Penguin Solutions (PENG) risk factors, FY2026 10-K

Risks Related to Our Business

1. 01Changing worldwide economic conditions could adversely affect our results of operations and financial condition
2. 02Our results of operations fluctuate from quarter to quarter, which makes them difficult to predict21% rewritten
3. 03We compete in historically cyclical markets
4. 04Fluctuations in average selling prices may have a material adverse effect on our business, results of operations and financial condition
5. 05We source a significant portion of our materials from, manufacture products in, and sell products in foreign countries, including China and Malaysia, exposing our business to tariffs, export controls and other international trade risksNew
6. 06We depend on a select number of customers for a significant portion of our revenue38% rewritten
7. 07The markets that we serve are highly competitive
8. 08We 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 condition42% rewritten
9. 09Our managed services engagements involve risks related to cost estimation, performance requirements and customer retention that could adversely affect our results of operationsNew
10. 10Our future success depends on our ability to develop new products and services
11. 11Our customers often require that our products undergo a lengthy and expensive process of evaluation and qualification without any assurance of net sales
12. 12If our OEM customers decide to utilize standardized solutions instead of our specialty products, our net sales and market share may decline
13. 13We depend on a small number of sole or limited source suppliers
14. 14We may be unable to adapt to technological change
15. 15We may not be able to maintain or improve our manufacturing efficiency
16. 16Disruption of our operations at any one of our manufacturing facilities would substantially harm our business
17. 17We are subject to a number of procurement laws and regulations
18. 18Products that fail to meet specifications, are defective or that are otherwise incompatible with end uses could impose significant costs on us
19. 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 losses
20. 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 losses25% rewritten
21. 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 business
22. 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
23. 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
24. 24Contracts with the U.S. Government may be terminated, cancelled or modified
25. 25Our indemnification obligations to our customers and suppliers could require us to pay substantial damages
26. 26We may need to raise additional funds, which may not be available on acceptable terms or at all32% rewritten
27. 27We have in the past made, and may in the future make, acquisitions, investments and/or alliances, which involve numerous risks
28. 28We 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 condition24% rewritten
29. 29We may incur liabilities relating to additional Brazilian withholding tax in connection with the sale of our SMART Brazil business
30. 30We may not achieve the intended benefits of the sale of our SMART Brazil business47% rewritten
31. 31If we are not able to maintain, develop and enhance our brand and our reputation, our business and results of operations may be adversely affected
32. 32We rely on third parties to sell a portion of our products and services
33. 33We may be unable to protect our intellectual property
34. 34Legal proceedings and claims could have a material adverse effect on our business, results of operations and financial condition
35. 35We may be required to pay royalties or obtain licenses to sell certain products
36. 36Changes in tax laws or potential adjustments by tax authorities could materially increase our tax expense
37. 37Our ability to use our tax attributes is limited35% rewritten
38. 38We have reversed valuation allowances for significant portions of our deferred tax assets, and we may not be able to realize these assets in the future89% rewritten
39. 39We could incur substantial costs or liabilities as a result of violations of environmental laws
40. 40We 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 investors and partners and could negatively impact our reputation or options for capital acquisition
41. 41Our 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
42. 42Public 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

1. 43Our business is subject to the risks generally associated with international business operations
2. 44We 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
3. 45Changes in foreign currency exchange rates could materially adversely affect our business, results of operations and financial condition
4. 46Exchange controls and restrictions on dividends and other distributions in certain jurisdictions, including China, limit and may further limit our ability to receive dividends and other distributions from our foreign subsidiaries
5. 47High rates of inflation could have a material adverse effect on our business, results of operations and financial condition
6. 48We may have limited legal recourse under the laws of China if disputes arise under our agreements with third parties

Risks Related to Our Debt

1. 49Our indebtedness and short-term cash obligations could impair our financial condition and harm our ability to operate our business21% rewritten
2. 50Our credit agreement may limit our flexibility in operating our business
3. 51Under 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
4. 52Provisions in the Convertible Senior Notes and their respective indentures could delay or prevent an otherwise beneficial takeover of us
5. 53Our capped call transactions may affect the value of our debt and common stock

Risks Related to Our Common Stock

1. 54The trading price of our common stock has been and may continue to be volatile
2. 55If 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
3. 56Future sales of our common stock in the public market, or the perception that these sales may occur, could cause our stock price to fall
4. 57Anti-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
5. 58We do not anticipate paying any cash dividends on our common stock in the foreseeable future
6. 59Our 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
7. 60Our 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

General Risk Factors

1. 61Worldwide economic and political conditions as well as other factors may adversely affect our operations and cause fluctuations in demand for our products
2. 62We 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 and financial condition
3. 63Our success depends on our ability to attract, retain and motivate highly skilled employees
4. 64Worldwide political conditions and threats of terrorist attacks may adversely affect our operations and demand for our products