Penguin Solutions (PENG) FY2025 10-K Risk Factors: 8 New, 6 Dropped

What the changes say

Penguin Solutions completed a U.S. Domestication transaction, introducing related tax and governance risks.

What changed since the prior 10-K

New

NewRisks Related to Our Business
The anticipated benefits of the U.S. Domestication may not be realized
We completed a U.S. Domestication on June 30, 2025, and may fail to realize its anticipated benefits or incur excessive costs.
NewRisks Related to Our Business
The U.S. Domestication may adversely impact our effective tax rate
Our effective tax rate may increase following the U.S. Domestication due to various legal and jurisdictional factors.
NewRisks Related to Our Business
Determining whether a valuation allowance for deferred tax assets is appropriate requires significant judgment and an evaluation of all positive and negative evidence. At each reporting period, we assess the need for, or the adequacy of, a valuation allowance against our deferred tax assets
We recorded a valuation allowance against inherited interest expense carryforward attributes from the U.S. Domestication in fiscal year 2025.
NewRisks Related to Our Common Stock
future, we may also issue securities in connection with investments, acquisitions, or capital raising activities, which could constitute a material portion of our then-outstanding shares of common stock
Future issuances of common stock for investments, acquisitions, or capital raising could dilute shares and impact market price.
NewRisks Related to Our Common Stock
Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could delay, defer, discourage, or prevent a takeover attempt
Delaware law and our corporate provisions establish a classified board and anti-takeover measures that may discourage takeover attempts.
NewRisks Related to Our Common Stock
Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law
We indemnify directors and officers to the fullest extent permitted by Delaware law and advance expenses.
NewRisks Related to Our Common Stock
Our directors’ and officers’ liability insurance policies may not be available to us in the future at a reasonable rate, may not cover all potential claims for indemnification, and may not be adequate to indemnify us for all liability that may be imposed
Directors and officers liability insurance may become unavailable at reasonable rates or fail to cover all potential claims.
NewRisks Related to Our Common Stock
exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act
Our certificate of incorporation designates the Delaware Court of Chancery and federal district courts as exclusive forums for certain disputes.

Dropped

DroppedRisks Related to Our Business
reduce its volume of business with us or fail to pay us in full for the goods or services purchased from us, our sales and profitability would be materially reduced and our business and financial condition would be seriously harmed
DroppedRisks Related to Our Business
manufacturing and shipments or require product redesigns which could damage relationships with our customers, increase our costs, reduce our margins or increase the prices we need to charge for our products and could materially and adversely affect our business, results of operations and financial condition
DroppedRisks Related to Our Business
successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risk. For example, to the extent catastrophic events become more frequent, it may adversely impact the availability or cost of insurance
DroppedRisks Related to Our Business
Armed conflicts around the world, such as those in Ukraine and Israel, may exacerbate certain risks we face
DroppedRisks Related to Investments in Cayman Islands Companies
We are a Cayman Islands company and, because the rights of shareholders under Cayman Islands law differ from those under U.S. law, shareholders may have difficulty protecting their shareholder rights
DroppedRisks Related to Our Ordinary Shares
Anti-takeover provisions in our organizational documents may discourage our acquisition by a third party, which could limit shareholders’ opportunity to sell their ordinary shares at a premium

Reworded

87% rewrittenRisks Related to Our Business
We may be unable to successfully manage environmental or social sustainability initiatives, in whole or in part, which could lead to less opportunity for us to have sustainability investors and partners and could negatively impact our reputation or options for capital acquisition
Updated ESG wording to focus on stakeholder scrutiny regarding climate change, human capital, and sustainability initiatives.
Was: We may be unable to complete ESG initiatives, in whole or in part, which could lead to less opportunity for us to have ESG investors and partners and could negatively impact our reputation or options for capital acquisition
78% rewrittenRisks Related to Our Common Stock
Future sales of our common stock in the public market, or the perception that these sales may occur, could cause our stock price to fall
Updated share counts, common stock terminology, and added references to Issued CPS conversion.
Was: Future sales of our ordinary shares in the public market, or the perception that these sales may occur, could cause our share price to fall
76% rewrittenRisks Related to Our Business
Tariffs or other trade restrictions or taxes have had in the past, and could have in the future, an adverse impact on our business, results of operations and financial condition
Added specifics regarding new U.S. tariffs and changes to existing tariffs on goods from China.
Was: Tariffs or other trade restrictions or taxes have had in the past, and could have in the future, an adverse impact on our operations
72% rewrittenRisks Related to Our Common Stock
Worldwide political conditions and threats of terrorist attacks may adversely affect our operations and demand for our products
Updated evaluation of Ukraine and Israel conflicts noting hostilities have not yet directly impacted financial conditions.
68% rewrittenRisks Related to Our Business
Our ability to use our tax attributes is limited
Updated federal and state net operating loss and tax credit carryforward figures and expiration schedules as of August 29, 2025.
67% rewrittenRisks Related to Our Common Stock
We do not anticipate paying any cash dividends on our common stock in the foreseeable future
Updated dividend restrictions to reference the 2025 Credit Agreement and CPS Delaware Certificate of Designation.
Was: We do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future
65% rewrittenRisks Related to Our Business
Changes in tax laws or potential adjustments by tax authorities could materially increase our tax expense
Refined language regarding multinational tax jurisdictions and factors affecting future effective tax rates.
64% rewrittenRisks Related to Our Business
We depend on a select number of customers for a significant portion of our revenue
Updated customer concentration figures showing top ten end customers accounted for 66% of net sales in 2025.
47% rewrittenRisks Related to Our Business
We depend on a small number of sole or limited source suppliers
43% rewrittenRisks Related to Our Debt
Our capped call transactions may affect the value of our debt and common stock
Was: Our capped call transactions may affect the value of our debt and ordinary shares
40% rewrittenRisks Related to Our Debt
Our credit agreement may limit our flexibility in operating our business
37% rewrittenRisks Related to Our Business
Some of our offerings utilize open source software, which may pose particular risks to our proprietary software, products and services in a manner that could harm our business
36% rewrittenRisks Related to Our Business
We may need to raise additional funds, which may not be available on acceptable terms or at all
35% rewrittenRisks Related to Our Business
Our worldwide operations, and those of our suppliers, business partners and customers, may be disrupted by events outside of our control, including the effects of climate change, natural disasters, man-made disasters or other events, as well as societal and governmental responses to such events
34% rewrittenRisks Related to Our Business
Actual or perceived non-compliance with applicable data privacy and security laws, or that of our customers, suppliers or business partners, could expose us to losses
32% rewrittenRisks Related to Our Business
We have incurred, and may in the future incur, impairment charges related to our goodwill, which could have a material adverse effect on our business, results of operations and financial condition
32% rewrittenRisks Related to Our Business
Our results of operations fluctuate from quarter to quarter, which make them difficult to predict
Was: Our operating results fluctuate from quarter to quarter, which make them difficult to predict
31% rewrittenRisks Related to Our Debt
Provisions in the Convertible Senior Notes and their respective indentures could delay or prevent an otherwise beneficial takeover of us
Was: Provisions in the Convertible Notes and their respective Indentures could delay or prevent an otherwise beneficial takeover of us
30% rewrittenRisks Related to Our Business
Changing worldwide economic conditions could adversely affect our results of operations and financial condition
Was: Changing worldwide economic conditions could adversely affect our operating results and financial condition
27% rewrittenRisks Related to Our Business
Legal proceedings and claims could have a material adverse effect on our business, results of operations or financial condition
23% rewrittenRisks Related to Our Common Stock
Our success depends on our ability to attract, retain and motivate highly skilled employees
22% rewrittenRisks Related to Our Business
We have in the past made, and may in the future make, acquisitions, investments and/or alliances, which involve numerous risks
22% rewrittenRisks Related to Our Common Stock
The trading price of our common stock has been and may continue to be volatile
Was: The trading price of our ordinary shares has been and may continue to be volatile
22% rewrittenRisks Related to Our Business
We may be required to pay royalties or obtain licenses to sell certain products
21% rewrittenRisks Related to Our Business
Contracts with the U.S. Government may be terminated, cancelled or modified
Was: Contracts with the United States Government may be terminated, cancelled or modified
21% rewrittenRisks Related to Our Business
Actual or perceived failures or breaches of our information and security systems, or those of our customers, suppliers or business partners, could expose us to losses
21% rewrittenRisks Related to Our Debt
Our indebtedness could impair our financial condition and harm our ability to operate our business

All 70 risk factors

Headings as the filing states them, in filing order.

Risks Related to Our Business

01Changing worldwide economic conditions could adversely affect our results of operations and financial condition30% rewritten
02Our results of operations fluctuate from quarter to quarter, which make them difficult to predict32% rewritten
03We have experienced losses in the past and may experience losses in the future
04We compete in historically cyclical markets
05Fluctuations in average selling prices may have a material adverse effect on our business, results of operations and financial condition
06Tariffs or other trade restrictions or taxes have had in the past, and could have in the future, an adverse impact on our business, results of operations and financial condition76% rewritten
07We depend on a select number of customers for a significant portion of our revenue64% rewritten
08The markets that we serve are highly competitive
09We may be unable to optimally match purchasing and production to customer demand, which may have a material adverse effect on our business, results of operations and financial condition
10Our future success depends on our ability to develop new products and services
11Our customers often require that our products undergo a lengthy and expensive process of evaluation and qualification without any assurance of net sales
12If our OEM customers decide to utilize standardized solutions instead of our specialty products, our net sales and market share may decline
13We depend on a small number of sole or limited source suppliers47% rewritten
14We may be unable to adapt to technological change
15We may not be able to maintain or improve our manufacturing efficiency
16Disruption of our operations at any one of our manufacturing facilities would substantially harm our business
17We are subject to a number of procurement laws and regulations
18Products that fail to meet specifications, are defective or that are otherwise incompatible with end uses could impose significant costs on us
19Actual or perceived failures or breaches of our information and security systems, or those of our customers, suppliers or business partners, could expose us to losses21% rewritten
20Actual or perceived non-compliance with applicable data privacy and security laws, or that of our customers, suppliers or business partners, could expose us to losses34% rewritten
21Some of our offerings utilize open source software, which may pose particular risks to our proprietary software, products and services in a manner that could harm our business37% rewritten
22Open source software may make it easier for competitors, some of which may have greater resources than we have, to enter our markets and compete with us
23We could be prevented from selling or developing our software if our licenses are not enforceable or are modified so as to become incompatible with other open source licenses
24Contracts with the U.S. Government may be terminated, cancelled or modified21% rewritten
25Our indemnification obligations to our customers and suppliers could require us to pay substantial damages
26We may need to raise additional funds, which may not be available on acceptable terms or at all36% rewritten
27We have in the past made, and may in the future make, acquisitions, investments and/or alliances, which involve numerous risks22% rewritten
28We may fail to realize the anticipated benefits of our acquisitions
29We have incurred, and may in the future incur, impairment charges related to our goodwill, which could have a material adverse effect on our business, results of operations and financial condition32% rewritten
30We may incur liabilities relating to additional Brazilian withholding tax in connection with the sale of our Brazil business
31We may not achieve the intended benefits of the sale of our Brazil business
32The sale of our Brazil business could impair our ability to protect our trademarks and brand
33If we are not able to maintain, develop and enhance our brand and our reputation, our business and results of operations may be adversely affected
34We rely on third parties to sell a portion of our products and services
35We may be unable to protect our intellectual property
36Legal proceedings and claims could have a material adverse effect on our business, results of operations or financial condition27% rewritten
37We may be required to pay royalties or obtain licenses to sell certain products22% rewritten
38The anticipated benefits of the U.S. Domestication may not be realizedNew
39The U.S. Domestication may adversely impact our effective tax rateNew
40Changes in tax laws or potential adjustments by tax authorities could materially increase our tax expense65% rewritten
41Our ability to use our tax attributes is limited68% rewritten
42Determining whether a valuation allowance for deferred tax assets is appropriate requires significant judgment and an evaluation of all positive and negative evidence. At each reporting period, we assess the need for, or the adequacy of, a valuation allowance against our deferred tax assetsNew
43We could incur substantial costs or liabilities as a result of violations of environmental laws
44We may be unable to successfully manage environmental or social sustainability initiatives, in whole or in part, which could lead to less opportunity for us to have sustainability investors and partners and could negatively impact our reputation or options for capital acquisition87% rewritten
45Our worldwide operations, and those of our suppliers, business partners and customers, may be disrupted by events outside of our control, including the effects of climate change, natural disasters, man-made disasters or other events, as well as societal and governmental responses to such events35% rewritten
46Public health crises, such as pandemics, epidemics, or widespread outbreaks of infectious disease, have had, and could in the future have, an adverse effect on our business, financial condition and results of operations

Risks Related to Our International Operations

47Our business is subject to the risks generally associated with international business operations
48We are subject to the taxation requirements of the jurisdictions in which we operate, and if we fail to qualify for certain tax incentives or to comply with local tax regulations, we may suffer financial losses
49Changes in foreign currency exchange rates could materially adversely affect our business, results of operations or financial condition
50If enacted, exchange controls may limit our ability to receive dividends and other distributions from our foreign subsidiaries
51High rates of inflation could have a material adverse effect on our business, results of operations and financial condition
52We may have limited legal recourse under the laws of China if disputes arise under our agreements with third parties

Risks Related to Our Debt

53Our indebtedness could impair our financial condition and harm our ability to operate our business21% rewritten
54Our credit agreement may limit our flexibility in operating our business40% rewritten
55Under the 2025 Credit Agreement, we also are required to satisfy and maintain certain specified financial ratios. Our ability to meet those financial ratios could be affected by events beyond our control, and there can be no assurance that we will meet those ratios
56Provisions in the Convertible Senior Notes and their respective indentures could delay or prevent an otherwise beneficial takeover of us31% rewritten
57Our capped call transactions may affect the value of our debt and common stock43% rewritten

Risks Related to Our Common Stock

58The trading price of our common stock has been and may continue to be volatile22% rewritten
59If our estimates or judgments relating to our critical accounting estimates are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the market price of our common stock
60Future sales of our common stock in the public market, or the perception that these sales may occur, could cause our stock price to fall78% rewritten
61future, we may also issue securities in connection with investments, acquisitions, or capital raising activities, which could constitute a material portion of our then-outstanding shares of common stockNew
62Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could delay, defer, discourage, or prevent a takeover attemptNew
63We do not anticipate paying any cash dividends on our common stock in the foreseeable future67% rewritten
64Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware lawNew
65Our directors’ and officers’ liability insurance policies may not be available to us in the future at a reasonable rate, may not cover all potential claims for indemnification, and may not be adequate to indemnify us for all liability that may be imposedNew
66exclusive forum for the resolution of any complaint asserting a cause of action under the Securities ActNew
67Worldwide economic and political conditions as well as other factors may adversely affect our operations and cause fluctuations in demand for our products
68We and others are subject to a variety of laws, regulations, or industry standards that may have a material adverse effect on our business, results of operations or financial condition
69Our success depends on our ability to attract, retain and motivate highly skilled employees23% rewritten
70Worldwide political conditions and threats of terrorist attacks may adversely affect our operations and demand for our products72% rewritten

Penguin Solutions (PENG) risk factors, FY2025 10-K

What the changes say

What changed since the prior 10-K

All 70 risk factors

Other Penguin Solutions 10-Ks