| Management's Discussion and Analysis of Financial Condition and Results of Operations |
Overview
We are a global leader in the Automatic Identification and Data Capture ("AIDC") industry. The AIDC market consists of mobile computing, data capture, radio frequency identification devices ("RFID"), thermal barcode printing, and other workflow automation products and services. The Company's offerings are proven to help our customers and end-users digitize and automate their workflows to achieve their critical business objectives, including improved productivity and operational efficiency, optimized regulatory compliance, and better customer experiences.
We design, manufacture, and sell a broad range of AIDC offerings, including: mobile computers, barcode scanners and imagers, RFID readers, specialty printers for barcode labeling and personal identification, real-time location systems ("RTLS"), related accessories and supplies, such as labels and other consumables, and related software applications. We also provide machine vision and self-serve touchscreen solutions; a full range of services, including maintenance, technical support, repair, managed and professional services; as well as cloud-based software subscriptions. End-users of our offerings include those in retail and e-commerce, manufacturing, transportation and logistics, healthcare, hospitality, public sector, and other industries.
We continue to evolve and advance our vision: frontline operations everywhere are digitized, automated and intelligent. Through continual innovation, we have expanded beyond the traditional AIDC market to transform activities such as factory production, packages moving through a supply chain, retail shopping, the hospital patient journey, restaurant self-service, and first responders addressing public safety and emergency situations. Data from enterprise assets, including status, condition, location, utilization, and preferences, is analyzed to provide prioritized actionable insights and optimize activities.
The Company's operations consist of two reportable segments that provide complementary offerings to our customers: Connected Frontline ("CF") and Asset Visibility & Automation ("AVA").
•The CF segment is focused on unifying teams, customers, and AI agents to deliver enhanced frontline experiences. This segment brings together solutions that empower frontline workers with the information and tools they need to make smarter decisions and improve customer service. Principal product categories include mobile computing, point of sale solutions, self-service kiosks and interactive touchscreen displays, workflow optimization software solutions, and related services.
•The AVA segment provides solutions that track critical assets and automate workflows to provide real-time, data-driven insights necessary to optimize supply chains, manufacturing, and logistics. The principal product categories include thermal barcode printing and related supplies and sensors, data capture, fixed industrial scanning, machine vision, RFID, real-time location systems (RTLS), and related services.
Third Quarter 2026 Financial Summary
•Net sales were $1,614 million in the current quarter compared to $1,320 million in the prior year third quarter.
•Operating income was $237 million in the current quarter compared to $183 million in the prior year third quarter.
•Net income was $164 million, or $3.43 per diluted share in the current quarter, compared to net income of $101 million, or $1.97 per diluted share in the prior year third quarter.
•We repurchased $643 million of common shares year to date, including $75 million in the third quarter.
Results of Operations
Consolidated Results of Operations
(amounts in millions, except percentages)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | $ Change | % Change | October 3, 2026 | September 27, 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||||||||||||||||||||||||||
| Tangible products | $ | 1,370 | $ | 1,081 | $ | 289 | 26.7 | % | $ | 3,917 | $ | 3,198 | $ | 719 | 22.5 | % | |||||||||||||||||||||||||||||||
| Services and software | 244 | 239 | 5 | 2.1 | % | 749 | 723 | 26 | 3.6 | % | |||||||||||||||||||||||||||||||||||||
| Total Net sales | 1,614 | 1,320 | 294 | 22.3 | % | 4,666 | 3,921 | 745 | 19.0 | % | |||||||||||||||||||||||||||||||||||||
| Gross profit | 738 | 634 | 104 | 16.4 | % | 2,305 | 1,895 | 410 | 21.6 | % | |||||||||||||||||||||||||||||||||||||
| Gross margin | 45.7 | % | 48.0 | % | (230) bps | 49.4 | % | 48.3 | % | 110 bps | |||||||||||||||||||||||||||||||||||||
| Operating expenses | 501 | 451 | 50 | 11.1 | % | 1,532 | 1,334 | 198 | 14.8 | % | |||||||||||||||||||||||||||||||||||||
| Operating income | $ | 237 | $ | 183 | $ | 54 | 29.5 | % | $ | 773 | $ | 561 | $ | 212 | 37.8 | % | |||||||||||||||||||||||||||||||
Net sales to customers by geographic region were as follows (amounts in millions, except percentages):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | $ Change | % Change | October 3, 2026 | September 27, 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| North America | $ | 822 | $ | 666 | $ | 156 | 23.4 | % | $ | 2,324 | $ | 1,943 | $ | 381 | 19.6 | % | |||||||||||||||||||||||||||||||
| EMEA | 496 | 394 | 102 | 25.9 | % | 1,501 | 1,260 | 241 | 19.1 | % | |||||||||||||||||||||||||||||||||||||
| Asia-Pacific | 190 | 163 | 27 | 16.6 | % | 538 | 447 | 91 | 20.4 | % | |||||||||||||||||||||||||||||||||||||
| Latin America | 106 | 97 | 9 | 9.3 | % | 303 | 271 | 32 | 11.8 | % | |||||||||||||||||||||||||||||||||||||
| Total Net sales | $ | 1,614 | $ | 1,320 | $ | 294 | 22.3 | % | $ | 4,666 | $ | 3,921 | $ | 745 | 19.0 | % | |||||||||||||||||||||||||||||||
Operating expenses are summarized below (amounts in millions, except percentages):
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | As a % of Net sales | October 3, 2026 | September 27, 2025 | As a % of Net sales | ||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Selling and marketing | $ | 183 | $ | 159 | 11.3 | % | 12.0 | % | $ | 556 | $ | 478 | 11.9 | % | 12.2 | % | |||||||||||||||||||||||||||||||
| Research and development | 158 | 146 | 9.8 | % | 11.1 | % | 482 | 441 | 10.3 | % | 11.2 | % | |||||||||||||||||||||||||||||||||||
| General and administrative | 122 | 111 | 7.6 | % | 8.4 | % | 363 | 324 | 7.8 | % | 8.3 | % | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 37 | 25 | NM | NM | 111 | 74 | NM | NM | |||||||||||||||||||||||||||||||||||||||
| Acquisition and integration costs | 1 | 10 | NM | NM | 4 | 17 | NM | NM | |||||||||||||||||||||||||||||||||||||||
| Exit and restructuring costs | - | - | NM | NM | 16 | - | NM | NM | |||||||||||||||||||||||||||||||||||||||
| Total Operating expenses | $ | 501 | $ | 451 | 31.0 | % | 34.2 | % | $ | 1,532 | $ | 1,334 | 32.8 | % | 34.0 | % | |||||||||||||||||||||||||||||||
Consolidated Organic Net sales growth:
| Three Months Ended | Nine Months Ended | ||||||||||
| October 3, 2026 | October 3, 2026 | ||||||||||
Reported GAAP Consolidated Net sales growth | 22.3 | % | 19.0 | % | |||||||
| Adjustments: | |||||||||||
Impact of foreign currency translations (1) | (2.1) | % | (2.2) | % | |||||||
Impact of acquisitions and dispositions (2) | (8.9) | % | (8.5) | % | |||||||
Consolidated Organic Net sales growth (3) | 11.3 | % | 8.3 | % | |||||||
(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period as well as removing realized cash flow hedge gains and losses from both the current and prior year periods.
(2)For purposes of computing Organic Net sales growth, amounts attributable to business acquisitions or dispositions are excluded for twelve months following or preceding the respective acquisition or disposition, respectively.
(3)Consolidated Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.
Third quarter 2026 compared to third quarter 2025
Total Net sales increased by $294 million or 22.3% compared to the prior year quarter, reflecting continued growth in both of our segments. Our overall sales growth reflects broad-based growth across all verticals and regions. Excluding the effects of foreign currency, acquisitions and dispositions, Consolidated Organic Net sales increased by 11.3%.
Gross margin decreased to 45.7% for the current quarter compared to 48.0% for the prior year quarter, primarily due to increased memory costs and unfavorable business mix, partially offset by foreign currency favorability.
Operating expenses for the quarters ended October 3, 2026 and September 27, 2025 were $501 million and $451 million, or 31.0% and 34.2% of Net sales, respectively. Current quarter Operating expenses increased compared to the prior year quarter primarily due to the inclusion of operating expenses of Elo Touch, inclusive of intangible asset amortization.
Operating income was $237 million for the current quarter compared to $183 million in the prior year quarter.
Total Other expense, net increased primarily due to lower interest income on cash equivalents and higher interest expense associated with higher average debt balances.
The Company's effective tax rates for the three months ended October 3, 2026 and September 27, 2025 were 17.2% and 36.5%, respectively. The decrease in effective tax rate was primarily due to prior year foreign earnings subject to U.S. taxation resulting from federal tax legislation, as well as lower current year U.S. state income taxes.
Year to date 2026 compared to Year to date 2025
Total Net sales increased by $745 million or 19.0% compared to the prior year, reflecting continued growth in both of our segments and all regions. Excluding the effects of foreign currency, acquisitions and dispositions, Consolidated Organic Net sales increased by 8.3%.
Gross margin increased to 49.4% for the current year compared to 48.3% for the prior year, primarily due to favorable impacts of IEEPA tariff recoveries recognized in the second quarter and foreign currency, partially offset by higher memory costs.
Operating expenses for the quarters ended October 3, 2026 and September 27, 2025 were $1,532 million and $1,334 million, or 32.8% and 34.0% of Net sales, respectively. Current year Operating expenses increased compared to the prior year primarily due to the inclusion of operating expenses of Elo Touch, inclusive of intangible asset amortization, as well as higher employee-related costs.
Operating income was $773 million for the current year compared to $561 million in the prior year.
Total Other expense, net increased primarily due to lower interest income on cash equivalents and higher interest expense associated with higher average debt balances, partially offset by lower foreign exchange losses.
The Company's effective tax rates for the nine months ended October 3, 2026 and September 27, 2025 were 18.2% and 24.5%, respectively. The decrease in effective tax rate was primarily due to prior year foreign earnings subject to U.S. taxation resulting from federal tax legislation, as well as lower current year U.S. state income taxes.
Results of Operations by Segment
The following commentary should be read in conjunction with the financial results of each reportable business segment as detailed in Note 17, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment operating income excludes Share-based Compensation, Amortization of intangible assets, Acquisition and integration costs, Exit and restructuring costs, as well as certain other non-recurring costs (impairment of goodwill and other intangible assets, and business acquisition purchase accounting adjustments).
Connected Frontline Segment ("CF")
(amounts in millions, except percentages)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | $ Change | % Change | October 3, 2026 | September 27, 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||||||||||||||||||||||||||
| Tangible products | $ | 750 | $ | 509 | $ | 241 | 47.3 | % | $ | 2,065 | $ | 1,511 | $ | 554 | 36.7 | % | |||||||||||||||||||||||||||||||
| Services and software | 199 | 196 | 3 | 1.5 | % | 612 | 595 | 17 | 2.9 | % | |||||||||||||||||||||||||||||||||||||
| Total Net sales | 949 | 705 | 244 | 34.6 | % | 2,677 | 2,106 | 571 | 27.1 | % | |||||||||||||||||||||||||||||||||||||
| Gross profit | 410 | 324 | 86 | 26.5 | % | 1,277 | 996 | 281 | 28.2 | % | |||||||||||||||||||||||||||||||||||||
| Gross margin | 43.2 | % | 46.0 | % | (280) bps | 47.7 | % | 47.3 | % | 40 bps | |||||||||||||||||||||||||||||||||||||
| Operating expenses | 239 | 192 | 47 | 24.5 | % | 718 | 582 | 136 | 23.4 | % | |||||||||||||||||||||||||||||||||||||
| Operating income | $ | 171 | $ | 132 | $ | 39 | 29.5 | % | $ | 559 | $ | 414 | $ | 145 | 35.0 | % | |||||||||||||||||||||||||||||||
CF Organic Net sales growth:
| Three Months Ended | Nine Months Ended | ||||||||||
| October 3, 2026 | October 3, 2026 | ||||||||||
| CF Reported GAAP Net sales growth | 34.6 | % | 27.1 | % | |||||||
| Adjustments: | |||||||||||
Impact of foreign currency translations (1) | (2.4) | % | (2.3) | % | |||||||
Impact of acquisitions (2) | (17.2) | % | (15.9) | % | |||||||
CF Organic Net sales growth (3) | 15.0 | % | 8.9 | % | |||||||
(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period as well as removing realized cash flow hedge gains and losses from both the current and prior year periods.
(2)For purposes of computing Organic Net sales growth, amounts directly attributable to the acquisition of Elo Touch are excluded for twelve months following the acquisition date.
(3)CF Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.
Third quarter 2026 compared to third quarter 2025
Total Net sales for CF increased $244 million or 34.6% compared to the prior year, primarily due to the inclusion of Elo Touch, higher sales of mobile computers, and favorable impact of foreign currency. Excluding the impact of foreign currency and the acquisition of Elo Touch, CF Organic Net sales increased by 15.0%.
Gross margin decreased to 43.2% in the current year compared to 46.0% for the prior year quarter, primarily due to higher memory costs and unfavorable business mix, partially offset by foreign currency favorability.
Operating income increased 29.5% in the current year compared to the prior year.
Year to date 2026 compared to Year to date 2025
Total Net sales for CF increased $571 million or 27.1% compared to the prior year, primarily due to the inclusion of Elo Touch, higher sales of mobile computers, and favorable impact of foreign currency. Excluding the impact of foreign currency and the acquisition of Elo Touch, CF Organic Net sales increased by 8.9%.
Gross margin increased to 47.7% in the current year compared to 47.3% for the prior year, primarily due to favorable impacts of IEEPA tariff recoveries recognized in the second quarter and foreign currency, partially offset by higher memory costs and unfavorable business mix.
Operating income increased 35.0% in the current year compared to the prior year.
Asset Visibility & Automation Segment ("AVA")
(amounts in millions, except percentages)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| October 3, 2026 | September 27, 2025 | $ Change | % Change | October 3, 2026 | September 27, 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||||||||||||||||||||||||||
| Tangible products | $ | 620 | $ | 572 | $ | 48 | 8.4 | % | $ | 1,852 | $ | 1,687 | $ | 165 | 9.8 | % | |||||||||||||||||||||||||||||||
| Services and software | 45 | 43 | 2 | 4.7 | % | 137 | 128 | 9 | 7.0 | % | |||||||||||||||||||||||||||||||||||||
| Total Net sales | 665 | 615 | 50 | 8.1 | % | 1,989 | 1,815 | 174 | 9.6 | % | |||||||||||||||||||||||||||||||||||||
| Gross profit | 332 | 312 | 20 | 6.4 | % | 1,048 | 908 | 140 | 15.4 | % | |||||||||||||||||||||||||||||||||||||
| Gross margin | 49.9 | % | 50.7 | % | (80) bps | 52.7 | % | 50.0 | % | 270 bps | |||||||||||||||||||||||||||||||||||||
| Operating expenses | 174 | 176 | (2) | (1.1) | % | 539 | 530 | 9 | 1.7 | % | |||||||||||||||||||||||||||||||||||||
| Operating income | $ | 158 | $ | 136 | $ | 22 | 16.2 | % | $ | 509 | $ | 378 | $ | 131 | 34.7 | % | |||||||||||||||||||||||||||||||
AVA Organic Net sales growth:
| Three Months Ended | Nine Months Ended | ||||||||||
| October 3, 2026 | October 3, 2026 | ||||||||||
| AVA Reported GAAP Net sales growth | 8.1 | % | 9.6 | % | |||||||
| Adjustments: | |||||||||||
Impact of foreign currency translations (1) | (1.3) | % | (1.9) | % | |||||||
Impact of acquisitions and dispositions (2) | 0.2 | % | - | % | |||||||
AVA Organic Net sales growth (4) | 7.0 | % | 7.7 | % | |||||||
(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period as well as removing realized cash flow hedge gains and losses from both the current and prior year periods.
(2)For purposes of computing AVA Organic Net sales growth, amounts directly attributable to the acquisition of Photoneo and the disposition of the robotics automation business are excluded for twelve months following or preceding the respective acquisition or disposition, respectively.
(3)AVA Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.
Third quarter 2026 compared to third quarter 2025
Total Net sales for AVA increased $50 million or 8.1% compared to the prior year, primarily due to higher sales of machine vision and printing products and favorable impact of foreign currency. Excluding the impacts of foreign currency and acquisitions and dispositions, AVA Organic Net sales increased by 7.0%.
Gross margin decreased to 49.9% in the current year compared to 50.7% for the prior year, primarily due to higher memory costs, partially offset by foreign currency favorability.
Operating income for the current year increased by 16.2% compared to the prior year.
Year to date 2026 compared to Year to date 2025
Total Net sales for AVA increased $174 million or 9.6% compared to the prior year, primarily due to higher sales of printing and machine vision products and favorable impact of foreign currency. Excluding the impacts of foreign currency and acquisitions and dispositions, AVA Organic Net sales increased by 7.7%.
Gross margin increased to 52.7% in the current year compared to 50.0% for the prior year, primarily due to favorable impacts of IEEPA tariff recoveries recognized in the second quarter, business mix, and foreign currency, partially offset by higher memory costs.
Operating income for the current year increased by 34.7% compared to the prior year.
Liquidity and Capital Resources
The primary factors that influence our liquidity include the amount and timing of cash collections from our customers, cash payments to our suppliers, capital expenditures, acquisitions, and share repurchases. Management believes that our existing capital resources, inclusive of available borrowing capacity on debt and other financing facilities and funds generated from operations, are sufficient to meet anticipated capital requirements and service our indebtedness. The following table summarizes our cash flow activities for the periods indicated (in millions):
| Nine Months Ended | |||||||||||||||||
| Cash flow provided by (used in): | October 3, 2026 | September 27, 2025 | $ Change | ||||||||||||||
| Operating activities | $ | 711 | $ | 560 | $ | 151 | |||||||||||
| Investing activities | (39) | (121) | 82 | ||||||||||||||
| Financing activities | (617) | (286) | (331) | ||||||||||||||
| Effect of exchange rates on cash balances | 2 | (1) | 3 | ||||||||||||||
| Net change in cash and cash equivalents | $ | 57 | $ | 152 | $ | (95) | |||||||||||
| Cash flow provided by (used in): | |||||||||||||||||
| Operating activities | $ | 711 | $ | 560 | $ | 151 | |||||||||||
| Less: Purchases of property, plant and equipment | (50) | (56) | 6 | ||||||||||||||
Free cash flow (Non-GAAP)(1) | $ | 661 | $ | 504 | $ | 157 | |||||||||||
(1)Free cash flow, a non-GAAP measure, is defined as Net cash provided by (used in) operating activities in a period minus purchases of property, plant and equipment (capital expenditures) made in that period.
2026 compared to 2025
The change in our cash and cash equivalents balance during the nine months ended October 3, 2026 compared to the prior year was primarily due to the following:
•$151 million increase in net operating cash inflows primarily due to higher operating profitability, including IEEPA tariff refunds.
•$82 million decrease in net investing cash outflows primarily due to the acquisition of Photoneo in the prior year.
•$331 million increase in net financing cash outflows primarily due to higher share repurchases, partially offset by net borrowings on our debt facilities.
Company Debt
The following table shows the carrying value of the Company's debt (in millions):
| October 3, 2026 | December 31, 2025 | ||||||||||
| Term Loan A | $ | 1,509 | $ | 1,575 | |||||||
| Senior Notes | 500 | 500 | |||||||||
| Revolving Credit Facility | 445 | 275 | |||||||||
| Receivables Financing Facility | 124 | 161 | |||||||||
| Total debt | $ | 2,578 | $ | 2,511 | |||||||
| Less: Debt issuance costs | (6) | (8) | |||||||||
| Less: Unamortized discounts | (1) | (2) | |||||||||
| Less: Current portion of debt | (2,077) | (141) | |||||||||
| Total long-term debt | $ | 494 | $ | 2,361 | |||||||
As of October 3, 2026, our short-term debt obligations primarily consists of our Term Loan A and Revolving Credit Facility (collectively, the "Credit Facility"), both of which are scheduled to mature on May 25, 2027. We intend to refinance the Credit Facility in the fourth quarter of 2026. The ultimate timing, structure, and terms of any such transaction will remain subject to the macroeconomic environment and prevailing conditions in the debt capital markets at the time of execution. Until a refinancing is completed, we will continue to meet our current debt service obligations using cash on hand and cash generated from operating activities.
See Note 10, Long-Term Debt in the Notes to Consolidated Financial Statements for further details related to the Company's debt instruments.
Share Repurchases
During the third quarter of 2026, the Company repurchased 229,206 shares of common stock for approximately $75 million. During the nine months ended October 3, 2026, the Company has repurchased a total of 2,697,227 shares of common stock for $643 million.
Safe Harbor
Forward-looking statements contained in this report are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors, which could cause actual results to differ materially from those expressed or implied in such forward-looking statements. When used in this document and documents referenced, the words "anticipate," "expect," "believe," "intend," "estimate," "will," "plan," "goal," "target," and "strategy" and similar expressions or future conditional verbs such as "may," "will," "should," "would," and "could" as they relate to the Company or its management are intended to identify such forward-looking statements but are not the exclusive means of identifying these statements.
Actual results may differ materially from those expressed or implied by forward-looking statements. Any forward-looking statements represent the Company's views only as of the date of this report and should not be relied upon as representing the Company's views as of any subsequent date. The forward-looking statements include, but are not limited to, the Company's financial outlook for the full year, strategy, and future business prospects. These forward-looking statements are based on current expectations, forecasts and assumptions, and are subject to the risks and uncertainties inherent in the Company's industry, market conditions, general domestic and international economic conditions, and other factors. These factors include:
•Market acceptance of the Company's products, services, and software solutions and competitors' offerings and the potential effects of emerging technologies and changes in customer requirements,
•The effect of global market conditions, including in North America, Europe, Middle East, and Africa ("EMEA"), Latin America, and Asia-Pacific regions in which we do business,
•The impact of changes in foreign exchange rates, customs duties and trade policies due to the large percentage of our sales and operations being outside the U.S.,
•The Company's ability to effectively manage manufacturing and operating costs,
•Risks related to the manufacturing of the Company's products and conducting business operations in non-U.S. countries, including the risk of depending on key suppliers who are also in non-U.S. countries,
•The Company's ability to purchase sufficient materials, parts, and components, and our ability to provide services, software, and products to meet customer demand, particularly in light of global economic conditions,
•The availability of credit and the volatility of capital markets, which may affect our suppliers, customers, and ourselves,
•Success of integrating acquisitions,
•The Company's ability to attract, retain, develop, and motivate key personnel,
•Interest rate and financial market conditions,
•Access to cash and cash equivalents held outside the U.S.,
•The effect of natural disasters, man-made disasters, public health issues (including pandemics), and cybersecurity incidents on our business, our customers or our contracted third parties,
•The impact of changes in foreign and domestic governmental policies, laws, or regulations,
•The outcome of litigation in which the Company may be involved, particularly litigation or claims related to infringement of third-party intellectual property rights, and
•The outcome of any future tax matters or tax law changes.
We encourage readers of this report to review Part II, Item 1A, "Risk Factors" in this report for further discussion of issues that could affect the Company's future results.
The Company undertakes no obligation, other than as may be required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any other reason after the date of this report.
New Accounting Pronouncements
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses, which requires disaggregated disclosure of certain categories of expenses that are included within expense captions presented on the Consolidated Statements of Operations on an annual and interim basis. This ASU will be effective for the Company's fiscal December 31, 2027 year-end and interim periods thereafter, with early adoption permitted. We are assessing the impact of this guidance on our disclosures; it will not have an impact on our results of operations, cash flows, or financial condition.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which amends the criteria for capitalizing internal-use software development costs. This ASU will be effective for the Company beginning in 2028, with early adoption permitted. While we are currently assessing the impact of this ASU, we do not expect it to have a significant impact to the Company's consolidated financial statements.
Non-GAAP Measures
The Company has provided reconciliations of the supplemental non-GAAP financial measures, as defined under the rules of the Securities and Exchange Commission, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP.
These supplemental non-GAAP financial measures - Consolidated Organic Net sales growth, CF Organic Net sales growth, AVA Organic Net sales growth, and Free cash flow - are presented because our management evaluates our financial results both including and excluding the effects of items that are not part of ongoing operations. Management believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of our business from period to period and trends in our historical operating results. These supplemental
non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with the GAAP financial measures presented.