strategies are inherently risky and may not be successful.

The failure of any significant investment could materially adversely affect our business, reputation, results of operations and financial condition.

For example, as mentioned in the risk factor above “

If we fail to successfully execute on our business strategies, our business, financial condition, results of operations and reputation could be materially adversely affected.

* We depend on a limited number of third-party manufacturers for substantially all of our manufacturing needs.

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Specifically, substantially all of our manufacturing and assembly occurs in the Asia Pacific region, and any disruptions due to natural disasters, climate change, health epidemics and political, social and economic instability in the region would affect the ability of our third-party manufacturers to manufacture our products.

For example, in late August 2021, heavy rains caused our manufacturer in Thailand to become flooded and created a one-month delay in manufacturing and required us to move

some non-U.S.

For example, in late August 2021, heavy rains caused our manufacturer in Thailand to become flooded and created a one-month delay in manufacturing and required us to move some non-U.S.

manufacturing back to China.

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Average sales prices have declined in the past and may again decline in the future.

These competitors may have more advanced technology, more extensive distribution channels, stronger brand names, greater access to shelf space in retail locations, bigger promotional budgets and larger customer bases than we do.

These competitors may have more advanced technology, more extensive distribution channels, stronger brand names,

greater access to shelf space in retail locations, bigger promotional budgets and larger customer bases than we do.

In addition, many of these competitors leverage a broader product portfolio and offer lower pricing as part of a more comprehensive end-to-end solution which we may not have.

1 unchanged sentence

Our competitors may acquire other companies in the market and leverage combined resources to gain market share.

In some instances, our competitors may be acquired by larger companies with additional

formidable resources, such as the purchase of ARRIS by CommScope, Eero by Amazon and Linksys by Foxconn.

In some instances, our competitors may be acquired by larger companies with additional formidable resources, such as the purchase of ARRIS by CommScope, Eero by Amazon and Linksys by Foxconn.

Additionally, in the case of Linksys, Foxconn is one of our main third-party manufacturing partners, which presents an additional risk if Foxconn decides to prioritize its interest in Linksys over its relationship with us.

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International sales comprise a significant amount of our overall net revenue.

International sales were approximately 35% of overall net revenue in the second fiscal quarter of 2023 and approximately 36% of overall net revenue in fiscal 2022.

International sales were approximately 30% of overall net revenue in the third fiscal quarter of 2023 and approximately 36% of overall net revenue in fiscal 2022.

We continue to be committed to growing our international sales, and while we have committed resources to expanding our international operations and sales channels, these efforts may not be successful.

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If we are unable to anticipate technology trends and service provider customer product needs, and to allocate research and development resources to the right projects, we may not be successful in continuing to sell products to service provider customers.

In addition, because our service provider customers command significant resources, including for software support, and demand extremely

competitive pricing, certain ODMs have declined to develop service provider products on an ODM basis.

In addition, because our service provider customers command significant resources, including for software support, and demand extremely competitive pricing, certain ODMs have declined to develop service provider products on an ODM basis.

Accordingly, as our ODMs increasingly limit development of our service provider products, our service provider business will be harmed if we cannot replace this capability with alternative ODMs or in-house development.

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Additionally, the imposition of tariffs is dependent upon the classification of items under the Harmonized Tariff System (“HTS”) and the country of origin of the item.

Determination of the HTS and the origin of the item is a technical matter that can be subjective in nature.

Accordingly, although we believe our classifications of both HTS and origin are appropriate, there

is no certainty that the U.S.

Determination of the HTS and the origin of the item is a technical matter that

can be subjective in nature.

Accordingly, although we believe our classifications of both HTS and origin are appropriate, there is no certainty that the U.S.

government will agree with us.

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However, there is no guarantee that we would be able to fully understand and use the source code, as we may not have the expertise to do so.

We are increasingly exposed to these risks as we continue to develop and market more products containing third-party software, such as our subscription service offerings related to network security and smart parental controls.

We are increasingly exposed to these risks as we continue to develop and market more products and services containing third-party software, such as our subscription service offerings related to network security and smart parental controls.

If we are unable to license the necessary technology, we may be forced to acquire or develop alternative technology, which could be of lower quality or performance standards.

The acquisition or development of alternative technology may limit and delay our

ability to offer new or competitive products and services and increase our costs of production.

The acquisition or development of alternative technology may limit

and delay our ability to offer new or competitive products and services and increase our costs of production.

As a result, our business, operating results and financial condition could be materially adversely affected.

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Potential breaches of our security measures and the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us, our employees or our customers, including the potential loss or disclosure of such information or data as a result of improper use of AI tools, employee error or other employee actions, hacking, fraud, social engineering or other forms of deception, could expose us, our customers or the individuals affected to a risk of loss or misuse of this information, result in litigation and potential liability for us, subject us to significant governmental fines, damage our brand and reputation, or otherwise harm our business.

Our management has spent increasing amounts of time, effort and expense in this area, and in the event of the discovery of a significant product or system security vulnerability or improper use of AI tools, we would incur additional substantial expenses and our business would be harmed.

Our management has spent increasing amounts of time, effort and expense in this area, and in the event of the discovery of significant product or system security vulnerability, or improper use of AI tools or other cybersecurity incidents, we could incur additional substantial expenses and our business and reputation could be harmed.

If we or our third-party providers are unable to successfully prevent breaches of security relating to our products, services, systems or customer private information, including customer personal identification information, or if these third-party systems failed for other reasons, it could result in litigation and potential liability for us, damage our brand and reputation, or otherwise harm our business.

* We make substantial investments in software research and development and unsuccessful investments could materially adversely affect our business, financial condition and results of operations.

We continue to evolve our historically hardware-centric business model towards a model that includes more sophisticated software offerings, including subscription services and applications that complement our products and are intended to drive subscriber growth and future recurring revenue.

As such, we have evolved the focus of our organization towards the delivery of more integrated hardware and software solutions for our customers, as well as related services, and we have and will continue to expend additional resources in this area in the future, including key new hires.

Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations and insufficient revenue to offset expenses associated with this strategy.

Software development is inherently risky for a company such as ours with a historically hardware-centric business model, and accordingly, our efforts in software development may not be successful and could materially adversely affect our financial condition and operating results.

If we cannot proportionately decrease our cost structure in response to competitive price pressures, our gross margin and, therefore, our profitability could be adversely affected.

In addition, if our software solutions, services, applications, pricing and other factors are not sufficiently competitive, or if there is an adverse reaction to our product and services decisions, we may lose market share in certain areas, which could adversely affect our revenue, profitability and prospects.

Software research and development is complex.

We must make long-term investments, develop or obtain appropriate intellectual property and commit significant resources before knowing whether our output from these investments will successfully result in meaningful customer demand and retention for our products and services.

We must accurately forecast mixes of software solutions and configurations that meet customer requirements, and we may not succeed at doing so within a given product’s life cycle or at all.

Any delay in the development, production or marketing of a new software solution could result in us not being among the first to market, which could further harm our competitive position.

In addition, our regular testing and quality control efforts may not be effective in controlling or detecting all quality issues and defects.

We may be unable to determine the cause, find an appropriate solution or offer a temporary fix to address defects.

Finding solutions to quality issues or defects can be expensive and may result in additional warranty, replacement and other costs, adversely affecting our profits.

If new or existing customers have difficulty with our software solutions or are dissatisfied with our services, our operating margins could be adversely affected, and we could face possible claims if we fail to meet our customers’

expectations.

In addition, quality issues can impair our relationships with new or existing customers and adversely affect our brand and reputation, which could adversely affect our operating results.

4 unchanged sentences

We make substantial investments in software research and development and unsuccessful investments could materially adversely affect our business, financial condition and results of operations ”

below, we devote considerable time and resources on testing and quality control efforts to detect quality issues and defects, and any reallocation of resources to fix such quality issues and defects could lead to delays in product introductions, which could further harm our competitive position.

above, we devote considerable time and resources on testing and quality control efforts to detect quality issues and defects, and any reallocation of resources to fix such quality issues and defects could lead to delays in product introductions, which could further harm our competitive position.

In addition, epidemic failure clauses are found in certain of our customer contracts, especially contracts with service providers.

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The substantial majority of our revenue from our subscription services is generated from use of such services on mobile devices.

We are dependent on the interoperability of Armor and our parental controls services and our other products with popular mobile operating systems, networks, technologies, products, and standards that we do not control, such as the Android

and iOS operating systems and mobile browsers.

Any changes, bugs, or technical issues in such systems, or changes in our relationships with mobile operating system partners, handset manufacturers, browser developers, or mobile carriers, or in their terms of service or policies that degrade our products’

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In the event that it is more difficult for our users to access and use our subscription services products or our other products on their mobile devices, or if our users choose not to access or use our subscription services products or our other products on their mobile devices, our user growth and user engagement and our business could be harmed.

We make substantial investments in software research and development and unsuccessful investments could materially adversely affect our business, financial condition and results of operations.

As such, we have evolved the focus of our organization towards the delivery of more integrated hardware and software solutions for our customers, as well as related services, and we have and continue to expend additional resources in this area in the future, including key new hires.

Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations and insufficient revenue to offset expenses associated with this strategy.

If we cannot proportionately decrease our cost structure in response to competitive price pressures, our gross margin and, therefore, our profitability could be adversely affected.

In addition, if our software solutions, services, applications, pricing and other factors are not sufficiently competitive, or if there is an adverse reaction to our product decisions, we may lose market share in certain areas, which could adversely affect our revenue, profitability and prospects.

Software research and development is complex.

We must accurately forecast mixes of software solutions and configurations that meet customer requirements, and we may not succeed at doing so within a given product’s life cycle or at all.

Any delay in the development, production or marketing of a new software solution could result in us not being among the first to market, which could further harm our competitive position.

In addition, our regular testing and quality control efforts may not be effective in controlling or detecting all quality issues and defects.

We may be unable to determine the cause, find an appropriate solution or offer a temporary fix to address defects.

Finding solutions to quality issues or defects can be expensive and may result in additional warranty, replacement and other costs, adversely affecting our profits.

expectations.

In addition, quality issues can impair our relationships with new or existing customers and adversely affect our brand and reputation, which could adversely affect our operating results.

If we are unable to secure and protect our intellectual property rights, our ability to compete could be harmed.

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If we do not prevail in any such disagreements, our profitability may be affected.

The computation of our tax provision assumes that we will have sufficient profitability in the respective jurisdictions to continue to record deferred tax assets without a valuation allowance.

As of the period ended July 2, 2023, we had a net deferred tax asset balance of $93.5 million.

If we do not generate sufficient profits in the future, we may be required to record a valuation allowance to impair our deferred tax assets.

This would harm our profitability in the future.

Historically the computation of our tax provision assumes that we will have sufficient profitability in the respective jurisdictions to continue to record deferred tax assets without a valuation allowance.

As of the period ended October 1, 2023, we determined that it was no longer more likely than not that we would have sufficient profitability to realize the U.S.

federal and state deferred tax assets.

Accordingly, we recorded a valuation allowance of $81.5 million to impair U.S.

federal and state deferred tax assets.

Future benefit of these deferred tax assets will be realized in the period they are utilized.

We are subject to, and must remain in compliance with, numerous laws and governmental regulations concerning the manufacturing, use, distribution and sale of our products, as well as any such future laws and regulations.

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The potential for liability under these laws can be difficult to predict as it often depends on a finding that the challenged conduct resulted in harm to competition, such as higher prices, restricted supply, or a reduction in the quality or variety of products available to consumers.

We utilize a number of different distribution channels to deliver our products to the end consumer, and regularly enter agreements with resellers of our products at various levels in the distribution chain that could be subject to scrutiny under these laws in the event of private litigation or an investigation by a governmental competition authority.

In addition, many of our products are sold to consumers via the Internet.

Many of the competition-related laws that

govern these Internet sales were adopted prior to the advent of the Internet, and, as a result, do not contemplate or address the unique issues raised by online sales.

Many of the competition-related laws that govern these Internet sales were adopted prior to the advent of the Internet, and, as a result, do not contemplate or address the unique issues raised by online sales.

New interpretations of existing laws and regulations, whether by courts or by the state, federal or foreign governmental authorities charged with the enforcement of those laws and regulations, may also impact our business in ways we are currently unable to predict.

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As a result, they may be able to compete more effectively than we can in the United States and the international Internet security market.

If our goodwill and intangible assets become impaired, as occurred in 2022, we may be required to record a significant charge to earnings.

If our goodwill and intangible assets become impaired, as occurred in 2022 and 2023, we may be required to record a significant charge to earnings.

Goodwill is required to be tested for impairment at least annually.

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Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit.

For example, during the first quarter of 2022, the market price of our common stock and market capitalization declined and the U.S.

For example, in 2022 and 2023, the market price of our common stock and market capitalization declined and the U.S.

WiFi market contracted, which had a significant negative impact on our Connected Home business.

As a result, we recognized an impairment charge to our Connected Home reporting unit in the first quarter of 2022.

We have not recognized any goodwill impairment charge on our SMB reporting unit.

As a result, we recognized a goodwill impairment charge in the first quarter of 2022 and an intangible impairment charge in the third quarter of 2023 to our Connected Home reporting unit.

We have not recognized any impairment charge on our SMB reporting unit.

However, we operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from actual results.

As a result, we may incur substantial impairment charges to earnings in our financial statements should an impairment of our goodwill and intangible assets be determined on our SMB reporting unit, resulting in an adverse impact on our results of operations.

As a result, we may incur substantial impairment charges to earnings in our financial statements should an impairment of our goodwill be determined on our SMB reporting unit, resulting in an adverse impact on our results of operations.

General Risk Factors

3 unchanged sentences

financial condition and the levels of business activity of our customers.

Weakness in, and uncertainty about, global economic conditions may cause businesses to postpone spending in response to tighter credit, negative financial news and/or declines in

income or asset values, which could have a material negative effect on the demand for networking products.

Weakness in, and uncertainty about, global economic conditions may cause businesses to postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for networking products.

Adverse changes in economic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could adversely impact the demand and sale of our products to end users and the quantity of products our customers decide to purchase from us (or change the mix of products demanded) and make it more challenging to forecast our operating results and make business decisions.

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

What changed 10-Q

Item 4. Controls and Procedures