Crexendo (CXDO) Risk Analysis

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Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

Crexendo disclosed 23 risk factors in its most recent earnings report. Crexendo reported the most risks in the “Finance & Corporate” category.

Risk Overview Q4, 2025

Risk Distribution

57% Finance & Corporate

13% Macro & Political

9% Tech & Innovation

9% Legal & Regulatory

9% Production

4% Ability to Sell

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

Crexendo Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q4, 2025

Main Risk Category

Finance & Corporate

With 13 Risks

Finance & Corporate

With 13 Risks

Number of Disclosed Risks

+22

From last report

S&P 500 Average: 31

+22

From last report

S&P 500 Average: 31

Recent Changes

21Risks added

0Risks removed

0Risks changed

Since Dec 2025

21Risks added

0Risks removed

0Risks changed

Since Dec 2025

Number of Risk Changed

No changes from last report

S&P 500 Average: 3

No changes from last report

S&P 500 Average: 3

See the risk highlights of Crexendo in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 23

Finance & Corporate

Total Risks: 13/23 (57%)Above Sector Average

Accounting & Financial Operations8 | 34.8%

Accounting & Financial Operations - Risk 1

Added

Operating Results of our Software Solutions Segment (in thousands)

Software Solutions 2025 2024 Software solutions revenue $29,664 $23,374 Operating expenses: Cost of software solutions revenue 8,275 6,793 Selling and marketing 5,323 4,974 General and administrative 6,907 5,273 Research and development 5,239 4,764 Total operating expenses 25,744 21,804 Income/(loss) from operations 3,920 1,570 Other income/(expense), net 65 (94)Income/(loss) before income tax $3,985 $1,476 44

Accounting & Financial Operations - Risk 2

Added

Quarterly Financial Information

For the three months ended March 31, June 30, September 30, December 31, Software Solutions 2025 2025 2025 2025 Software solutions revenue $6,868 $6,975 $7,521 $8,300 Operating expenses: Cost of software solutions revenue 1,490 1,813 1,924 3,048 Selling and marketing 1,437 1,290 1,307 1,289 General and administrative 1,581 1,627 1,852 1,847 Research and development 1,391 1,322 1,292 1,234 Total operating expenses 5,899 6,052 6,375 7,418 Income/(loss) from operations 969 923 1,146 882 Other income/(expense), net (16) 54 (6) 33 Income/(loss) before income tax $953 $977 $1,140 $915 For the three months ended March 31, June 30, September 30, December 31, Software Solutions 2024 2024 2024 2024 Software solutions revenue $5,146 $5,325 $5,860 $7,043 Operating expenses: Cost of software solutions revenue 1,392 1,445 1,686 2,270 Selling and marketing 1,231 1,150 1,245 1,348 General and administrative 1,138 1,200 1,417 1,518 Research and development 980 1,070 1,339 1,375 Total operating expenses 4,741 4,865 5,687 6,511 Income/(loss) from operations 405 460 173 532 Other income/(expense), net (17) (10) (5) (62)Income/(loss) before income tax $388 $450 $168 $470

Accounting & Financial Operations - Risk 3

Added

Software Solutions Revenue

Software solutions revenue consists primarily of software license fees, subscription maintenance and support, professional services, and annual user group meeting fees. Software licenses are billed by the number of concurrent sessions a customer has purchased or subscribes to. Subscription maintenance and support is ongoing and provides for software updates and improvements, support for add-on modules, bug fixes, and other general maintenance items. Professional services and other revenues consist of professional services such as the installation of software and integration of other modules, training and implementation as well as custom mobile branding. The following table reflects our service revenue for the year ended December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change Software solutions revenue $29,664 $23,374 $6,290 27% 45The increase in software solutions revenue is primarily related to an increase in recurring software license and maintenance and support subscriptions of $3,553, an increase in perpetual software license revenue of $2,667, and an increase in professional services and other revenue of $70.

Accounting & Financial Operations - Risk 4

Added

Other income/(expense)

Other income/(expense) primarily relates to net foreign exchange gains or losses and other income and expenses. The following table reflects our other income/(expense) for the year ended December 31, 2025, compared to the year ended December 31, 2024: 2025 2024 Dollar Change Percent Change Other income/(expense), net $65 $(94) $159 169%The change in other income/(expense) is primarily related to an increase in foreign exchange gains/(losses) of $111, an increase in other income of $37, and an increase in interest income of $11.

Accounting & Financial Operations - Risk 5

Added

Operating Activities

Cash provided by or used in operating activities is driven by our net income/(loss), adjustments to reconcile to net cash provided by or used in operating activities, the timing of customer collections, as well as the amount and timing of disbursements to our vendors, the amount of cash we invest in personnel, marketing, and infrastructure costs to support the anticipated growth of our business. The following table reflects our net cash provided by/(used in) operating activities for the year ended December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change Net cash provided by/(used in) operating activities $9,297 $6,284 $3,013 48% 47The net cash provided by operations for the year ended December 31, 2025 was primarily driven by our net income of $5,071, non-cash expenses for depreciation and amortization of $3,295, share-based compensation of $2,932, an increase in accounts payable and accrued expenses of $1,045 and an increase in contract liabilities of $164, offset by an increase in equipment financing receivables of $1,124, an increase in contract costs of $827, and an increase in trade receivables of $539.The net cash provided by operations for the year ended December 31, 2024 was primarily driven by non-cash expenses for depreciation and amortization of $3,331, share-based compensation of $3,028, our net income of $1,677, an increase in accounts payable and accrued expenses of $1,275, and an increase in contract liabilities of $784, offset by an increase in contract costs of $1,192, an increase in trade receivables of $876, an increase in equipment financing receivables of $822, an increase in prepaid expenses of $368, and an increase in other assets of $346 primarily related to the capitalization of professional service fees for our new accounting system of $234.

Accounting & Financial Operations - Risk 6

Added

Off balance sheet arrangements

As of December 31, 2025, we are not involved in any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Accounting & Financial Operations - Risk 7

Added

Recent Accounting Pronouncements

For a summary of recent accounting pronouncements and the anticipated effects on our consolidated financial statements, see Note 1 to the consolidated financial statements, which is incorporated by reference herein.

Accounting & Financial Operations - Risk 8

Added

Item 8. Financial statements and supplementary data

CREXENDO, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE PAGE Report of Independent Registered Public Accounting (Firm Auditor ID 1013) 51 Consolidated Balance Sheets as of December 31, 2025 and 2024 53 Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 54 Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2025 and 2024 55 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025 and 2024 56 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 57 Notes to Consolidated Financial Statements 58 Schedule II – Valuation and Qualifying Accounts 111 50Report of Independent Registered Public Accounting FirmStockholders and Board of DirectorsCrexendo, Inc. and SubsidiariesTempe, AZOpinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of Crexendo, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income/(loss), stockholders’ equity, and cash flows for the years then ended, and the related notes and financial statement schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.Revenue Recognition — Refer to Note 2 to the Consolidated Financial StatementsCritical Audit Matter DescriptionThe Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company offers customers the ability to acquire multiple licenses of products and services.Significant judgment is exercised by the Company in determining revenue recognition for certain customer agreements, and includes the following: ·Determination of whether products and services are considered distinct performance obligations that should be accounted for separately versus together, such as hard goods and related services that are sold with contracts. ·Determination of stand-alone selling prices for each distinct performance obligation and for products and services that are not sold separately. ·The pattern of delivery (i.e., timing of when revenue is recognized) for each distinct performance obligation.Recent Accounting PronouncementsFor a summary of recent accounting pronouncements and the anticipated effects on our consolidated financial statements, see Note 1 to the consolidated financial statements, which is incorporated by reference herein.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKSForeign Currency RiskFor all periods presented, our sales and operating expenses were predominately denominated in U.S. dollars. We therefore have not had material foreign currency risk associated with sales and cost-based activities. The functional currency of our material operating entities is the U.S. dollar.For the periods presented, we believe the exposure to foreign currency fluctuation from operating expenses is immaterial as the related costs do not constitute a significant portion of our total expenses. As we grow operations, our exposure to foreign currency risk may become more significant.Inflation RiskWe do not believe that inflation has had a material effect on our business, financial condition, or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. 49ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Debt & Financing3 | 13.0%

Debt & Financing - Risk 1

Added

Related party transactions

On November 1, 2022, the Company completed the acquisition of Allegiant Networks, LLC, a Kansas limited liability company (the “Allegiant Networks”) to acquire from Seller one hundred percent (100%) of the issued and outstanding shares of Allegiant Networks in exchange for (i) a cash payment at closing in the amount of $2.0 million, (ii) a three-year promissory note by the Company in favor of Seller in the amount of $1.1 million, and (iii) 2,461,538 shares of the Company’s common stock, par value $0.001 per share. In connection with this transaction, the seller Bryan Dancer, became a greater than five percent shareholder of the Company. Therefore, the three-year promissory note in the amount of $1.1 million, is considered a related party transaction. The loan agreement has a term of three (3) years with quarterly payments of Ninety-Eight Thousand Three Hundred Eighty-one Dollars ($98,381), including interest at 4.00%, beginning on April 1, 2024. As of December 31, 2025 and 2024, the outstanding balance of the related party note payable was $98 and $478, respectively. During the years ended December 31, 2025 and 2024, the Company paid principal of $380 and $365, respectively, and interest of $12 and $27, respectively.On February 1, 2024, the Company entered into a consulting agreement with Steven G. Mihaylo, Chairman Emeritus of the board of directors and a greater than five percent shareholder. In exchange for his consulting services, Mr. Mihaylo is to receive monthly consideration of $14 or $168 annually. During the years ended December 31, 2025 and 2024, the company paid $168 and $154, respectively.

Debt & Financing - Risk 2

Added

Other Income/(Expense)

Other income/(expense) primarily relates to interest income, interest expense, net foreign exchange gains or losses, gain on the sale of property and equipment, and credit card cash back rewards. The following table reflects our other income/(expense) for the year ended December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change Other income/(expense), net $616 $159 $457 287%The change in other income/(expense) is primarily from an increase in interest income of $435 and a decrease in interest expense of $23, offset by a decrease in other income of $1.

Debt & Financing - Risk 3

Added

Financing Activities

Cash provided by or used in financing activities is driven by the proceeds from the exercise of options, taxes paid on the net settlement of stock options and RSUs, payments of contingent consideration, proceeds from notes payable, repayments made on finance leases and notes payable, proceeds and repayments on line of credit, dividend payments, and proceeds from the issuance of common stock in connection with an offering. The following table reflects our net cash provided by financing activities for the year ended December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change Net cash provided by/(used in) financing activities $3,882 $1,595 $2,287 -143%Net cash provided by financing activities for the year ended December 31, 2025 primarily relates to cash received from the exercise of stock options of $4,870, offset by the payments of employee tax withholdings from the net settlement of stock options and RSUs of $489, repayments made on notes payable of $478, and repayments made on finance leases of $21.Net cash provided by financing activities for the year ended December 31, 2024 primarily relates to cash received from the exercise of stock options of $2,370, offset by repayments made on notes payable of $457, the payments of employee tax withholdings from the net settlement of stock options and RSUs of $243, and repayments made on finance leases of $75.

Corporate Activity and Growth2 | 8.7%

Corporate Activity and Growth - Risk 1

Added

Investing Activities

Cash provided by or used in investing activities is driven by the purchase of property and equipment, business combinations, and asset acquisitions. The following table reflects our net cash provided by/(used in) investing activities for the year ended December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change Net cash provided by/(used in) investing activities $(18) $(27) $9 -33%Net cash used in investing activities for the year ended December 31, 2025 primarily relates to the purchases of property and equipment of $18. Net cash used in investing activities for the year ended December 31, 2024 primarily relates to the purchases of property and equipment of $27.

Corporate Activity and Growth - Risk 2

Added

General and administrative expenses

General and administrative expenses consist of salaries, benefits, bonuses and share-based compensation for executives and administrative personnel, amortization of trademark, trade name, and capitalized software development costs intangible assets, legal, rent, equipment, accounting and other professional services, consulting fees and other administrative corporate expenses. The following table reflects our general and administrative expenses for the year ended December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change General and administrative $6,907 $5,273 $1,634 31% 46The increase in general and administrative expenses is primarily related to an increase in salaries, benefits, bonuses, share-based compensation, and headcount of $1,013, an increase in legal expenses of $266, an increase in the amortization of intangible assets of $119, an increase in professional service costs of $60, an increase in bank and merchant fees of $49, an increase in consulting fees of $42, an increase in accounting software costs of $32 associated with service contract fees for our new accounting system, and an increase in other general and administrative expenses of $53.

Macro & Political

Total Risks: 3/23 (13%)Above Sector Average

Economy & Political Environment2 | 8.7%

Economy & Political Environment - Risk 1

Added

43 General and Administrative

General and administrative expenses consist of salaries, benefits, bonuses and share-based compensation for executives, administrative personnel, legal, rent, equipment, accounting and other professional services, investor relations, depreciation, amortization of intangible assets, and other administrative corporate expenses. The following table reflects our general and administrative expenses for the year ended December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change General and administrative $7,816 $8,556 $(740) -9%The decrease in general and administrative expenses is primarily related to a decrease in executive and administrative salaries, benefits, bonuses, share-based compensation, and headcount of $508, a decrease in telecommunication annual taxes and fees of $138, a decrease in rent expense of $74, and a decrease in other general and administrative expenses of $20.

Economy & Political Environment - Risk 2

Added

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition, or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. 49

Capital Markets1 | 4.3%

Capital Markets - Risk 1

Added

Foreign Currency Risk

For all periods presented, our sales and operating expenses were predominately denominated in U.S. dollars. We therefore have not had material foreign currency risk associated with sales and cost-based activities. The functional currency of our material operating entities is the U.S. dollar.For the periods presented, we believe the exposure to foreign currency fluctuation from operating expenses is immaterial as the related costs do not constitute a significant portion of our total expenses. As we grow operations, our exposure to foreign currency risk may become more significant.

Tech & Innovation

Total Risks: 2/23 (9%)Below Sector Average

Innovation / R&D2 | 8.7%

Innovation / R&D - Risk 1

Added

Research and development expenses

Research and development expenses primarily consists of salaries, benefits, bonuses, share-based compensation, and outsourcing engineering services related to the development of our software solutions. The following table reflects our research and development expense for the year end December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change Research and development $5,239 $4,764 $475 10%The increase in research and development expenses is primarily related to an increase in salaries, benefits, bonuses, share-based compensation, and headcount of $344 due to the allocation of resources from the Cloud Telecommunications Services segment as we finalize the migration of our customers to the VIP platform, and an increase in outsourced engineering services expenses of $134, offset by a decrease in other research and development expenses of $3.

Innovation / R&D - Risk 2

Added

Research and Development

Research and development expenses primarily consist of salaries, benefits, bonuses, and share-based compensation, and outsourced engineering services related to the development of new cloud telecommunications features and products. The following table reflects our research and development expenses for the year ended December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change Research and development $481 $788 $(307) -39%The decrease in research and development expenses is primarily related to the allocation of engineering resources to our Software Solutions segment of $316, offset by an increase in other research and development expenses of $9.

Legal & Regulatory

Total Risks: 2/23 (9%)Below Sector Average

Regulation2 | 8.7%

Regulation - Risk 1

% The increase in selling and marketing expense is primarily related to an increase in commission expense of $592 directly related to the increase in revenue, an increase in salaries, benefits, bonuses, share-based compensation, and headcount of $355, an increase in marketing costs of $134, and an increase in other selling and marketing expenses of $44, offset by a decrease in bad debt related to a decrease in our credit loss reserve of $110 and a decrease in the amortization of customer relationship intangible assets of $131.

Regulation - Risk 2

Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. We finance our operations primarily through services, software solutions, and product sales to our customers. As of December 31, 2025 and 2024, we had cash and cash equivalents of $31,378 and $18,193, respectively. Changes in cash and cash equivalents are dependent upon changes in, among other things, working capital items such as contract liabilities, contract costs, accounts payable, accounts receivable, prepaid expenses, and various accrued expenses, as well as purchases of property and equipment, asset acquisitions, business combinations, and changes in our capital and financial structure due to debt repayments and issuances, stock option exercises, sales of equity investments and similar events. We believe that our operations along with existing liquidity sources will satisfy our cash requirements for at least the next 12 months.

Production

Total Risks: 2/23 (9%)Below Sector Average

Employment / Personnel1 | 4.3%

Employment / Personnel - Risk 1

Added

Remaining Performance Obligations

Remaining Performance Obligations (RPOs) represents the total contract value of all contracts signed, less revenue recognized from those contracts as of December 31, 2025 and 2024. RPOs decreased 6%, or $1,890 to $28,372 as of December 31, 2025 as compared to $30,262 as of December 31, 2024. Below is a table which displays the Software solutions segment remaining performance obligations as of December 31, 2025 and 2024, which we expect to recognize as revenue within the next thirty-six months (in thousands):Software solutions RPOs as of December 31, 2025 $28,372 Software solutions RPOs as of December 31, 2024 $30,262

Costs1 | 4.3%

Costs - Risk 1

Added

Cost of Software Solutions Revenue

Cost of software solutions revenue consists primarily of salaries, benefits, bonuses, and share-based compensation, amortization expense for developed technologies intangible assets, cost of data center hosting, third-party software, annual user group meeting costs, and outsourced services required to install and support software solutions. The following table reflects our cost of service revenue for the year ended December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change Cost of software solutions revenue $8,275 $6,793 $1,482 22% The increase in cost of software solutions revenue is primarily related to an increase in salaries, benefits, bonuses, share-based compensation, and headcount of $631, an increase in software costs of $310, an increase in third-party hosting service costs of $181, an increase in annual user group meeting expenses of $169, an increase in outsourced services of $169, and an increase in other cost of software solutions revenue of $22.

Ability to Sell

Total Risks: 1/23 (4%)Below Sector Average

Sales & Marketing1 | 4.3%

Sales & Marketing - Risk 1

Added

Selling and Marketing

Selling and marketing expenses consist primarily of sales and marketing salaries, benefits, bonuses, commissions, share-based compensation, travel expenses, lead generation services, trade shows, third-party marketing services, the production of marketing materials, annual user group meeting costs, and sales support software. The following table reflects our selling and marketing expenses for the year ended December 31, 2025, compared to the year ended December 31, 2024: Year Ended December 31, 2025 2024 Dollar Change Percent Change Selling and marketing $5,323 $4,974 $349 7%The increase in selling and marketing expense is primarily related to an increase in commission expense of $394 directly related to the increase in revenue, an increase in marketing materials and trade shows of $137, offset by a decrease in salaries, benefits, bonuses, and share-based compensation of $91 due to the allocation of marketing resources to the Cloud Telecommunications Services segment, a decrease in bad debt related to a decrease in our credit loss reserve of $50, and a decrease in other selling and marketing costs of $41.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.