What changed in this filing

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Item 1A. Risk Factors

2022-11-09 compared with 2022-08-09 · 75 added, 72 removed, 890 unchanged (14% of the section changed)

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Any of the following risks could have a material adverse effect on our business, financial condition, results of operations and prospects and cause the trading price of our common stock to decline:

• Our quarterly results of operations have fluctuated and are likely to continue to fluctuate and may be negatively affected by the COVID-19 pandemic, the precautions we have taken in response to the pandemic and our current hybrid return to office plan, the disruption to global supply chains and negative Macroeconomic Conditions.

• Our quarterly results of operations have fluctuated and are likely to continue to fluctuate and may be negatively affected by the COVID-19 pandemic, the precautions we have taken in response to the pandemic and our previously implemented hybrid return to office plan, the disruption to global supply chains and negative Macroeconomic Conditions.

• Our actual operating results may differ significantly from any guidance provided.

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The uncertainty caused by and the unprecedented nature of the current COVID-19 pandemic makes the long-term impact of the pandemic difficult to predict and the full extent to which it may negatively affect our industry, our supply of hardware products, our business operations or our operating results is uncertain.

Weak global economic conditions, inflation, additional business disruptions or closures and spikes or surges in COVID-19 infection, also may exacerbate the impact of the pandemic.

Weak global economic conditions, inflation, additional business

disruptions or closures and spikes or surges in COVID-19 infection, also may exacerbate the impact of the pandemic.

Further, we do not yet know the full effects of the COVID-19 pandemic on our suppliers and service providers.

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Accordingly, these potential impacts, while uncertain, could harm our business and adversely affect our operating results.

In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and

uncertainties described in this “Risk Factors” section which may materially and adversely affect our business and results of operations.

In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section which may materially and adversely affect our business and results of operations.

Our actual operating results may differ significantly from any guidance provided.

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Our precautions taken due to the COVID-19 pandemic and easing of those precautions could harm our business.

After evaluating the public health situation in the United States regarding COVID-19 including revised guidance from public health authorities, the rise in vaccinated individuals, and decline of hospitalizations due to COVID-19 in the six months ended June 30, 2022, as compared to 2020 and 2021, we have eased some of the temporary precautionary measures intended to help minimize the risk of contracting COVID-19.

We have implemented a hybrid return to office plan that includes voluntary remote workdays and mandatory in-office workdays.

Although we continue to monitor the situation and may adjust our current policies as more information and guidance become available, any precautions taken to minimize the risk of contracting COVID-19 and the implementation of our hybrid return to office plan could negatively impact our marketing efforts, slow down our recruiting efforts, or create operational or other challenges, including decreased productivity, any of which could harm our business.

After evaluating the public health situation in the United States regarding COVID-19 including revised guidance from public health authorities, the rise in vaccinated individuals, and decline of hospitalizations due to COVID-19 in the nine months ended September 30, 2022, as compared to 2020 and 2021, we have eased some of the temporary precautionary measures intended to help minimize the risk of contracting COVID-19.

We continue to follow our previously implemented hybrid return to office plan that includes voluntary remote workdays and mandatory in-office workdays.

Although we continue to monitor the situation and may adjust our current policies as more information and guidance become available, any precautions taken to minimize the risk of contracting COVID-19 and the continued following of our hybrid return to office plan could negatively impact our marketing efforts, slow down our recruiting efforts, or create operational or other challenges, including decreased productivity, any of which could harm our business.

There is no guarantee that our precautions and return to office plan will fully protect our employees or enable us to maintain our productivity and any illnesses linked or alleged to be linked to our employees or service providers, whether accurate or not, could further harm our business.

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• the impact of natural disasters such as earthquakes, hurricanes, fires, power outages, floods, epidemics, pandemics and public health crises, including COVID-19, and other catastrophic events or man-made problems such as terrorism, civil unrest and actual or threatened armed conflict, or global or regional economic, political and social conditions.

Further, as disclosed under “Item 1 – Legal Proceedings,” Vivint, Inc., or Vivint, notified us it will stop paying license fees to Alarm.com under its Patent Cross License agreement with us, which could have a material adverse effect upon our business, financial condition and results of operations and could cause our results of operations to fluctuate.

This matter is subject to ongoing arbitration and there can be no assurance that Alarm.com will be successful in these proceedings.

Fluctuations in our quarterly operating results may be particularly pronounced in the current economic environment.

Due to the foregoing factors and the other risks discussed in this Quarterly Report, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance.

Due to the foregoing factors

and the other risks discussed in this Quarterly Report, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance.

You should not consider our recent revenue growth and changes in Adjusted EBITDA or results of one quarter as indicative of our future performance.

See the "Non-GAAP Measures" section of Item 2.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measurement, for the three and six months ended June 30, 2022 and 2021.

Downturns in general economic and market conditions and reductions in spending may reduce demand for our platforms and solutions, which could harm our revenue, results of operations and cash flows.

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Our platforms and solutions may contain undetected defects in the software, infrastructure, third-party components or processes.

We have implemented a hybrid return to office plan that includes voluntary remote workdays and mandatory in-office workdays.

We continue to follow our previously implemented hybrid return to office plan that includes voluntary remote workdays and mandatory in-office workdays.

The continued remote workdays and transition back to in-office workdays may make us more vulnerable to cyber-attacks and may create operational or other challenges, any of which could harm our systems or our business.

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Although our contracts with our service provider partners limit our liability to our service provider partners for these defects, disruptions or errors, we nonetheless could be subject to litigation for actual or alleged losses to our service provider partners or our subscribers, which may require us to spend significant time and money in litigation or arbitration, or to pay significant settlements or damages.

Defending a lawsuit, regardless of its merit, could be costly, divert management's attention and affect our ability to obtain or maintain liability insurance on acceptable terms and could harm our business.

Defending a lawsuit, regardless of its merit, could be costly, divert management's attention and affect our ability to obtain or

maintain liability insurance on acceptable terms and could harm our business.

Although we currently maintain some warranty reserves, we cannot assure you that these warranty reserves will be sufficient to cover future liabilities.

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We have experienced significant growth and also have substantially expanded our operations in a short period of time.

Our revenue increased from $420.5 million in 2018 to $749.0 million in 2021 and increased from $361.4 million for the six months ended June 30, 2021 to $418.3 million for the six months ended June 30, 2022.

Our revenue increased from $420.5 million in 2018 to $749.0 million in 2021 and increased from $553.7 million for the nine months ended September 30, 2021 to $634.4 million for the nine months ended September 30, 2022.

We do not expect to achieve similar growth rates in future periods.

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If we fail to manage the expansion of our operations and infrastructure effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.

We increased our number of full-time employees from 884 as of December 31, 2018 to 1,606 as of June 30, 2022.

We increased our number of full-time employees from 884 as of December 31, 2018 to 1,699 as of September 30, 2022.

Our growth has placed, and may continue to place, a significant strain on our managerial, administrative, operational, financial and other resources.

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Our business, operations and service provider partners are subject to various U.S.

federal, state and local consumer protection laws, licensing regulation and other laws and regulations, and to similar laws and regulations in the other countries in which we operate.

federal, state and local consumer protection laws, licensing regulation and other laws and regulations, and to similar laws and regulations in the other countries in

which we operate.

Our advertising and sales practices and that of our U.S.

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A number of proposed privacy bills in other U.S.

states could place restrictions on how we and our service provider partners use personal information and market to

consumers in those states.

states could place restrictions on how we and our service provider partners use personal information and market to consumers in those states.

Other laws and regulations, including consumer protection laws, laws and regulations governing advertising and sales practices, as well as privacy and data security laws and regulations apply in the other countries in which we operate.

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In addition, while the COVID-19 pandemic continues, consumers may prefer to purchase products that they can install themselves.

If there are continuing restrictions on our service providers’ ability to meet with residential and commercial property owners in person, our ability to compete will depend on our ability to make our products available for remote installation or to make certain of our products easily installable by consumers rather than solely by our service providers.

If there are continuing restrictions on our service providers’ ability to meet with residential and commercial property owners in person, our ability to compete will depend on our ability to

make our products available for remote installation or to make certain of our products easily installable by consumers rather than solely by our service providers.

Our current competitors include providers of other technology platforms for the connected property with interactive security, including Alula (formed following the merger of ipDatatel, LLC and Resolution Products, LLC), Avigilon Corporation, Brivo Inc., Digital Monitoring Products Inc., Eagle Eye Networks Inc., Honeywell International Inc., Resideo Technologies Inc., SecureNet Technologies, LLC, Telular Corporation (acquired by AMETEK, Inc.), United Technologies Corporation, and Verkada Inc., which sell solutions to service providers, cable operators, technology retailers and other residential and commercial automation providers.

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offers connected video cameras, a connected video doorbell, and smart security devices.

offers a feature that allows some manufacturers’ connected devices and accessories, including video cameras and doorbells, to be controlled through its HomeKit service available in

Apple’s iOS operating system.

offers a feature that allows some manufacturers’ connected devices and accessories, including video cameras and doorbells, to be controlled through its HomeKit service available in Apple’s iOS operating system.

Additionally, Canary and other companies offer all in one video monitoring and awareness devices.

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If our solutions and/or upgrades fail to operate properly, our solutions could stop functioning for a period of time, which could put our users at risk.

Our ability to keep our business operating is highly dependent on the proper and efficient operation of our network operations centers and data back-up systems.

Our ability to keep our business operating is highly dependent on the proper and efficient operation of our

network operations centers and data back-up systems.

Although our network operations centers have back-up computer and power systems, if there is a catastrophic event, natural disaster, terrorist attack, security breach or other extraordinary event, we may be unable to provide our subscribers with uninterrupted monitoring service or may be unable to adequately protect confidential information and data from unauthorized access or loss.

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We cannot be certain that advances in cyber-capabilities or other developments will not compromise or breach the technology protecting the networks that access our platforms and solutions, and we can make no assurance that we will be able to detect, prevent, timely and adequately address or mitigate the negative effects of cyber-attacks or other security breaches.

We have implemented a hybrid return to office plan that includes voluntary remote workdays and mandatory in-office workdays.

We continue to follow our previously implemented hybrid return to office plan that includes voluntary remote workdays and mandatory in-office workdays.

The continued remote workdays and transition back to in-office workdays may make us more vulnerable to cyber-attacks or other security breaches.

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federal and state authorities, foreign data privacy authorities in the EU, Canada, and other countries, and private claims by companies or individuals.

A system disruption, shutdown, or loss of data may result in adverse publicity and therefore adversely affect the market's perception of the security and reliability of our services.

A system disruption, shutdown, or loss of data may result in adverse publicity

and therefore adversely affect the market's perception of the security and reliability of our services.

A cyber-attack may cause additional costs, such as investigative and remediation costs, and the costs of providing individuals and/or data owners with notice of the breach, legal fees and the costs of any additional fraud detection activities required by law, a court or a third-party.

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Any of our service provider partners may choose to offer a product from one of our competitors instead of our platforms and solutions, elect to develop their own competing solutions or simply discontinue their operations with us.

For example, we entered into a license agreement in November 2013 with Vivint Inc., or Vivint, pursuant to which we granted a license to use the intellectual property associated with our connected home solutions.

For example, we entered into a Patent Cross License agreement in November 2013 with Vivint, pursuant to which we granted a license to use the intellectual property associated with our connected home solutions.

Under the terms of this arrangement, Vivint has transitioned from selling our solutions directly to its customers to selling its own home automation product to its new customers.

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Therefore, we receive less revenue on a per customer basis from Vivint compared to our SaaS subscriber base, which may result in a lower revenue growth rate.

As disclosed under “Item 1 – Legal Proceedings,” Vivint notified us it will stop paying license fees to Alarm.com under its Patent Cross License agreement with us, which could have a material adverse effect upon our business, financial condition and results of operations.

This matter is subject to ongoing arbitration and there can be no assurance that Alarm.com will be successful in these proceedings.

Similarly, we entered into a patent license agreement with ADT pursuant to which we granted a license to use certain Alarm.com intellectual property following the termination or expiration of the initial term of our master service agreement with ADT.

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While we have developed a network of over 10,900 service provider partners in 2021 to sell, install and support our platforms and solutions, we receive a substantial portion of our revenue from a limited number of channel partners and significant customers.

During the years ended December 31, 2021, 2020 and 2019, our 10 largest revenue service provider partners accounted for

47%, 48% and 52% of our revenue, respectively.

During the years ended December 31, 2021, 2020 and 2019, our 10 largest revenue service provider partners accounted for 47%, 48% and 52% of our revenue, respectively.

ADT LLC, or ADT, represented greater than 15% but not more than 20% of our revenue in 2021, 2020 and 2019.

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We expect more and more consumer electronic and consumer appliance products to be network-aware and connected — each very likely to have its own smart device (phone or tablet) application.

Consumers may be attracted to the relatively low costs of these point products and the ability to expand their connected property control solution over time with minimal upfront costs, despite

some of the disadvantages of this approach, which may reduce demand for our connected property solutions.

Consumers may be attracted to the relatively low costs of these point products and the ability to expand their connected property control solution over time with minimal upfront costs, despite some of the disadvantages of this approach, which may reduce demand for our connected property solutions.

If so, our service provider partners may switch and offer the point products and services of competing companies, which would adversely affect our sales and profitability.

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Further, wireless carriers from time to time suffer service outages which range from local to national in scale during which security control panels may be unable to transmit life safety signals to emergency responders.

Any such wireless carrier service disruptions could materially and adversely impact our ability to provide services to our service provider partners and subscribers and result in significant costs, which could materially and adversely impact our business, results of operations and reputation.

Any such wireless carrier service disruptions could materially and adversely impact our ability to provide services to our service provider partners and subscribers and result in significant costs,

which could materially and adversely impact our business, results of operations and reputation.

In addition, product changes by wireless carriers, price increases or changes to existing contract terms or termination of our agreements could also have a material and adverse impact on our business, financial condition, cash flows and results of operations.

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In addition, global transportation disruptions have led to slower shipping times generally, while reductions in passenger air travel have also led to reduced capacity and increased costs for air freight shipments, which may continue to adversely affect the timing and cost of delivery of components, materials and products.

Any of these disruptions to our inventory and supply chain could have a material adverse effect on our business, financial condition, cash flows and results of operations.

We have several large hardware suppliers from which we procure hardware on a purchase order basis, including three key suppliers that supplied products and components of our inventory which collectively represented 62% of our hardware revenue for the six months ended June 30, 2022 (32%, 21% and 9% of hardware revenue, respectively).

Any of these disruptions to our inventory and supply chain could have a material adverse

effect on our business, financial condition, cash flows and results of operations.

We have several large hardware suppliers from which we procure hardware on a purchase order basis, including three key suppliers that supplied products and components of our inventory which collectively represented 60% of our hardware revenue for the nine months ended September 30, 2022 (35%, 19% and 6% of hardware revenue, respectively).

The failure of any of these key suppliers or their subcomponent suppliers to deliver product on time or at the contracted price would materially and adversely affect our business, financial condition, cash flows and results of operations.

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We believe part of our growth will continue to be driven by acquisitions of other companies or their technologies, assets and businesses.

For example, on October 21, 2019 , we acquired 85% of the issued and outstanding shares of capital stock of PC Open Incorporated, doing business as OpenEye, and on December 14, 2020 , we acquired Shooter Detection Systems, LLC.

For example, on September 23, 2022, we acquired 85% of the issued and outstanding shares of capital stock of Noonlight, Inc., on October 21, 2019 , we acquired 85% of the issued and outstanding shares of capital stock of PC Open Incorporated, doing business as OpenEye, and on December 14, 2020 , we acquired Shooter Detection Systems, LLC.

Additionally, on December 16, 2021, our EnergyHub subsidiary acquired certain assets of an unrelated third party.

Substantially all of the acquired assets consisted of developed technology.

We have also acquired other businesses in the past.

For example, we acquired the assets of HiValley Technology Inc.

in March 2015, assets of ObjectVideo, Inc.

We have also acquired other businesses in the past, including the assets of HiValley Technology Inc.

in March 2015, the assets of ObjectVideo, Inc.

in January 2017 and Icontrol's Connect and Piper business units in March 2017.

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We obtain our data from a variety of sources, including our service provider partners, our subscribers and third-party providers.

We cannot assure you that the data we require for our proprietary data sets will be available from these sources in the future or that the cost of such data will not increase.

We cannot assure that the data we require for our proprietary data sets will be available from these sources in the future or that the cost of such data will not increase.

The United States federal government and various state governments have adopted or proposed limitations on the collection, distribution, storage and use of personal information.

Several foreign jurisdictions, including the European Union and the United Kingdom, have adopted legislation (including directives or regulations) that is more rigorous governing data collection and storage than in the United States.

Several foreign jurisdictions in which we do business, including the European Union and the United Kingdom, have adopted legislation (including directives or regulations) that is more rigorous governing data collection and storage than in the United States.

On June 28, 2018, the State of California enacted the California Consumer Privacy Act of 2018, or CCPA, which took effect on January 1, 2020.

The CCPA governs the collection, sale and use of California residents’ personal information, and significantly impacts businesses’ handling of personal information and privacy policies and procedures.

The CCPA, as well as data privacy laws that have been adopted or proposed in other states, may limit our ability to use, process and store certain data, which may decrease adoption of our platforms and solutions, affect our relationships with service provider partners and our suppliers, increase our costs for compliance, and harm our business, financial condition, cash flows and results of operations.

The CCPA, as well as data privacy laws that have been adopted or proposed in other states such as Virginia, Colorado, Connecticut and Utah, may limit our ability to use, process and store certain data, which may decrease adoption of our platforms and solutions, affect our relationships with service provider partners and our suppliers, increase our costs for compliance, and harm our business, financial condition, cash flows and results of operations.

Specifically, the CCPA may subject us to regulatory fines by the State of California, individual claims, class actions, and increased commercial liabilities.

In addition, the California Privacy Rights Act of 2020, or CPRA, was approved by California voters and will be effective as of January 1, 2023.

The CPRA will, among other things, amend the CCPA by creating additional privacy rights for California consumers and additional obligations on businesses, which could subject us to additional compliance costs as well as potential fines, individual claims, class actions and commercial liabilities.

The CPRA will, among other things, amend the CCPA by creating additional privacy rights for California consumers (including employees) and additional obligations on businesses, which could subject us to additional compliance costs as well as potential fines, individual claims, class actions and commercial liabilities.

European data protection laws, including the General Data Protection Regulation, or GDPR, generally restrict the transfer of personal data from Europe, including the European Economic Area, or EEA, UK and Switzerland, to the United States and most other countries unless the parties to the transfer have implemented specific safeguards to protect the transferred personal data.

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We have until December 27, 2022 to implement the new SCCs with all of our EEA customers and vendors who are sub-processors and receive access to personal data from our EEA customers.

Moreover, the UK data protection regulator developed new SCCs for transferring personal data from the UK that were finalized in March 2022, and we will be required to execute the new UK SCCs with our current and future customers in the UK.

Moreover, the UK data protection

regulator developed new SCCs for transferring personal data from the UK that were finalized in March 2022, and we will be required to execute the new UK SCCs with our current and future customers in the UK.

Our transition from relying on the EU-U.S.

Privacy Shield to adopting, implementing and complying with the new SCCs may slow down our contracting process and increase our legal and compliance costs (including an increase in exposure to substantial fines under EEA data protection laws as well as injunctions against processing or transferring personal data from the EEA), which could adversely affect our cash flows and financial condition.

Privacy Shield to adopting, implementing and complying with the new SCCs may slow down our contracting process and increase our legal and compliance costs (including an increase in exposure to substantial fines under EEA data protection laws, increasing requests from our customers for compliance-related product changes, as well as injunctions against processing or transferring personal data from the EEA), which could adversely affect our cash flows and financial condition.

SCCs with additional safeguards and obligations put in place by EEA data protection authorities or customers may impose new restrictions on our business and could affect our operations in the EEA.

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The inability to import personal data from the EEA, UK or Switzerland may require us to increase our data processing capabilities in those jurisdictions at significant expense.

Various other non-EU jurisdictions may also choose to impose data localization laws limiting the transfer of personal data out of their

respective jurisdictions, or our EEA, UK or Swiss service provider partners may require similar contractual restrictions regarding data localization.

Various other non-EU jurisdictions may also choose to impose data localization laws limiting the transfer of personal data out of their respective jurisdictions, or our EEA, UK or Swiss service provider partners may require similar contractual restrictions regarding data localization.

Such laws or contractual restrictions may increase our costs for compliance, and harm our business, financial condition, cash flows and results of operations.

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We have indemnity obligations to certain of our service provider partners for certain claims regarding our platforms and solutions, including security breach, product recall, epidemic failure, and product liability claims.

As a result, in the case of any

such claims against these service provider partners, we could be required to indemnify them for losses resulting from such claims or to refund amounts they have paid to us.

As a result, in the case of any such claims against these service provider partners, we could be required to indemnify them for losses resulting from such claims or to refund amounts they have paid to us.

We expect that some of our service provider partners may seek indemnification from us in the event that such claims are brought against them.

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Goodwill and other identifiable intangible assets represent a significant portion of our total assets, and we may never realize the full value of our intangible assets.

As of June 30, 2022, we had $195.2 million of goodwill and identifiable intangible assets.

As of September 30, 2022, we had $238.0 million of goodwill and identifiable intangible assets.

Goodwill and other identifiable intangible assets are recorded at fair value on the date of acquisition.

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Comprehensive tax reform bills could adversely affect our business and financial condition.

Proposed legislative changes in the U.S.

and other countries could increase our tax liability and adversely affect our after-tax profitability.

For example, the House of Representatives has introduced legislation proposing an increase to the U.S.

corporate tax rate from 21% to 26.5% in addition to other changes in U.S.

tax law that would increase our U.S.

Additionally, the Biden Administration has introduced proposals to increase U.S.

taxation of our international business operations by reducing the deduction for Foreign-Derived Intangible Income, or FDII.

As these proposals have not yet been passed by Congress and enacted into law, we have not yet determined the impact on our effective tax rate, though we continue to monitor the progression of these, and other, tax proposals.

Current economic and political considerations make tax rules in the United States and other applicable jurisdictions subject to significant change, and changes in applicable tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our income tax expense and profitability.

The Group of Seven countries has proposed a global minimum tax of 15%, which is supported by leadership within the U.S.

government and anticipated to become effective in 2023.

Additionally, there is a continued interest within the European Union, Canada and other jurisdictions to apply new taxes on companies participating in the digital economy.

In August 2022, the Inflation Reduction Act of 2022 was enacted in the United States which, among other provisions, includes a minimum 15.0% tax on companies that have a three-year average annual adjusted financial statement income of more than $1.0 billion and a 1.0% excise tax on the value of net corporate stock repurchases.

Both provisions are effective for tax years beginning after December 31, 2022.

We do not currently believe the 15.0% corporate minimum tax or the 1.0% tax on net corporate stock repurchases will have a material impact on our financial condition or results of operations.

Current economic and political considerations make additional tax rules in the United States and other applicable jurisdictions subject to significant change, and changes in applicable tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our income tax expense and profitability.

There is a continued interest within the European Union, Canada and other jurisdictions to apply new taxes on companies participating in the digital economy.

Such tax rule changes could materially and adversely affect our cash flows, deferred tax assets and financial results.

Beginning in 2022, the TCJA eliminated the option to immediately deduct research and development expenditures in the year incurred pursuant to Section 174.

The amended provision under Section 174 requires taxpayers to capitalize and amortize these expenditures over five years for research performed in the U.S.

As currently in effect, Section 174 requires taxpayers to capitalize and amortize these expenditures over five years for research performed in the U.S.

and over 15 years for research performed outside the U.S.

While it is possible that Congress may defer, modify or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified or repealed.

If this provision is not deferred, modified or repealed with retroactive effect to January 1, 2022, we estimate it would significantly increase our cash taxes payable and reduce our cash flow from operating activities in 2022.

While there are ongoing discussions that Congress may defer, modify or repeal this provision, potentially with retroactive effect, we have no assurance that this provision will be deferred, modified or repealed.

This estimate is based on the limited information that is currently available and is subject to change.

We do not expect the amended provision under Section 174 to impact our tax rate, our results of operations or our Adjusted EBITDA.

The actual impact on 2022 cash flow from operating activities will depend on whether and when we make a payment and if this provision is deferred, modified or repealed by Congress, including if retroactively, and the amount of research and development expenses paid or incurred in 2022, among other factors.

While the largest impact will be to cash flow from operating activities, the impact would continue over the five-year amortization period, but would decrease over the period and is expected to be immaterial in year six.

The actual impact on 2022 cash flow from operating activities will depend on whether and when we make an associated tax payment and if this provision is deferred, modified or

repealed by Congress, including if retroactively, and the amount of research and development expenses paid or incurred in 2022, among other factors.

While the largest impact will be to cash flow from operating activities, the impact would continue over the five-year amortization period, but would decrease over that period and is expected to be immaterial beginning in year six.

We may be subject to additional tax liabilities, which would harm our results of operations.

We are subject to income, sales, use, value added and other taxes in the United States and other countries in which we conduct business, which laws and rates vary greatly by jurisdiction.

Certain jurisdictions in which we do not collect sales, use, value added or other taxes on our sales may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect such taxes in the future.

Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are subject to potential evolution.

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fines, which may be imposed on us and responsible employees or managers;

and, in extreme cases, the incarceration of responsible employees or managers.

and, in extreme cases, the incarceration

of responsible employees or managers.

In addition, if our service provider partners fail to obtain appropriate import, export or re-export licenses or authorizations, we may also be adversely affected through reputational harm and penalties.

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Even though we take precautions to prevent our platforms and solutions from being shipped or provided to U.S.

sanctions targets, our

platforms and solutions could be shipped to those targets or provided by third-parties despite such precautions.

sanctions targets, our platforms and solutions could be shipped to those targets or provided by third-parties despite such precautions.

Any such shipment could have negative consequences, including government investigations, penalties and reputational harm.

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We anticipate that our efforts to operate and continue to expand our business internationally will entail additional costs and risks as we establish our international offerings and develop relationships with service provider partners to market, sell, install, and support our platforms, solutions and brand in other countries.

Revenue in countries outside of North America accounted for 2% and 4% of our total revenue for the six months ended June 30, 2022 and 2021, respectively.

Revenue in countries outside of North America accounted for 4% and 3% of our total revenue for the nine months ended September 30, 2022 and 2021, respectively.

We have limited experience in selling our platforms and solutions in international markets outside of North America or in conforming to the local cultures, standards, or policies necessary to successfully compete in those markets, and we may be required to invest significant resources in order to do so.

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If our products are deemed to be subject to additional duties and taxes as determined by a court or governmental agency, we may suffer additional hardware revenue margin erosion or be required to raise our prices on certain imported products.

There can be no assurance that we will not experience a disruption in our business or harm to our financial condition related to these or other changes in trade practices, and any changes to our operations or our sourcing strategy in order to mitigate any such tariff costs could be complicated, time-consuming, and costly.

strategy in order to mitigate any such tariff costs could be complicated, time-consuming, and costly.

Furthermore, our business may be adversely affected by retaliatory trade measures taken by China and other countries, which could materially harm our business, financial condition and results of operations.

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Many of these policies are highly complex and involve many assumptions, estimates and judgments.

A change in accounting standards or practices, in particular with respect to revenue recognition, could harm our operating results and may even affect our reporting

of transactions completed before the change is effective.

A change in accounting standards or practices, in particular with respect to revenue recognition, could harm our operating results and may even affect our reporting of transactions completed before the change is effective.

GAAP rules are subject to interpretation by the FASB, the SEC and other various bodies formed to promulgate and interpret appropriate accounting principles.

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Even if we were to prevail in any of these matters, ongoing litigation could continue to be costly and time-consuming, divert the attention of our management and key personnel from our business operations and dissuade potential customers from purchasing our solution, which would also materially harm our business.

During the course of each of these litigation matters, we anticipate announcements of the results of hearings and motions, and other interim developments related to the litigation matters at hand.

During the course of each of these litigation matters, we

anticipate announcements of the results of hearings and motions, and other interim developments related to the litigation matters at hand.

If securities analysts or investors regard these announcements as negative, the market price of our common stock may decline.

58 unchanged sentences

Moreover, some holders of shares of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders.

We have also registered shares of common stock that we may issue under our employee equity incentive plans.

We have also registered shares of

common stock that we may issue under our employee equity incentive plans.

Accordingly, these shares may be able to be sold freely in the public market upon issuance as permitted by any applicable vesting requirements.

66 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors