Forgent Power Solutions (FPS) risk factors, 2026 10-K

Risks Related to Our Business and Our Industry

1. 01Significant disruptions to our supply chain, including the high cost or unavailability of raw materials and components required to manufacture our products, and significant disruptions to our distribution networks could have a material adverse effect on our business, financial condition and results of operations
2. 02Our growth depends in part on continued investment in new data centers, which depends in part on continued interest in developing AI
3. 03Demand for our products depends, in large part, on new construction activity which has declined significantly during past recessions
4. 04Any delay or interruption in the operations of any of our manufacturing campuses could impair our ability to provide products to customers, which could have a material adverse effect on our business, financial condition and results of operations
5. 05Amounts included in our backlog may not result in revenue or generate profits in the amounts we expect or in the timeframe we anticipate
6. 06We operate in competitive environments. Our failure to compete successfully could cause us to lose market share, which could have a material adverse effect on our business, financial condition and results of operations
7. 07Any failure of our products could subject us to substantial liability, including product liability claims, which could damage our reputation or the reputation of one or more of our brands
8. 08If we are unable to adequately control the costs associated with our manufacturing campuses expansion, such failure could have a material adverse effect on our business, financial condition and results of operations
9. 09If our ongoing efforts to reduce our costs, such as using automation to increase labor productivity and implementing initiatives to control or reduce our overhead costs, are not successful, it could have a material adverse effect on our business, financial condition and results of operations
10. 10If we fail to motivate and retain our key personnel or if we fail to attract additional qualified personnel, we may not be able to achieve our anticipated level of growth and could have a material adverse effect on our business, financial condition and results of operations
11. 11Our failure to manage customer relationships and customer contracts could have a material adverse effect on our business, financial condition and results of operations
12. 12Changes in technology or customer preferences could result in less demand for certain categories of electrical distribution equipment which could have an adverse impact on our business
13. 13Large companies often require more favorable terms and conditions in our contracts, which could result in downward pricing pressures on our business, less desirable payment terms or greater warranty and contractual obligations
14. 14Our strategy to increase our sales of Powertrain Solutions could result in a concentration of our sales with fewer customers and a significant reduction in orders from any one of these customers could adversely impact our business
15. 15Disruption of, or consolidation or changes in, the performance, operating models or financial condition of our independent sales representatives and distributors could have a material adverse effect on our business, financial condition and results of operations
16. 16There are risks associated with our collaborations with third parties for certain projects, which could impose additional costs and obligations on us
17. 17If we fail to manage our recent and future growth effectively, we may be unable to execute our business plan, maintain high levels of customer service or adequately address competitive challenges
18. 18The integration of the Business Acquisitions poses risks to the operation of our business
19. 19If we fail to manage contingent workers, it could adversely impact our results of operations
20. 20Disruptions caused by labor disputes or organized labor activities could harm our business
21. 21The physical effects of climate change, including weather disruptions and related effects, could have a material adverse effect on our business, financial condition and results of operations
22. 22International expansion could subject us to additional business, financial, regulatory and competitive risks

Risks Related to Litigation and Regulation

1. 23We are subject to EHS laws and regulations, which could result in substantial costs, liabilities and impacts to our business, financial condition and results of operations
2. 24Failure by our vendors or our component or raw material suppliers to use ethical business practices and comply with applicable laws and regulations could have a material adverse effect on our business, financial condition and results of operations
3. 25We are subject to antitrust and competition laws that can result in sanctions and conditions on the way we conduct our business
4. 26Failure to meet at times competing environmental and sustainability-related expectations or standards could have a material adverse effect on our business, financial condition and results of operations
5. 27Changes to federal tax credits for renewable energy projects in the One Big Beautiful Bill Act (“OBBBA”) could impact demand for our Grid products
6. 28The impact of import or export laws could have a material adverse effect on our business, financial condition and results of operations
7. 29Failure to obtain or comply with federal, state and local government approvals, licenses and permits may negatively affect our ability to produce, market and sell our products
8. 30We may be subject to periodic litigation, regulatory proceedings and enforcement actions, which could have a material adverse effect on our business, financial condition and results of operations
9. 31Misconduct by our employees, independent contractors or subcontractors, or a failure to comply with applicable laws or regulations, could harm our reputation, damage our relationships with customers and subject us to criminal and civil enforcement actions

Risks Related to Our Intellectual Property

1. 32If we fail to, or incur significant costs in order to, obtain, maintain, protect, defend or enforce, our intellectual property and other proprietary rights, it could have a material adverse effect on our business, financial condition and results of operations
2. 33We may need to defend ourselves against third-party claims that we are infringing, misappropriating or otherwise violating others’ intellectual property rights, which could divert management’s attention, cause us to incur significant costs and prevent us from selling or using the technology to which such rights relate

Risks Related to Information Technology and Privacy

1. 34Failure to effectively utilize information technology systems or implement new technologies could disrupt our business or reduce our sales or profitability
2. 35Compromises, interruptions or shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our business operations and, if significant or extreme, could have a material adverse effect on our business, financial condition and results of operations
3. 36Unauthorized disclosure of personal or sensitive data or confidential information, whether through a breach of our computer system or otherwise, could have a material adverse effect on our business, financial condition and results of operations
4. 37Failure to comply with current or future federal, state and foreign laws and regulations and industry standards relating to privacy, data protection, advertising and consumer protection could have a material adverse effect on our business, financial condition and results of operations
5. 38The implementation of new information systems and enhancements to our current systems may be costly and disruptive to our operations

Financial, Tax, and General Risks

1. 39We may elect not to purchase insurance for certain business risks and expenses and, for the insurance coverage we have in place, such coverage may not address all of our potential exposures or, in the case of substantial losses, may be inadequate to cover such losses
2. 40Volatility in currency exchange rates could have a material adverse effect on our business, financial condition and results of operations
3. 41Future material impairments in the value of our long-lived assets, including goodwill, could have a material adverse effect on our business, financial condition and results of operations
4. 42Changes in tax laws or regulations that are applied adversely to us or our customers could materially adversely affect our business, financial condition and results of operations
5. 43Our tax burden could increase as a result of ongoing or future tax audits
6. 44Our indebtedness requires us to dedicate a substantial portion of our cash flow from operations and could adversely affect our financial flexibility and our competitive position
7. 45We and our subsidiaries have the ability to incur more indebtedness. Incurring additional debt could further intensify the risks described above
8. 46Our indebtedness may restrict our current and future operations, which could adversely affect our ability to respond to changes in our business and to manage our operations
9. 47We may not be able to raise additional capital to execute our current or future business strategies on favorable terms, if at all, or without dilution to our stockholders, which could have a material adverse effect on our business, financial condition and results of operations

Risks Related to Our Organizational Structure

1. 48We are a holding company and our principal asset is an indirect interest in Opco, and accordingly, we are dependent upon Opco and its consolidated subsidiaries for our results of operations, cash flows and distributions
2. 49We will be required to make payments under the Tax Receivable Agreement and the amounts of such payments could be significant
3. 50Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the TRA Participants that will not benefit certain holders of our Class A common stock to the same extent that it will benefit the TRA Participants
4. 51As a result of the Tax Receivable Agreement, interests of the Continuing Equity Owners may conflict with those of other holders of our Class A common stock
5. 52In certain circumstances, Opco will be required to make tax distributions to the Company and to the Existing Opco LLC Owners, and the distributions that Opco will be required to make may be substantial
6. 53In certain cases, payments under the Tax Receivable Agreement to the TRA Participants may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement
7. 54We will not be reimbursed for any payments made to the beneficiaries under the Tax Receivable Agreement in the event that any purported tax benefits are subsequently disallowed by the IRS
8. 55If Opco were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we and Opco might be subject to potentially significant tax inefficiencies

Risks Related to Ownership of Our Class A Common Stock

1. 56We recently ceased to be a “controlled company” within the meaning of the NYSE listing rules and accordingly, we are, subject to certain transition periods permitted by the NYSE listing rules, no longer able to rely on exemptions from corporate governance requirements that are available to controlled companies
2. 57Neos has significant influence over us. In addition, Neos’s interests may conflict with our interests and the interests of other stockholders
3. 58We cannot assure you that our stock price will not decline or not be subject to significant volatility
4. 59Our results of operations may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our results of operations for a particular period to fall below expectations, resulting in a decline in the price of shares of Class A common stock
5. 60The price of shares of Class A common stock could decline if securities analysts or other third parties publish inaccurate or unfavorable research about us or if securities or industry analysts cease to cover us
6. 61Future sales of shares of Class A common stock, or the perception that such sales may occur, could depress the price of shares of Class A common stock
7. 62Delaware law and anti-takeover provisions in our governing documents may have the effect of delaying or preventing a change of control or changes in our management and may deprive our investors of the opportunity to receive a premium for their shares
8. 63Together, these provisions in our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management
9. 64We do not intend to pay any cash distributions or dividends on shares of Class A common stock in the foreseeable future
10. 65If we fail to establish and maintain an effective system of integrated internal controls, we may not be able to report our financial results accurately, which could have a material adverse effect on our business, financial condition and results of operations
11. 66The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and officers, which may divert from our business operations