Education
About Us
Working with TipRanks
Follow Us
Olaplex Holdings (OLPX)
NASDAQ:OLPX
Risk Overview Q4, 2025
Risk Distribution
35% Finance & Corporate
20% Legal & Regulatory
16% Ability to Sell
12% Tech & Innovation
12% Production
6% Macro & Political
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
Olaplex Holdings 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.
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 18 Risks
Finance & Corporate
With 18 Risks
Number of Disclosed Risks
51
+1
From last reportS&P 500 Average: 31
51
+1
From last reportS&P 500 Average: 31
Recent Changes
1Risks added
0Risks removed
2Risks changed
Since Dec 2025
1Risks added
0Risks removed
2Risks changed
Since Dec 2025
Number of Risk Changed
2
+2
From last reportS&P 500 Average: 3
2
+2
From last reportS&P 500 Average: 3
See the risk highlights of Olaplex Holdings 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 51
Finance & Corporate
Total Risks: 18/51 (35%)Above Sector Average
Share Price & Shareholder Rights7 | 13.7%
Share Price & Shareholder Rights - Risk 1
We are a "controlled company" within the meaning of the corporate governance standards of The Nasdaq Stock Market LLC ("Nasdaq"). As a result, we qualify for, and rely on, exemptions from certain corporate governance standards.Share Price & Shareholder Rights - Risk 2
Delaware law and provisions in our Certificate of Incorporation and second amended and restated bylaws could make a merger, tender offer or proxy contest more difficult, limit attempts by our stockholders to replace or remove our current management and depress the market price of our common stock.In addition to the Advent Funds' beneficial ownership of a substantial percentage of our common stock, provisions in our Certificate of Incorporation and second amended and restated bylaws (the "Bylaws") and Delaware law could make it harder for a third party to acquire us, even if doing so might be beneficial to our stockholders, and for stockholders to elect directors that are not nominated by the current members of our Board of Directors or take other corporate actions, including effecting changes in our management. These provisions include a classified board of directors and the ability of our Board of Directors to issue preferred stock without stockholder approval that could be used to dilute a potential hostile acquirer. Our Certificate of Incorporation also imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock other than the Advent Funds. As a result, stockholders may lose their ability to sell their stock for a price in excess of the prevailing market price due to these protective measures, and efforts by stockholders to change the direction or management of the company may be unsuccessful.
Share Price & Shareholder Rights - Risk 3
There may be sales of a substantial amount of our common stock, and these sales could cause the price of our common stock to fall.Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could cause the market price of our common stock to decline and could impair our ability to raise capital through the sale of additional equity securities.
As of December 31, 2025, the Advent Funds held 74.7% of our total shares outstanding. The Advent Funds may require us to register shares of our common stock held by them for resale under the federal securities laws. Any such sales or anticipation thereof, including the filing of a registration statement relating to such shares, could cause the market price of our common stock to decline.
In addition, as of December 31, 2025, we had options to purchase an aggregate of 9.7 million shares of common stock outstanding. We have filed Form S-8 registration statements to register shares that we may issue pursuant to our equity incentive plans, including all of the shares underlying options currently outstanding, which permit the resale of such shares by non-affiliates in the public market without restriction under the Securities Act and the sale by affiliates in the public market subject to compliance with the resale provisions of Rule 144.
Any sales by the Advent Funds, by Company insiders including directors or officers, or of shares issued upon the exercise of stock options could cause the market price of our common stock to decline, potentially substantially, depending upon the volume and timing of such sales. In addition, short sales or hedging transactions involving our equity securities, whether or not we believe them to be prohibited, could also adversely affect the price of our common stock.
Share Price & Shareholder Rights - Risk 4
Our restated certificate of incorporation provides that we will waive any interest or expectancy in corporate opportunities presented to the Advent Funds or members of our Board of Directors who are affiliated with the Advent Funds.Our restated certificate of incorporation (the "Certificate of Incorporation") provides that the Advent Funds and the members of our Board of Directors who are affiliated with the Advent Funds are not required to offer us any corporate opportunity of which they become aware and can take any such corporate opportunity for themselves or offer it to other companies in which they have an investment. We, by the terms of our Certificate of Incorporation, expressly renounce any interest or expectancy in any such corporate opportunity to the extent permitted under applicable law, even if the opportunity is one that we or our subsidiaries might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so. The Advent Funds may have interests that differ from our investors' interests. The Advent Funds are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us.
Share Price & Shareholder Rights - Risk 5
Investment funds affiliated with Advent International, L.P. (the "Advent Funds") beneficially own a significant percentage of our common stock and have significant influence over us.As of December 31, 2025, entities affiliated with the Advent Funds beneficially owned 74.7% of our outstanding common stock. In addition, three members of our Board of Directors are employed by affiliates of the Advent Funds. For as long as affiliates of the Advent Funds continue to beneficially own a substantial percentage of the voting power of our outstanding common stock, they will continue to have significant influence over us. For example, they will be able to strongly influence or effectively control the election of all of the members of our Board of Directors and our business and affairs, including any determinations with respect to mergers or other business combinations, the acquisition or disposition of assets, the incurrence of additional indebtedness, the issuance of any additional shares of common stock or other equity securities, the repurchase or redemption of shares of our common stock and the payment of dividends. This concentration of ownership may have the effect of deterring investment in our common stock and may reduce the trading volume of our public float.
Share Price & Shareholder Rights - Risk 6
Our stock price may be volatile, and the value of our stock may decline.An active or liquid market in our common stock may not be sustained, and in the absence of an active trading market for our common stock, investors may not be able to resell any shares they hold at or above the price at which they purchased their shares, or at all.
Volatility in the stock market in general impacts the volatility of the market price of our common stock. The price of our common stock could be subject to wide fluctuations in response to a number of factors, including factors described elsewhere in this Annual Report, many of which are beyond our control or unrelated to our specific performance or prospects, and investors in our common stock may experience a decrease, which could be substantial, in the value of their stock and could lose part or all of their investment.
Furthermore, the market price of our common stock may also decline if we fail to meet analysts' projections or guidance that we give to the market. Securities class action litigation has often been initiated against companies following periods of volatility in their stock price or substantial declines following a company's failure to meet guidance or estimates, as has been the case with us. In November 2022, a putative securities class action was filed against us and certain of our current and former officers and directors. For more information, see "Legal Proceedings" included in Part I, Item 3 of this Annual Report. While the court approved a settlement of this matter in December 2025, derivative litigation and other similar types of litigation could result in substantial costs and divert our management's attention and resources and could require us to make a substantial payment to satisfy judgments or to settle such litigation.
Share Price & Shareholder Rights - Risk 7
Our Certificate of Incorporation designates specific courts as the sole and exclusive forum for certain claims or causes of action that may be brought by our stockholders, which could discourage lawsuits against us and our directors and officers.Our Certificate of Incorporation provides that (A), subject to limited exceptions, the Court of Chancery of the State of Delaware (or, if, and only if, the Court of Chancery of the State of Delaware dismisses a covered claim for lack of subject matter jurisdiction, any other state or federal court in the State of Delaware that does have subject matter jurisdiction) will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for the following types of claims: (i) any derivative claim brought in the right of the Company, (ii) any claim asserting a breach of a fiduciary duty to the Company or the Company's stockholders owed by any current or former director, officer or other employee or stockholder of the Company, (iii) any claim against the Company arising pursuant to any provision of the Delaware General Corporation Law, our Certificate of Incorporation or Bylaws, (iv) any claim to interpret, apply, enforce or determine the validity of our Certificate of Incorporation or our Bylaws, (v) any claim against the Company governed by the internal affairs doctrine, and (vi) any other claim, not subject to exclusive federal jurisdiction and not asserting a cause of action arising under the Securities Act, brought in any action asserting one or more of the claims specified in clauses (A)(i) through (v) herein above; and (B) the federal district courts of the U.S. will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. This provision would not apply to claims brought to enforce a duty or liability created by the Exchange Act.
Any person or entity purchasing or otherwise acquiring any interest in the shares of capital stock of the Company will be deemed to have notice of and consented to these choice of forum provisions and waived any argument relating to the inconvenience of the forums.
The choice of forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provisions contained in our Certificate of Incorporation to be inapplicable or unenforceable in respect to an action brought against us, we may incur additional costs associated with resolving such action in such other jurisdictions.
Accounting & Financial Operations6 | 11.8%
Accounting & Financial Operations - Risk 1
We do not intend to pay dividends for the foreseeable future.Accounting & Financial Operations - Risk 2
Because our operations are conducted through our subsidiaries, we are dependent on the receipt of distributions and dividends or other payments from our subsidiaries for cash to fund our operations and expenses, including payments under the Tax Receivable Agreement and future dividend payments, if any.Our operations are conducted through our subsidiaries. As a result, our ability to make payments under our Tax Receivable Agreement and future dividend payments, if any, is dependent on the earnings of our subsidiaries and the payment of those earnings to us in the form of dividends, loans or advances and through repayment of loans or advances from us. Payments to us by our subsidiaries will be contingent upon our subsidiaries' earnings and other business considerations and may be subject to statutory or contractual restrictions. We do not expect to declare or pay dividends on our common stock for the foreseeable future; however, if we determine in the future to pay dividends on our common stock, the agreements governing our outstanding indebtedness significantly restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us.
Accounting & Financial Operations - Risk 3
Impairment of our goodwill and other intangible assets would result in a reduction in net income.We have a significant amount of goodwill, trademarks and other intangible assets, as well as other long-lived assets, on our consolidated balance sheet, which are periodically evaluated for impairment in accordance with current accounting standards. Under generally accepted accounting principles, long-lived assets are required to be reviewed for impairment whenever adverse events or changes in circumstances indicate a possible impairment. Events and circumstances that could lead to an impairment charge include macroeconomic industry and market conditions, significant adverse shifts in our operating environment or the manner in which an asset is used, pending litigation or other regulatory matters, decline in our stock price, higher cost of capital, declines in actual and expected consumer consumption and demands, and current or forecasted reductions in net sales, operating income or cash flows associated with the use of an asset. Impairment charges reduce net income and can have an adverse effect on our business, results of operations or financial condition.
For additional information regarding goodwill and other intangible assets, see Note 2, "Summary of Significant Accounting Policies-Goodwill" and Note 7, "Goodwill and Intangible Assets," to the Consolidated Financial Statements included herein. For a further discussion of our impairment testing, please refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates-Goodwill".
Accounting & Financial Operations - Risk 4
Our quarterly results of operations may fluctuate, and if our operating and financial performance in any given period does not meet the guidance that we have provided to the public or the expectations of our investors and securities analysts, the trading price of our common stock may decline.Our quarterly results of operations may fluctuate for a variety of reasons, including those described elsewhere in this "Risk Factors" section, many of which are beyond our control. Our quarterly results may fall below the guidance that we have provided to the public or the expectations of our investors and securities analysts, which has caused and, in the future, may cause us to reissue our guidance or the trading price of our common stock to decline. In addition, our quarterly results of operations have varied historically, and they may vary in the future. Therefore, period-to-period comparisons of our results of operations may not be meaningful. Investors should not rely on the results of one quarter as an indication of future performance.
Accounting & Financial Operations - Risk 5
Our ability to use our net operating loss carry-forwards and certain other tax attributes may be limited.Added
We have incurred U.S. federal and state tax losses in 2025 and 2024. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any. Under the Tax Cuts and Jobs Act, enacted in 2017, unused U.S. federal net operating losses generated in tax years beginning after December 31, 2017 do not expire and may be carried forward indefinitely, but the deductibility of such federal net operating loss carryforwards in taxable years beginning after December 31, 2020 is limited to 80% of taxable income. In addition, our ability to utilize any federal net operating loss carryforwards may be limited under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended, which provide that if a corporation undergoes an "ownership change," generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation's ability to use its pre-change net operating loss carry-forwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carry-forwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
Accounting & Financial Operations - Risk 6
If we fail to maintain effective internal control over financial reporting and effective disclosure controls and procedures, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in the Company.Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting in each annual report on Form 10-K. This assessment includes disclosure of any material weakness identified by our management or our independent registered public accounting firm in our internal control over financial reporting. In addition, we are required to comply with the SEC's rules implementing Section 302 of the Sarbanes-Oxley Act, which requires management to certify financial and other information in our quarterly and annual reports, and we are required to disclose significant changes made in our internal control over financial reporting on a quarterly basis. To comply with these requirements, we may need to undertake various actions and to develop, implement and test additional processes and other controls. Testing and maintaining internal controls can divert our management's attention from other matters related to the operation of our business.
If we fail to maintain proper and effective internal controls, or are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting in future periods, our ability to produce accurate and timely financial statements could be impaired and investors may lose confidence in the accuracy and completeness of our financial reports, which could harm our operating results, harm our ability to operate our business and reduce the trading price of our stock.
Debt & Financing3 | 5.9%
Debt & Financing - Risk 1
The terms of our indebtedness restrict our current and future operations, particularly our ability to respond to change or to take certain actions.Debt & Financing - Risk 2
We may be unable to generate sufficient cash flow to service our debt obligations.Our business may not generate sufficient cash flow from operating activities to service our debt obligations. Our ability to make payments on and to refinance our debt and to fund planned capital expenditures depends on our ability to generate cash in the future. To some extent, this is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.
If we are unable to generate sufficient cash flow from operations to service our debt and meet our other commitments, including under the Tax Receivable Agreement, we may need to refinance all or a portion of our debt or raise additional debt or equity capital. We may not be able to affect any of these actions on a timely basis, on commercially reasonable terms or at all, and these actions may not be sufficient to meet our debt service and Tax Receivable Agreement requirements. If we incur additional debt or raise equity through the issuance of capital stock, the terms of the debt or capital stock issued may give the holders rights, preferences and privileges senior to those of holders of our common stock, particularly in the event of liquidation. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of holders of our common stock will be diluted. To the extent that we raise additional debt, the terms of the debt may also impose additional and more stringent restrictions on our operations than we currently have, which may adversely affect our business, financial condition and results of operations. Unfavorable changes in the ratings that rating agencies assign to our debt, including any additional debt, may negatively impact our access to the debt capital markets and increase the costs we incur to borrow funds. If we are unable to raise additional capital when needed, our financial condition could be adversely affected.
Debt & Financing - Risk 3
Our significant indebtedness could adversely affect our financial condition.Our significant indebtedness, when combined with our other financial obligations and contractual commitments, could have important consequences, including:
- requiring us to dedicate a significant portion of our cash flows from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, selling and marketing efforts, product development and other purposes;- increasing our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have relatively less indebtedness;- limiting our flexibility in planning for, or reacting to, changes in our business and industry;- increasing our exposure to rising interest rates because certain of our borrowings are at variable interest rates;- restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; and - limiting our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, product development and other purposes.
The agreements relating to our indebtedness limit but do not prohibit our ability to incur additional debt. We may increase our levels of debt in the future to finance our operations or in connection with acquisitions. If we increase our total indebtedness, our debt service obligations will increase, and we will become more exposed to the risks arising from our substantial level of indebtedness as we become more leveraged.
Corporate Activity and Growth2 | 3.9%
Corporate Activity and Growth - Risk 1
Acquisitions, joint ventures or strategic investments may expose us to additional risks.Corporate Activity and Growth - Risk 2
Our success depends, in part, on the effectiveness and successful implementation of our business transformation plan.Our future growth and revenue depend upon the effectiveness and successful implementation of our business transformation plan, including our strategic priorities. Our transformation plan has resulted in and is expected to continue to result in changes to business priorities and operations, marketing and brand strategies, capital allocation priorities, and operational and organizational infrastructure, as well as increased demands on management. Achieving our transformation plan may require investment in new capabilities, product innovation, talent, third party service providers, infrastructure, information technology and markets, as well as in efforts to enhance our brand, our presence among the Pro community and our market penetration. These investments may result in short-term costs without associated current sales and, therefore, may be dilutive to our earnings, and such investments may not be successful. Further, such transformation initiatives, including investments, may result in higher than expected costs, loss of customers, reduced sales volume, loss of key personnel, and other negative impacts on our business. Implementation of our transformation plan may take longer than anticipated. The failure to realize anticipated benefits of our business transformation plan or any delay in realizing such benefits, which may be due to our inability to execute plans, delays in the implementation of our plans, the failure to achieve efficiency and scalability in our processes or infrastructure, global or local economic conditions, regulatory changes, competition, changes in the beauty industry or in consumer preferences, or the other risks described herein, could have an adverse effect on our business, financial condition and results of operations. Our work to reset our international distribution network has caused recent volatility in certain channels and geographies, and we may not achieve the expected benefits of our global strategy in the timeframe we anticipate, if at all. Our investments in sales and marketing, our brand marketing strategy and our innovation strategy may not result in increased consumer demand or revenue. In addition, we need to continue to attract, develop and retain qualified executives and employees to successfully implement our transformation plan. We have experienced employee turnover as we have worked to implement the initiatives we believe are required to achieve our strategic objectives. We may not be able to successfully retain and develop existing talent and identify, hire and integrate new talent, which may result in weaknesses in our infrastructure and operations, risks that we may not be able to comply with legal and regulatory requirements, and loss of employees and reduced productivity among remaining employees.
Our growth has in the past, and may in the future, strain our ability to effectively manage our operations, as it may require us to expand or enhance our management team and our sales, marketing, innovation, and information technology capabilities, including with respect to new or advancing technologies such as artificial intelligence ("AI"). Our growth initiatives may also result in expanded reliance on the capabilities of our third-party supply chain partners, including our contract manufacturers, raw material and component suppliers, and distribution and logistics partners. We may be unable to achieve our strategic priorities if we do not have the right level of efficiency and scalability in our processes and operations to manage the increased complexity of our business. For example, our efforts to refresh the visual identity of our packaging across our product portfolio alongside our continuing efforts to enhance our innovation pipeline creates operational complexities for us and our third-party supply chain partners. Ineffective execution of our packaging refreshment and innovation initiatives by us or our third-party partners may result in increased costs, product delays or shortages, lost sales or reputational harm and may divert the attention of management, our employees and our third-party partners, which could adversely impact our business and financial results. Ineffective execution to support growth could result in, among other things, product quality concerns, product delays or shortages, damage to our relationships with our customers or consumers, operating errors, outages, inadequate customer service, reputational harm, inappropriate claims or promotions by our marketing team or brand representatives, or governmental inquires and investigations, any of which could harm our revenue and ability to generate sustained growth or result in unanticipated expenses. Expansion into new international markets or within existing markets may create operating difficulties in managing our business across numerous jurisdictions and ultimately may not be successful, which could result in slower revenue growth, higher operating costs and lower margins than anticipated and could impair our ability to enter into additional new markets or attract new customers.
Legal & Regulatory
Total Risks: 10/51 (20%)Above Sector Average
Regulation3 | 5.9%
Regulation - Risk 1
Our business is subject to federal, state and international laws, regulations and policies that could have an adverse effect on our business, prospects, results of operations, financial condition and cash flows.Regulation - Risk 2
If our products are not manufactured in compliance with applicable regulations, do not meet quality standards or otherwise result in adverse health effects in consumers, we could be subject to reputational harm, remediation costs or regulatory enforcement.We rely on third parties to manufacture our products in compliance with applicable law and other quality standards, including the FDA's recommendations for cosmetic GMPs. Compliance with these standards can increase the cost of manufacturing our products as we work with our vendors to ensure they are qualified and in compliance. If we or our contract manufacturers fail to comply with these standards, it could lead to customer complaints, adverse events, product withdrawal or recall or increase the likelihood that our products are adulterated or misbranded, any of which could result in negative publicity, legal proceedings, remediation costs or regulatory enforcement that could impact our ability to continue selling certain products. Problems associated with product recalls could be exacerbated due to the global nature of our business because a recall in one jurisdiction could lead to recalls in other jurisdictions.
Regulation - Risk 3
Government regulations relating to the marketing and advertising of our products may restrict, inhibit or delay our ability to sell our products and harm our business.A variety of federal, state and foreign government authorities regulate the advertising and promotion of our products and the marketing claims we can make regarding their properties and benefits, including in the U.S., the FDA, the FTC and state consumer protection agencies. These regulations can apply not only to our actions and statements and those of our employees, but also to those of our brand ambassadors and influencers. There is a degree of subjectivity in determining whether a labeling or marketing claim is appropriate under applicable standards, and government agencies could take enforcement action against us for our advertising and promotion practices or determine that the research and development efforts we undertake to support our claims are inadequate for any particular product or claim, which could require us to modify our product claims or result in fines. We have received, and in the future may receive, complaints regarding our marketing claims, and we have been, and may in the future be, subject to class action or false or misleading advertising lawsuits with respect to our marketing claims. Any government inquiry into the regulatory status of our products and any related interruption in the marketing and sales of our products or any lawsuit related to our marketing claims could damage our reputation and brand and have an adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Litigation & Legal Liabilities3 | 5.9%
Litigation & Legal Liabilities - Risk 1
Government reviews, inquiries, investigations and actions could harm our business.Litigation & Legal Liabilities - Risk 2
We may be liable for the failure of our PEOs to comply with their obligations under applicable law.We utilize the services of PEOs to support certain of our employment and employee benefits functions. Under the terms of our arrangements, the PEOs are the employer of record for our personnel and, depending on the jurisdiction, may be responsible for administering payroll, including tax withholding, and providing health insurance or other employee benefits to our employees. If any of our PEOs fails to comply with applicable laws or its obligations under its agreement with us, we could be liable for such violations. The indemnification provisions of our agreements with the PEOs, if applicable, may not be sufficient to insulate us from those liabilities. For example, we could, under certain circumstances, be held liable for a failure by any of our PEOs to pay employer-side taxes arising from payments to our employees or a failure by a PEO to withhold and remit employee-side taxes arising from such payments. We also could, under certain circumstances, be held liable for a failure by a PEO to appropriately pay our employees. In such a case, our potential liability could be significant and adversely affect our business. Furthermore, if any of our PEOs does not efficiently administer our employee benefits, our relationship with our employees could be damaged.
Litigation & Legal Liabilities - Risk 3
Disputes and other legal or regulatory proceedings could adversely affect our financial results.From time to time, we may become involved in litigation, other disputes or regulatory proceedings in connection with or incidental to our business, including litigation related to intellectual property, regulatory matters, contract, advertising, product-related and other consumer claims. In general, claims made by us or against us in litigation, disputes or other proceedings can be expensive and time consuming to bring or defend against and could result in settlements, injunctions or damages that could significantly affect our business. It is not possible to predict the final resolution of the litigation, disputes or proceedings to which we currently are or may in the future become party to. Regardless of the final resolution, such proceedings may have an adverse effect on our reputation, brand, financial condition and business, including by utilizing our resources and potentially diverting the attention of our management from the operation of our business. See "Legal Proceedings" included in Part I, Item 3 of this Annual Report. Our insurance policies may not cover any or all of the financial losses resulting from any such disruptions and the broader damage to our reputation that such disruptions may cause.
Taxation & Government Incentives2 | 3.9%
Taxation & Government Incentives - Risk 1
We could be subject to changes in our tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities, which could have a material and adverse effect on our operating results, cash flows and financial condition.Taxation & Government Incentives - Risk 2
The Tax Receivable Agreement with our Pre-IPO Stockholders requires us to make cash payments to them and exposes us to certain risks.In connection with the IPO, we entered into a Tax Receivable Agreement, under which generally we are required to pay to our Pre-IPO Stockholders 85% of the amount of cash savings, if any, in U.S. federal, state or local income tax that we or our subsidiaries realize (or are deemed to realize in certain circumstances) as a result of the utilization of the Pre-IPO Tax Assets (as defined herein) and the making of payments under the Tax Receivable Agreement. If we did not enter into the Tax Receivable Agreement, we would be entitled to realize the full economic benefit of the Pre-IPO Tax Assets. Consequently, stockholders other than the Pre-IPO Stockholders will only be entitled to the economic benefit of the Pre-IPO Tax Assets to the extent of our continuing 15% interest in those assets.
These payment obligations are our obligations and not obligations of any of our subsidiaries and are not conditioned upon the Pre-IPO Stockholders maintaining a continued direct or indirect ownership interest in us. While many of the factors that will determine the amount of payments that we will make under the Tax Receivable Agreement are outside of our control, we expect that the payments we will make under the Tax Receivable Agreement will be substantial. We currently expect that future payments under the Tax Receivable Agreement relating to the Pre-IPO Tax Assets could aggregate to $165.1 million, with payments expected to continue through 2038. Our payment obligations under the Tax Receivable Agreement are calculated based on current tax laws and the assumption that we and our subsidiaries earn sufficient taxable income to realize the full tax benefits subject to the Tax Receivable Agreement. Updates to our blended state tax rate, allocation of U.S. versus foreign sourced income and changes in U.S tax rules may significantly impact our payment obligations under the Tax Receivable Agreement and any changes to our established tax liability resulting from such impact would be recorded to other (expense) income in the period we made the determination.
In addition, we are subject to a number of additional risks pursuant to our obligations under the Tax Receivable Agreement, including: additional tax benefits arising from the Tax Receivable Agreement may result in higher amounts due under the agreement; payments under the Tax Receivable Agreement may exceed tax savings that we realize; certain transactions could cause us to recognize taxable income without a receipt of cash even though we would still be required to make payments under the Tax Receivable Agreement; Pre-IPO Stockholders may have interests that differ from or are in addition to those of our other stockholders; our payment obligations would accelerate upon the occurrence of certain events; and our obligations under the Tax Receivable Agreement could deter a potential acquirer of the Company from seeking such an acquisition. Further, because we are a holding company, our ability to make payments under the Tax Receivable Agreement is dependent on the ability of our subsidiaries to make distributions to us, and we may be unable to timely make payments under the Tax Receivable Agreement due to limitations on distributions under the terms of the 2022 Credit Agreement to which one or more of our subsidiaries are a party. These risks, if realized, could have a material adverse effect on our financial condition.
The Tax Receivable Agreement is filed as exhibit 10.3 to the Annual Report filed on Form 10-K for the fiscal year ended December 31, 2021 as filed with the Securities and Exchange Commission on March 8, 2022. The foregoing description of the Tax Receivable Agreement is qualified by reference thereto.
Environmental / Social2 | 3.9%
Environmental / Social - Risk 1
Our business could be negatively impacted by corporate citizenship and sustainability matters.Environmental / Social - Risk 2
Our processing of personal information could give rise to significant costs and liabilities, which may have an adverse effect on our reputation, business, financial condition and results of operations.Evolving state, federal and foreign laws, regulations and industry standards regarding privacy and security apply to our collection, use, retention, protection, disclosure, transfer and other processing of certain types of data, including with respect to our customers, employees, suppliers and others. For example, the E.U.'s General Data Protection Regulation ("GDPR"), as well as the U.K. GDPR and the U.K. Data Protection Act 2018, impose a strict data protection compliance regime and potentially substantial fines for breaches and violations. In the U.S., there are many privacy, security and data breach notification laws or regulations at the federal, state and local levels. These laws, regulations and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction. Ensuring compliance with these evolving obligations may require additional investment in processes, systems, and personnel. Our inability to comply with such mandates or to quickly adapt our practices to reflect them as they develop could subject us to significant fines, penalties, damages, liabilities and reputational harm, which could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Ability to Sell
Total Risks: 8/51 (16%)Below Sector Average
Competition1 | 2.0%
Competition - Risk 1
The beauty industry is highly competitive, and if we are unable to compete effectively, our business, financial condition and results of operations could be adversely affected.Demand4 | 7.8%
Demand - Risk 1
We depend on a limited number of customers for a large portion of our net sales.Demand - Risk 2
If we are unable to anticipate and respond to market trends and changes in consumer preferences and successfully introduce new, innovative and high-quality products, our financial results could be adversely affected.Our continued success depends on our ability to anticipate, gauge and react in a timely, effective manner to market trends, changes in consumer preferences for prestige haircare and other beauty products, and attitudes toward our industry and brand. We must continually work to timely develop, manufacture and market new products that are relevant to consumer preferences; anticipate and respond to market trends by developing or acquiring novel technology; maintain and enhance the recognition and reputation of our brand; successfully manage our inventories; and maintain and adapt to existing and emerging distribution channels and marketing platforms. Our new products and innovations on existing products may not receive the same level of consumer acceptance or margin profile as our products have in the past. In addition, from time to time, consumers may prioritize spending in other categories of prestige beauty products in which we do not participate, such as skincare or color cosmetics, which may negatively impact growth in the prestige haircare category and decrease demand for our products. These risks have been and may continue to be exacerbated by the current macroeconomic environment, which has led to shifts in consumer spending habits, confidence and sentiment.
Consumer tastes and preferences cannot be predicted with certainty and can change rapidly. The use of digital and social media by consumers and the speed by which information and opinions are shared increases this risk. Even if we are successful in anticipating consumer needs and preferences, our ability to timely and adequately respond to those needs and preferences will in part depend upon our continued ability to develop and introduce innovative, high-quality products while maintaining our distinctive brand identity as we expand the range of products we offer. The acceptance of new product launches and other product innovations may not be as high as we anticipate due to factors including lack of acceptance of the products themselves, the price of the products or the strengths of our competitors, including their ability to quickly introduce similar products or market their products as lower cost versions of our products. In addition, our ability to launch new products would be limited by delays or difficulties affecting the ability of our suppliers or manufacturers to procure raw materials, comply with quality standards and timely manufacture, distribute and ship new products or displays for new products, including as a result of regulations in the relevant jurisdictions. Sales of new products are affected by our ability to execute our marketing strategies, inventory management by our retail customers, and product shortages or limitations in retail display space by our retail customers. We may also experience a decrease in sales of existing products as a result of newly launched products, the impact of which could be exacerbated by shelf space limitations or any shelf space loss. Any of these occurrences could delay or impede our ability to achieve our sales objectives, which could have a material adverse effect on our business, financial condition and results of operations. Further, new product innovation may place a strain on our employees and our financial resources, including incurring expenses in connection with product innovation, development and marketing that are not subsequently supported by a sufficient level of sales.
As part of our ongoing business strategy, we may continue to expand our product launches into adjacent categories in haircare and other categories. The success of such product launches could be hampered by our relative inexperience operating in such categories, the strength of our competitors in such categories or any of the other risks described elsewhere in this "Risk Factors" section. Our failure to effectively respond to changing consumer preferences and market trends or to effectively introduce new products in our traditional product categories, new products in adjacent or other categories or innovations on existing products could lead to, among other things, lower sales, excess inventory or inventory shortages, markdowns and write-offs and diminished brand loyalty, and our business, financial condition and results of operations could suffer.
Demand - Risk 3
Our business is affected by seasonality.Our business has historically been influenced by seasonal trends common to traditional retail selling periods, and our revenues are typically slightly higher in the second half of the fiscal year due to increased levels of purchasing by consumers and by our customers for the end of year holiday selling season. Higher sales during the third and fourth quarters may cause our working capital needs to be greater during the second and third quarters of the fiscal year. However, fluctuations in net sales in any fiscal quarter may be attributable to a number of other factors, including macroeconomic factors, competitive activity, the level and scope of new product introductions or promotional and planning activities undertaken by us or our customers, which may impact the timing of purchases or order placement. As a result of quarterly fluctuations caused by these and other factors, comparisons of our historical operating results across different fiscal quarters may not be accurate indicators of our future performance.
Demand - Risk 4
If we are unable to accurately forecast customer and consumer demand, manage our inventory and plan for future expenses, our results of operations could be adversely affected.While we devote significant attention to forecasting efforts, the volume, timing, value and type of the orders we receive are inherently uncertain. Historical growth rates, trends and other key performance metrics may not predict future demand or growth. Our business and our ability to forecast demand is affected by, among other things, general economic and business conditions in the U.S. and in our international markets, public and consumer preferences, changes in buying patterns of retailers and consumers, customer confidence in future economic conditions, inventory management of customers, and competition in the beauty industry and the actions of our competitors. A portion of our expenses are fixed and cannot be adjusted even during periods when revenue is unexpectedly lower, which leads to lower profits. Any failure to accurately predict demand for our products or expenses could cause our operating results to be lower than expected, which could adversely affect our financial condition.
We base our current and future inventory needs and expense levels on our operating forecasts, forecasts of expected future purchasing activity from certain of our customers and our own estimates of future demand. Failure to accurately forecast demand for new or existing products has resulted in, and may in the future result in, inefficient or excess inventory supply or increased costs. Inventory levels in excess of customer demand has resulted in inventory write-downs or write-offs and may result in the sale of excess inventory at discounted prices, which would cause our gross margins to suffer and could impair the strength and prestige nature of our brand. Further, lower than forecasted demand may result in excess manufacturing capacity, increased inventory storage expenses and reduced manufacturing efficiencies, which would result in lower margins. Conversely, if we underestimate customer demand, our manufacturers and suppliers may not be able to deliver products to meet our requirements, and we may incur higher costs in order to secure the necessary production capacity or additional or expedited shipping. An inability to meet customer demand could result in reputational harm and damaged customer relationships and have an adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Sales & Marketing2 | 3.9%
Sales & Marketing - Risk 1
The illegal distribution and sale by third parties of counterfeit versions of our products or the unauthorized diversion by third parties of our products could have an adverse effect on our net sales and a negative impact on our reputation and business.Sales & Marketing - Risk 2
We may be affected by shifts in distribution channels, changes in consumer shopping preferences, and changes in the salon and retail environments.Changed
We must continually work to maintain and adapt our selling, advertising, promotional and other consumer engagement activities to existing and emerging distribution channels. From time to time, evolutions in our distribution channels may impact our financial performance, and our financial performance in certain of our distribution channels may fluctuate relative to other distribution channels. For example, our international sales strategy may prioritize certain distribution channels based on the market dynamics in a particular jurisdiction, which may impact other distribution channels in such geographies. Further, changes in ordering patterns by our customers in certain channels, such as industry destocking, may impact our quarterly results. If one or more of our distribution channels fails to perform as expected, there could be an adverse effect on our business. Fluctuations in our distribution channels may have a greater impact on us than on companies that sell their products under multiple brands or that have larger product portfolios across different channels.
Our professional channel is impacted by decreased consumer demand for salon treatments and changes to the salon environment, and our Pro customers have limited their product supply when demand for salon treatments has decreased. In addition, our professional channel depends on our engagement with Pros and our reputation and brand image within the Pro community. Negative perceptions of our brand by the Pro community and their end consumers have had in the past, and may in the future have, an adverse effect on our professional channel. Further, there may be consolidation of the salon market. If consolidation leads to customers gaining purchasing power, we may need to reduce the cost of our products, which would have an impact on our earnings. Consolidation among our customers may also increase the risk of customer concentration.
In addition, consumer preferences have and may continue to shift with respect to retail traffic in brick and mortar stores. Further, any consolidation or liquidation in the retail trade may result in us becoming increasingly dependent on key retailers, could reduce our brand visibility and shelf space and could result in an increased risk related to the concentration of our customers. A severe, adverse impact on the business operations of our customers could have a corresponding material adverse effect on us.
Brand / Reputation1 | 2.0%
Brand / Reputation - Risk 1
Our brand is critical to our success. If we fail to maintain the value of our brand or our marketing efforts are not successful, our business, financial condition and results of operations would be adversely affected.Tech & Innovation
Total Risks: 6/51 (12%)Above Sector Average
Trade Secrets4 | 7.8%
Trade Secrets - Risk 1
We may be subject to claims that our employees, contractors, collaborators, vendors, consultants or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.Trade Secrets - Risk 2
Third parties may allege that we are infringing, misappropriating or otherwise violating their intellectual property rights, which could involve substantial costs and adversely impact our business.Third parties have alleged, and in the future may allege, that our products infringe, misappropriate or otherwise violate their intellectual property rights, and we may become involved in litigation or other disputes relating to intellectual property used in our business. Any such claims, even those without merit, can be expensive and time-consuming to defend and may divert management's attention and resources, and an adverse result in any proceeding could put our ability to produce and sell our products in jeopardy. We may be required to expend significant amounts of resources to defend against claims of infringement, pay significant money damages, cease using certain processes, technologies, or other intellectual property, cease making, offering and selling certain products, obtain a license (which may not be available on commercially reasonable terms or at all) or redesign our brand, our products or our packaging, which could be costly and time-consuming.
In addition, we may be unaware of third-party intellectual property that covers or otherwise relates to some or all of our products. Because of technological changes in our industry, current patent coverage and the rapid rate of issuance of new patents, our current or future products may unknowingly infringe, misappropriate or otherwise violate existing, pending or future patents or intellectual property rights of other parties.
The defense costs and settlements for intellectual property infringement lawsuits may not be covered by insurance, and such lawsuits can take years to resolve. Even if resolved in our favor, the volume of intellectual property-related claims and the mere specter of threatened litigation or other legal proceedings may cause us to incur significant expenses and could distract our personnel from day-to-day responsibilities. The direct and indirect costs of addressing these actual and threatened disputes may have an adverse effect on our operations, reputation and financial performance.
Trade Secrets - Risk 3
Our efforts to enforce and otherwise protect our intellectual property against infringers may not be successful.Enforcing our intellectual property rights can be expensive and time-consuming, and an adverse result in any proceeding could put our intellectual property rights at risk of being invalidated or narrowed in scope of coverage. In addition, our ability to enforce our intellectual property rights depends on our ability to detect infringement, and it is difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor's or potential competitor's product. We may not prevail in any disputes that we initiate, and the damages or other remedies awarded, if we were to prevail, may not be commercially meaningful.
Competitors or other third parties have in the past, and may in the future, adopt trade names, trade dress (including packaging designs and label designs), design patents or industrial designs, trademarks or domain names that are confusingly similar to ours. These competitors or third parties may also market certain of their brands or products as a purported replacement or "dupe" of our brand or products, thereby impeding our ability to build brand identity, possibly leading to market confusion and potentially requiring us to pursue legal action. Our efforts to enforce or protect our trademarks, trade names and domain names may be ineffective, may impact the public perception of our brand, may be expensive, may divert our resources and, if a third party brings counterclaims against us in connection with such enforcement actions, could result in payment by us of monetary damages or injunctive relief, all of which could adversely impact our financial condition or results of operations.
Trade Secrets - Risk 4
Our efforts to register and maintain our intellectual property rights may not be sufficient to protect our business.Our patents and trademarks are essential to our business. Though we seek to register our intellectual property by filing for patents, patent applications and trademark registrations and applications, we may not be issued any registration, or our registration may be challenged or invalidated. In addition, differences in foreign trademark, patent and other laws concerning proprietary rights and enforcement practices impact our ability to protect our intellectual property rights uniformly in the markets where we intend to sell our products. If we do not adequately maintain our intellectual property, it can result in an irrevocable loss of rights, which could result in our competitors being able to use our technologies, names, brands or the goodwill that we have acquired in the marketplace or erode or negate any competitive advantages we may have, which could harm our business.
For example, pending and future patent applications to protect our products or which effectively prevent others from commercializing competitive technologies and products may not be approved or result in patents being issued. Moreover, the scope of coverage claimed in a patent application can be significantly reduced during prosecution before the patent is issued. Even once issued, the scope, validity, enforceability and commercial value of patent rights are uncertain, and our patents may not be of sufficient scope or strength to provide meaningful protection or commercial advantage and may not preclude competitors from developing products similar to ours or challenging the scope of our issued patents.
In addition, while we have registered or applied to register many of our trademarks, trade names and brand names to distinguish our products from those of our competitors in the United States and in the foreign countries in which we operate, we cannot ensure that our trademark applications will be approved uniformly across all jurisdictions. If we are unable to successfully register our trademarks and trade names and establish name recognition based on our trademarks, trade names and trade dress, we may not be able to compete effectively, and our business may be adversely affected. Third parties may also oppose our trademark applications or otherwise challenge our use of the trademarks. If our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to marketing new brands.
We rely on our unpatented proprietary technology, and others may independently develop the same or similar technology or otherwise obtain access to our unpatented technology. Although we generally seek to protect our trade secrets by confidentiality, non-disclosure and assignment of invention agreements with our employees, contractors, collaborators, vendors, consultants and advisors, these agreements may not provide meaningful protection in the event of unauthorized use or disclosure of our trade secrets.
Cyber Security1 | 2.0%
Cyber Security - Risk 1
Failure to adequately maintain the security of confidential information could materially adversely affect our business.Technology1 | 2.0%
Technology - Risk 1
We rely on the use of our and our third-party service providers' information technology. Any significant failure, inadequacy, interruption or data security incident impacting our information technology and websites, or those of our third-party service providers, could have an adverse effect on our business, prospects, results of operations, financial condition or cash flows.Production
Total Risks: 6/51 (12%)Below Sector Average
Manufacturing1 | 2.0%
Manufacturing - Risk 1
Our success depends, in part, on the quality, efficacy and safety of our products.Employment / Personnel2 | 3.9%
Employment / Personnel - Risk 1
Our success depends, in part, on our key talent.Employment / Personnel - Risk 2
Our employees, contractors, customers, consultants, suppliers and other business partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.We are exposed to the risk that our employees, contractors, customers, consultants, suppliers and other business partners may engage in fraudulent or illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or failure to disclose unauthorized activities to us that violate, among other things: (i) the rules of the applicable regulatory bodies; (ii) manufacturing standards; (iii) data privacy and security laws; (iv) the U.S. Foreign Corrupt Practices Act, U.K. Bribery Act and other anti-corruption, trade sanctions and export control laws; or (v) laws that require the true, complete and accurate reporting of financial information or data.
We sell our products in many parts of the world that are recognized as having governmental and commercial corruption and where, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. It is not always possible to identify and deter misconduct by our employees and third parties, and the precautions we take to detect and prevent these activities may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal and administrative penalties and oversight obligations. Investigations into potential violations of anti-corruption laws can be expensive and time-consuming to defend and may divert management's attention and resources.
Supply Chain3 | 5.9%
Supply Chain - Risk 1
Our products generally rely on a single or a limited number of manufacturers. The loss of manufacturers, quality or production concerns at any of our manufacturers or suppliers, or shortages in the supply of raw materials or finished products could harm our business, prospects, results of operations, financial condition and cash flows.Changed
Supply Chain - Risk 2
We are dependent on entities performing outsourced functions.As part of our long-term strategy, we outsource certain functions or parts of functions that can be performed more effectively by external service providers. These include certain information technology, e-commerce, logistics, finance and human resource functions. The failure of one or more entities to provide the expected services on a timely basis, at the prices we expect and in compliance with our performance standards and expectations, including with respect to data privacy and security, may have an adverse effect on our business. In addition, any transition of systems to a new external service provider could have an adverse effect on our business.
Supply Chain - Risk 3
A disruption in our supply chain could adversely affect our business, financial condition and results of operations.Our finished products are manufactured in the U.S. and Europe, primarily in Southern California. Any interruptions in operations at our manufacturing locations could result in our inability to satisfy demand, in particular because our products generally rely on a single or a limited number of manufacturers. In addition, we rely on third-party distributors within the United States and internationally. A number of factors could damage or destroy the manufacturing equipment or our inventory of components, supplies or finished goods, cause substantial delays in manufacturing, supply and distribution of our products, result in the loss of key information and cause us to incur additional expenses. These factors include industrial accidents, strikes and other labor disputes, natural disasters, such as wildfires, availability of natural resources, including water, political crises, such as terrorist attacks, war and other geopolitical instability, capacity constraints, equipment or technology malfunctions or failures, disruptions in ingredient, material or packaging supply, disruptions in supply chain or information technology, loss or impairment of key manufacturing sites or suppliers, product quality control, safety, increase in commodity prices and energy costs, inflationary pressures, tariffs, trade restrictions, licensing requirements and other regulatory issues, unforeseen public health crises and other external factors over which we have no control. We have experienced, and may in the future experience, increased costs as a result of supply chain disruption and inflationary pressures. Further, our third-party manufacturers, suppliers or distributors may have economic or business interests that are inconsistent with ours; take actions contrary to our instructions, policies or objectives; be unable or unwilling to fulfill their obligations to us; engage in activities that may harm our reputation; or take other actions that are outside of our control. The occurrence of any such factors or events could have an adverse effect on our business, financial condition and results of operations.
Our business interruption insurance may not cover our losses, and insurance may not be available on commercially reasonable terms to cover certain of these events or interruptions. Regardless of the level of insurance coverage, any disruption that impedes our ability to timely manufacture our products could adversely affect our business, financial condition and results of operations.
We rely on third-party global service providers to deliver our products to customers, including directly to consumers. Our ability to receive inbound inventory efficiently and ship products to customers may be negatively affected by factors beyond our and these providers' control, including health crises, weather, fire, flood, power loss, earthquakes, acts of war or terrorism or other events specifically impacting our service providers, such as labor disputes, cyberattacks, financial difficulties and system failures. We are also subject to risks of damage or loss during delivery by our shipping providers. We have in the past experienced, and may in the future experience, shipping delays for reasons outside of our control.
If we are not able to negotiate acceptable pricing and other terms with our third-party shipping, warehousing and distribution providers, or if these providers experience performance problems or other difficulties in processing our orders or timely delivering our products to customers, our customers could become dissatisfied and cease buying products from us, which could negatively impact our results of operations.
Macro & Political
Total Risks: 3/51 (6%)Below Sector Average
Economy & Political Environment1 | 2.0%
Economy & Political Environment - Risk 1
A general economic downturn or disruption in business conditions may affect our business, including consumer purchases of discretionary items and the financial strength of our customers and consumers, which could adversely affect our financial condition and results of operations.International Operations1 | 2.0%
International Operations - Risk 1
We are subject to risks related to the global scope of our operations.Natural and Human Disruptions1 | 2.0%
Natural and Human Disruptions - Risk 1
Our business and results of operations could be adversely affected by natural disasters, public health crises, political crises or other catastrophic events.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.