Risks Related to Our Business and Industry
−Removed: Our business and results of operations may be negatively affected by the COVID-19 pandemic.
−Removed: The COVID-19 pandemic has negatively impacted the global economy and global supply chains, and created significant disruption of global financial markets.
−Removed: Governments, public institutions and other organizations in many countries and localities where COVID-19 has been detected have taken certain emergency measures and may from time to time take additional emergency measures, to combat its spread, resurgences and variants, including imposing lockdowns, shelter-in-place orders, quarantines, restrictions on travel and gatherings and the extended shutdown of non-essential businesses that cannot be conducted remotely.
−Removed: These emergency measures remain in place to varying degrees.
−Removed: While vaccines have been approved for use in the United States and in many other countries, and vaccination efforts are well underway, it remains difficult to assess or predict the ultimate duration and economic impact of the COVID-19 pandemic due to a resurgence of COVID-19 and the emergence and severity of COVID-19 variants.
−Removed: To date, the COVID-19 pandemic has, and it may continue to, disrupt our hardware supply chain, including limited inventory availability, increased lead times, and shipping delays, as well as cause disruptions to and restrictions on our service providers’ ability to travel and to meet with residential and commercial property owners who use our solutions, cancellations or postponement of certain events, or temporary closures of our facilities or the facilities of our service providers or suppliers.
−Removed: Further, given global supply chain shortages, our service providers may be unable to source other hardware required for installation, such as security control panels and related peripherals, which could result in reduced demand for our products and services.
−Removed: See “We depend on our suppliers.
−Removed: The loss of any key supplier or the inability of a key supplier to deliver their products to us on time or at the contracted price would materially and adversely affect our business, financial condition, cash flows and results of operations” below.
−Removed: The COVID-19 pandemic has also resulted in significant volatility in global financial markets, which may reduce our ability to access capital and which could negatively affect our liquidity in the future.
−Removed: This economic and financial uncertainty may also negatively impact pricing for our platform or cause customers to reduce or postpone purchasing our solutions, which may, in turn, negatively affect our revenue, cash flows, results of operations and financial condition.
−Removed: The increased uncertainty and volatility in global markets may also negatively impact our growth opportunities whether organically or through acquisitions.
−Removed: Because our service provider partners have indicated that they typically have three to five-year service contracts with residential and commercial property owners who use our solutions, any such adverse effects may not be fully reflected in our results of operation until future periods.
−Removed: 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.
−Removed: Weak global economic conditions, additional business disruptions or closures and spikes or surges in COVID-19 infection, also may exacerbate the impact of the pandemic.
−Removed: Further, we do not yet know the full effects of the COVID-19 pandemic on our suppliers and service providers.
−Removed: However, if the economy fails to fully recover or there are additional shutdowns of non-essential businesses due to a resurgence of COVID-19 and the emergence and severity of COVID-19 variants, our SaaS and license revenue growth rate may be lower in future periods, with a corresponding reduction in hardware revenue, if some consumers or small businesses defer or cancel previously anticipated purchases.
−Removed: The ultimate impact to our results will depend to a large extent on currently unknowable developments, including the length of time the disruption and uncertainty caused by COVID-19 will continue, which will, in turn, depend on, among other things, the actions taken by authorities and other entities to effect a widespread roll-out of the available vaccines or otherwise contain COVID-19 or treat its impact, including the impact of any re-opening plans, additional closures and spikes or surges in COVID-19 infection, the emergence and severity of COVID-19 variants and individuals’ and companies’ risk tolerance regarding health matters going forward, all of which are beyond our control.
−Removed: Accordingly, these potential impacts, while uncertain, could harm our business and adversely affect our operating results.
−Removed: 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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In particular, guidance relating to the anticipated results of operations of an acquired business is inherently more speculative in nature than other guidance as management will, necessarily, be less familiar with the business, procedures and operations of the acquired business.
−Removed: Similarly, guidance offered in
−Removed: periods of extreme uncertainty, such as the uncertainty caused by the COVID-19 pandemic and the evolving responses to the resulting public health crisis, is inherently more speculative in nature than guidance offered in periods of relative stability.
+Added: Similarly, guidance offered in periods of extreme uncertainty, such as the uncertainty caused by the COVID-19 pandemic, the evolving responses to the resulting public health crisis and geopolitical tensions, in particular Russia’s incursion into Ukraine, is inherently more speculative in nature than guidance offered in periods of relative stability.
Accordingly, any guidance with respect to our projected financial performance is necessarily only an estimate of what management believes is realizable as of the date the guidance is given.
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If our actual results of operations fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.
−Removed: We have taken certain precautions due to the COVID-19 pandemic that could harm our business.
−Removed: In light of the uncertain and rapidly evolving situation relating to the spread of COVID-19 and shelter-in-place orders in many of the locations we have offices or other facilities, we have taken temporary precautionary measures intended to help minimize the risk of COVID-19 to our employees, service providers and subscribers, as well as the communities in which we participate.
−Removed: These precautionary measures could negatively impact our business.
−Removed: In particular, we have enabled substantially all of our employees to work remotely in compliance with relevant government advice, have suspended all non-essential travel for our employees, are canceling, postponing or limiting company-sponsored events, employee attendance at industry events and in-person work-related meetings.
−Removed: Although we continue to monitor the situation and may adjust our current policies as more information and guidance become available, temporarily suspending travel and shifting non-essential function employees to work-from-home 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.
−Removed: Though we are taking these precautionary measures as well as preparing our systems for the likelihood of increased cybersecurity threats, there is no guarantee that our precautions 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.
−Removed: The full extent to which COVID-19 and our precautionary measures related thereto may impact our business will depend on future developments, which are highly uncertain and cannot be predicted at this time.
Our quarterly results of operations have fluctuated and are likely to continue to fluctuate.
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Fluctuations in our results of operations may be due to a number of factors, including:
−Removed: • the portion of our revenue attributable to software as a service, or SaaS, and license versus hardware and other sales;
+Added: • the portion of our revenue attributable to SaaS and license versus hardware and other sales;
• our ability to manage the businesses we have acquired, and to integrate and manage any future acquisitions of businesses;
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• the strength of regional, national and global economies;
−Removed: • the impact of natural disasters such as earthquakes, hurricanes, fires, power outages, floods, epidemics, pandemics, including COVID-19, and other catastrophic events or man-made problems such as terrorism or global or regional economic, political and social conditions.
−Removed: Fluctuations in our quarterly operating results may be particularly pronounced in the current economic environment due to the uncertainty caused by and the unprecedented nature of the current COVID-19 pandemic.
+Added: • 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.
+Added: Further, as disclosed under “Item 3 – Legal Proceedings,” Vivint, Inc., or Vivint, has stopped paying license fees to Alarm.com under its Patent Cross License Agreement with us, which is having a material adverse effect upon our business, financial condition and results of operations and is causing our results of operations to fluctuate.
+Added: This matter is subject to ongoing arbitration and there can be no assurance that Alarm.com will be successful in these proceedings.
+Added: 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 Annual Report, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance.
−Removed: You should not consider our recent revenue growth and changes in Adjusted EBITDA or results of one quarter as indicative of our future performance.
+Added: For the same reason, 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 7.
−Removed: "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 years ended December 31, 2021, 2020 and 2019.
+Added: "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 from net income, the most directly comparable GAAP measurement, for the years ended December 31, 2022, 2021 and 2020.
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.
Our revenue, results of operations and cash flows depend on the overall demand for our platforms and solutions.
−Removed: Negative conditions in the general economy both in the United States and abroad, including conditions resulting from the COVID-19 pandemic, changes in gross domestic product growth, financial and credit market fluctuations, energy costs, international trade relations and other geopolitical issues, the availability and cost of credit and the global housing and mortgage markets could cause a decrease in consumer discretionary spending and business investment and diminish growth expectations in the U.S.
+Added: Negative Macroeconomic Conditions in the general economy both in the United States and abroad, including conditions resulting from the COVID-19 pandemic, inflation, changes in gross domestic product growth, financial and credit market fluctuations, energy costs, international trade relations and other geopolitical tensions, the availability and cost of credit, rising interest rates and the global housing and mortgage markets could cause a decrease in consumer discretionary spending and business investment and diminish growth expectations in the U.S.
economy and abroad.
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Likewise, consumer bankruptcies can detrimentally affect the business stability of our service provider partners.
−Removed: The current COVID-19 pandemic has caused significant uncertainty and volatility in global markets, which has and may continue to cause consumer discretionary spending to decline for an unknown period of time.
+Added: The current Macroeconomic Conditions have caused significant uncertainty and volatility in global markets, which has and may continue to cause consumer discretionary spending to decline for an unknown period of time.
A prolonged economic slowdown and a material reduction in new home construction and renovation projects may result in diminished sales of our platforms and solutions.
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Our platforms and solutions may contain undetected defects in the software, infrastructure, third-party components or processes.
−Removed: In addition, due to the COVID-19 pandemic, we have enabled substantially all of our employees to work remotely which 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.
+Added: We continue to follow our previously implemented hybrid return to office plan that includes voluntary remote workdays and mandatory in-office workdays.
+Added: 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.
Although we have taken precautionary measures to prepare for these threats and challenges, there is no guarantee that our precautions will fully protect our systems.
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Although we currently maintain some warranty reserves, we cannot assure you that these warranty reserves will be sufficient to cover future liabilities.
−Removed: Our business is subject to the risks of earthquakes, hurricanes, fires, power outages, floods, pandemics, natural disasters and other catastrophic events, and to interruption by man-made problems such as terrorism or global or regional economic, political and social conditions.
−Removed: A significant natural disaster, such as an earthquake, hurricane, fire, flood, or a public health pandemic, such as COVID-19, or a significant power outage could harm our business, financial condition, cash flows and results of operations.
+Added: Our business and results of operations may be negatively affected by the COVID-19 pandemic.
+Added: The COVID-19 pandemic has negatively impacted the global economy and global supply chains, and created significant disruption of global financial markets.
+Added: Governments, public institutions and other organizations in many countries and localities have previously taken and may in the future take certain emergency measures to combat the spread of COVID-19 and its variants, including imposing lockdowns, shelter-in-place orders, quarantines, restrictions on travel and gatherings and the extended shutdown of non-essential businesses that cannot be conducted remotely.
+Added: These emergency measures remain in place to varying degrees.
+Added: It remains difficult to assess or predict the ultimate duration and economic impact of the COVID-19 pandemic due to a resurgence of COVID-19 and the emergence and severity of COVID-19 variants.
+Added: To date, the COVID-19 pandemic has, and it may continue to, disrupt our hardware supply chain, including limited inventory availability, increased lead times, and shipping delays, as well as cause disruptions to and restrictions on our service providers’ ability to travel and to meet with residential and commercial property owners who use our solutions, cancellations or postponement of certain events, or temporary closures of our facilities or the facilities of our service providers or suppliers.
+Added: Further, given increased lead times and other global supply chain challenges, our service providers may be unable to source other hardware required for installation, such as security control panels and related peripherals, which could result in reduced demand for our products and services.
+Added: See “We depend on our suppliers.
+Added: The loss of any key supplier or the inability of a key supplier to deliver their products to us on time or at the contracted price would materially and adversely affect our business, financial condition, cash flows and results of operations.” below.
+Added: The COVID-19 pandemic has also resulted in significant volatility in global financial markets, which may reduce our ability to access capital and which could negatively affect our liquidity in the future.
+Added: This economic and financial uncertainty may also negatively impact pricing for our platform or cause customers to reduce or postpone purchasing our solutions, which may, in turn, negatively affect our revenue, cash flows, results of operations and financial condition.
+Added: The increased uncertainty and volatility in global markets may also negatively impact our growth opportunities whether organically or through acquisitions.
+Added: Because our service provider partners have indicated that they typically have three- to five-year service contracts with residential and commercial property owners who use our solutions, any such adverse effects may not be fully reflected in our results of operation until future periods.
+Added: 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.
+Added: 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.
+Added: Further, we do not yet know the full effects of the COVID-19 pandemic on our suppliers and service providers.
+Added: However, if the economy fails to fully recover or there are additional shutdowns of non-essential businesses due to a resurgence of COVID-19 and the emergence and severity of COVID-19 variants, our SaaS and license revenue growth rate may be lower in future periods, with a corresponding reduction in hardware revenue, if some consumers or small businesses defer or cancel previously anticipated purchases.
+Added: The ultimate impact to our results will depend to a large extent on currently unknowable developments, including the length of time the disruption and uncertainty caused by COVID-19 will continue, which will, in turn, depend on, among other things, the actions taken by authorities and other entities to continue to effect a widespread roll-out of the available vaccines or otherwise contain COVID-19 or treat its impact, including the impact of any re-opening plans, additional closures and spikes or surges in COVID-19 infection, the emergence and severity of COVID-19 variants and individuals’ and companies’ risk tolerance regarding health matters going forward, all of which are beyond our control.
+Added: Accordingly, these potential impacts, while uncertain, could harm our business and adversely affect our operating results.
+Added: 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.
+Added: Our precautions taken due to the COVID-19 pandemic and easing of those precautions could harm our business.
+Added: 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 during the year ended December 31, 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.
+Added: We continue to follow our previously implemented hybrid return to office plan that includes voluntary remote workdays and mandatory in-office workdays.
+Added: 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.
+Added: 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.
+Added: The full extent to which COVID-19 and any measures related thereto may impact our business will depend on future developments, which are highly uncertain and cannot be predicted at this time.
+Added: Our business is subject to the risks of earthquakes, hurricanes, fires, power outages, floods, pandemics and public health crises, natural disasters and other catastrophic events, and to interruption by man-made problems such as terrorism, civil unrest and actual or threatened armed conflict, or global or regional economic, political and social conditions.
+Added: A significant natural disaster, such as an earthquake, hurricane, fire, flood, pandemic, or a public health crisis, such as COVID-19, or a significant power outage could harm our business, financial condition, cash flows and results of operations.
The impact of climate change may increase these risks due to changes in weather patterns, such as increases in storm intensity and frequency, sea-level rise, melting of permafrost and temperature extremes in areas where we conduct our business.
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To the extent that any of the above results in delays or cancellations of orders, or delays in the manufacture, deployment or shipment of our platforms and solutions, our business, financial condition, cash flows and results of operations would be harmed.
+Added: Geopolitical conditions, including trade disputes and direct or indirect acts of war or terrorism, could have an adverse effect on our operations and financial results.
+Added: Since we operate on a global basis, our operations could be disrupted by geopolitical conditions, trade disputes, international boycotts and sanctions, political and social instability, acts of war, terrorist activity or other similar events.
+Added: From time to time, we could have a large investment in a particular asset type, a large revenue stream associated with a particular customer or industry, or a large number of customers located in a particular geographic region.
+Added: A discrete event impacting a specific asset type, customer, industry, or region in which we have a concentrated exposure could negatively impact our results of operations.
+Added: For example, in February 2022 Russia initiated military action against Ukraine.
+Added: In response, the U.S.
+Added: and certain other countries imposed sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations, and the U.S.
+Added: and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen.
+Added: It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, the movement of refugees, and the measures and retaliatory actions taken by the U.S.
+Added: and other countries in respect thereof as well as any counter measures or retaliatory actions by Russia or Belarus in response, including, for example, potential cyberattacks or the disruption of energy exports, is likely to cause regional instability, geopolitical shifts, and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy.
+Added: The situation remains uncertain, and while it is difficult to predict the full impact of any of the foregoing, the conflict and actions taken in response to the conflict could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.
We may not sustain our growth rate and we may not be able to manage any future growth effectively.
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From time to time, we are involved in legal proceedings where a negative outcome, including an adverse litigation judgment or settlement, could expose us to monetary damages or limit our ability to operate our business, resulting in a material adverse effect on our business, financial condition, cash flows and results of operations.
−Removed: We are involved and have been involved in the past in legal proceedings from time to time, including claims directly against us or claims against certain of our service provider partners where we have agreed to indemnify those service provider partners.
+Added: We are involved and have been involved in the past in legal proceedings from time to time, including claims directly against us or claims against certain of our service provider partners that we have agreed to indemnify.
For example, on June 2, 2015, Vivint filed a lawsuit against us alleging that our technology directly and indirectly infringes six patents purchased by Vivint.
−Removed: On January 10, 2022, EcoFactor, Inc., or EcoFactor, filed a lawsuit against us in U.S.
−Removed: District Court, District of Oregon, alleging Alarm.com’s products and services directly and indirectly infringe five U.S.
+Added: On January 10, 2022, EcoFactor, Inc., or EcoFactor, filed a lawsuit against us alleging Alarm.com’s products and services directly and indirectly infringe five U.S.
patents owned by EcoFactor.
−Removed: On July 22, 2021, Causam Enterprises, Inc., or Causam, filed a lawsuit against us in U.S.
−Removed: District Court, Western District of Texas, alleging that Alarm.com’s smart thermostats infringe four U.S.
+Added: On July 22, 2021, Causam Enterprises, Inc., or Causam, filed a lawsuit against us alleging that Alarm.com’s smart thermostats infringe four U.S.
patents owned by Causam.
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International Trade Commission, or ITC, naming Alarm.com Incorporated, Alarm.com Holdings, Inc., and EnergyHub, Inc., among others, as proposed respondents.
−Removed: The complaint alleges infringement of the same four patents Causam asserted in district court.
+Added: The complaint alleges infringement of the same four patents Causam asserted in court.
See the section of this Annual Report titled "Legal Proceedings" for additional information regarding each of these matters and the other legal proceedings we are involved in.
−Removed: We may not be able to accurately assess the risks related to any of these suits, and we may be unable to accurately assess our level of exposure as the results of any litigation, investigations and other legal proceedings are inherently unpredictable and expensive.
+Added: We may not be able to accurately assess the risks related to any of these suits, and we may be unable to accurately assess our level of exposure as the results of any litigation, investigations and other legal proceedings are inherently unpredictable.
Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, damage our reputation, require significant amounts of management time and divert significant resource.
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states regulate our, and our service provider partners’, use, collection, and disclosure of subscribers’ personal information.
−Removed: A number of proposed privacy bills in other U.S.
+Added: A number of proposed privacy bills in
states could place restrictions on how we and our service provider partners use personal information and market to consumers in those states.
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See “Evolving government and industry regulation and changes in applicable laws relating to the Internet and data privacy may increase our expenditures related to compliance efforts or otherwise limit the solutions we can offer, which may harm our business and adversely affect our financial condition” below.
+Added: Furthermore, the SEC proposed expansive rules requiring public companies to disclose information about the material impact of climate change on their business, as well as information about companies’ governance, risk management and strategy related to climate risk.
+Added: The SEC has also proposed rules to enhance and standardize disclosures regarding cybersecurity risk management, strategy, governance and cybersecurity incident reporting by public companies.
Changes in laws or regulations could require us to change the way we operate, which could increase costs or otherwise disrupt operations.
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Further, if these laws and regulations were to change or if we fail to comply with such laws and regulations as they exist today or in the future, our business, financial condition, cash flows and results of operations could be materially and adversely affected.
−Removed: The markets in which we participate are highly competitive and many companies, including large technology companies, broadband and security service providers and other managed service providers, are actively targeting the home automation, security monitoring, video monitoring and energy management markets.
+Added: The markets in which we participate are highly competitive and many companies, including large technology companies, broadband and security service providers and other managed service providers, are actively targeting the home and business automation, security monitoring, video monitoring and energy management markets.
If we are unable to compete effectively with these companies, our sales and profitability could be adversely affected.
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and SimpliSafe, Inc.
−Removed: In addition, our service provider partners compete with security solutions sold directly to subscribers, as well as managed service providers, such as cable television, telephone and broadband companies like AT&T Inc., Comcast Cable Communications, LLC and Rogers Communications, Inc., and providers of point products, including Google Inc.'s Nest Labs, Inc.
+Added: In addition, our service provider partners compete with security solutions sold directly to subscribers, as well as managed service providers, such as cable television, telephone and broadband companies like Comcast Cable Communications, LLC and Rogers Communications, Inc., and providers of point products, including Google Inc.'s Nest Labs, Inc.
Amazon.com offers Amazon Home Services security packages with bundled equipment and professional installation, and Amazon Key, a security camera and smart lock integration feature.
−Removed: Ring Inc., owned by Amazon.com, offers a connected video doorbell, video cameras and an integrated security system, Ring Alarm.
+Added: Ring Inc., owned by Amazon.com, offers a connected video
+Added: doorbell, video cameras and an integrated security system, Ring Alarm.
Samsung's SmartThings offers a security system and a home automation and awareness hub.
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Our current and potential competitors may also establish cooperative relationships among themselves or with third parties and rapidly acquire significant market share.
−Removed: competition could also result in price reductions and loss of market share, any of which could result in lower revenue and negatively affect our ability to grow our business.
+Added: Increased competition could also result in price reductions and loss of market share, any of which could result in lower revenue and negatively affect our ability to grow our business.
Aggressive business tactics by our competitors may reduce our revenue.
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federal and state authorities, foreign data privacy authorities in the European Union, or the EU, Canada, and other countries, and/or private claims by companies or individuals.
−Removed: If a malfunction or security breach results in a wider or sustained disruption, it could have a material adverse effect on our reputation, business, financial condition, cash flows or results of operations.
+Added: If a malfunction or
+Added: security breach results in a wider or sustained disruption, it could have a material adverse effect on our reputation, business, financial condition, cash flows or results of operations.
Failure to maintain the security of our information and technology networks, including information relating to our service provider partners, subscribers and employees, could adversely affect us.
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The legal, regulatory and contractual environment surrounding information security, privacy and credit card fraud is constantly evolving and companies that collect and retain such information are under increasing attack by cyber-criminals around the world.
−Removed: Further, as the regulatory focus on privacy issues continues to increase and worldwide laws and regulations
−Removed: concerning the protection of data and personal information expand and become more complex, these potential risks to our business will intensify.
+Added: Further, as the regulatory focus on privacy issues continues to increase and worldwide laws and regulations concerning the protection of data and personal information expand and become more complex, these potential risks to our business will intensify.
A significant actual or potential theft, loss, fraudulent use or misuse of service provider partner, subscriber, employee or other personally identifiable data, whether by third parties or as a result of employee malfeasance or otherwise, non-compliance with our contractual or other legal obligations regarding such data or a violation of our privacy and security policies with respect to such data could result in loss of confidential information, damage to our reputation, early termination of our service provider partner contracts, litigation, regulatory investigations or actions and other liabilities or actions against us, including significant fines by U.S.
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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.
−Removed: In addition, due to the COVID-19 pandemic, we have enabled substantially all of our employees to work remotely which may make us more vulnerable to cyber-attacks or other security breaches.
+Added: We continue to follow our previously implemented hybrid return to office plan that includes voluntary remote workdays and mandatory in-office workdays.
+Added: The continued remote workdays and transition back to in-office workdays may make us more vulnerable to cyber-attacks or other security breaches.
+Added: Furthermore, cyber-attacks may potentially increase following Russia’s incursion into Ukraine.
Security breaches of, or sustained attacks against, our networks and infrastructure could create system disruptions and shutdowns that could result in disruptions to our operations or unauthorized access to or loss of our data.
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In order for us to maintain our current revenue sources and grow our revenues, we must effectively manage and grow relationships with our service provider partners.
−Removed: Recruiting and retaining qualified service provider partners and training them in our technology and solutions requires significant time and resources and has been made more challenging by the shelter-in-place orders and travel restrictions which were, and may from time to time be, implemented in many locations to combat the
−Removed: COVID-19 pandemic, which orders and restrictions to varying degrees remain in place.
+Added: Recruiting and retaining qualified service provider partners and training them in our technology and solutions requires significant time and resources and has been made more challenging by the shelter-in-place orders and travel restrictions which were, and may from time to time be, implemented in many locations to combat the COVID-19 pandemic.
If we fail to maintain our relationships with existing service provider partners or develop relationships with new service provider partners, our revenue and operating results would be adversely affected.
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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.
−Removed: 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.
+Added: 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.
+Added: As disclosed under “Item 3 – Legal Proceedings,” Vivint has stopped paying license fees to Alarm.com under its Patent Cross License Agreement with us, which is having a material adverse effect upon our business, financial condition and results of operations.
+Added: 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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These service provider contracts typically have an initial term of one year, with subsequent renewal terms of one year, and are terminable at the end of the initial term or renewal terms without cause upon written notice to the other party.
−Removed: In some cases, these contracts provide the service provider partner with the right to terminate prior to the expiration of the term without cause upon 30 days written notice, or, in the case of certain termination events, the right to terminate the contract immediately.
−Removed: While we have developed a network of over 10,900 service provider partners 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.
−Removed: 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.
+Added: In some cases,
+Added: these contracts provide the service provider partner with the right to terminate prior to the expiration of the term without cause upon 30 days written notice, or, in the case of certain termination events, the right to terminate the contract immediately.
+Added: While we have developed a network of over 11,000 service provider partners as of December 31, 2022 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.
+Added: During the years ended December 31, 2022, 2021 and 2020, our 10 largest revenue service provider partners or distributors accounted for 49%, 47% and 48% of our revenue, respectively.
ADT LLC, or ADT, represented greater than 15% but not more than 20% of our revenue in 2022, 2021 and 2020.
6 unchanged sentences
In addition, even if ADT continues to use other services that we offer, we cannot assure you that the revenue from ADT or new accounts added by ADT will reach or exceed historical levels in any future period.
−Removed: We may not be able to offset any unanticipated
−Removed: decline in revenue from ADT with revenues from new customers or other existing customers.
+Added: We may not be able to offset any unanticipated decline in revenue from ADT with revenues from new customers or other existing customers.
Any negative developments in ADT’s business, or any significant decrease in revenue from or loss of ADT as a customer could materially and adversely harm our business, financial condition, cash flows and results of operations.
4 unchanged sentences
Historically, ADT has accounted for, and continues to account for, substantially all of the revenue of the Connect business unit.
−Removed: In connection with the Acquisition we amended our master service agreement with ADT to cover services provided with respect to the non-hosted software platform, or Software platform.
+Added: In connection with the Acquisition we amended our MSA with ADT to cover services provided with respect to the non-hosted software platform, or Software platform.
We cannot assure you that ADT will use the Software platform for its new customers or keep existing customers on the Software platform.
19 unchanged sentences
In addition, some of our competitors may enter into new alliances with each other or may establish or strengthen cooperative relationships with systems integrators, third-party consulting firms or other parties.
−Removed: Any such consolidation, acquisition, alliance or cooperative relationship could adversely affect our ability to compete effectively and lead to pricing
−Removed: pressure and our loss of market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our business, financial condition, cash flows and results of operations.
+Added: Any such consolidation, acquisition, alliance or cooperative relationship could adversely affect our ability to compete effectively and lead to pricing pressure and our loss of market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our business, financial condition, cash flows and results of operations.
We are dependent on our connected property solutions, and the lack of continued market acceptance of our connected property solutions would result in lower revenue.
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If our efforts and our service provider partners’ efforts to satisfy our existing subscribers are not successful, we may not be able to retain them or sell additional functionality to them and, as a result, our revenue and ability to grow could be adversely affected.
−Removed: We track our SaaS and license revenue renewal rate on an annualized basis, as reflected in the section of this Annual Report titled "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Other Business Metrics — SaaS and License Revenue Renewal Rate." However, our service provider partners, who resell our services to our subscribers, have indicated that they typically have three to five-year service contracts with our subscribers.
−Removed: Our SaaS and license revenue renewal rate is calculated across our entire subscriber base, including subscribers whose contract with their service provider reached the end of its contractual term during the measurement period, as well as subscribers whose contract with their service provider has not reached the end of its contractual term during the measurement period, and is not intended to estimate the rate at which our subscribers renew their contracts with our service provider partners.
+Added: We track our SaaS and license revenue renewal rate on an annualized basis, as reflected in the section of this Annual Report titled "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Other Business Metrics — SaaS and License Revenue Renewal Rate." However, our service provider partners, who resell our services to our subscribers, have indicated that they typically have three to five-year service contracts with residential and commercial property owners who use our solutions.
+Added: Our SaaS and license revenue renewal rate is calculated across our entire subscriber base, including subscribers whose contract with their service provider reached the end of its contractual term during the measurement period, as well as subscribers whose contract with their service provider has not reached the end of its contractual
+Added: term during the measurement period, and is not intended to estimate the rate at which our subscribers renew their contracts with our service provider partners.
As a result, we may not be able to accurately predict future trends in renewals and the resulting churn.
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Our wireless carriers may suspend wireless service to expand, maintain or improve their networks, or may discontinue or sunset older wireless networks as new technology evolves.
−Removed: For example, certain cellular carriers have announced their intention to shut down their 3G and CDMA wireless networks by the end of 2022 which may require our subscribers to upgrade to alternative and potentially more expensive technologies.
+Added: For example, certain cellular carriers have shut down their 3G and CDMA wireless networks in 2022 which required our subscribers to upgrade to alternative and potentially more expensive technologies.
See “The technology we employ may become obsolete and we may need to incur significant capital expenditures to update our technology” below.
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Our ability to attract new subscribers and increase revenue from existing subscribers will depend in significant part on our ability to anticipate changes in industry standards, to continue to enhance our existing solutions or introduce new solutions on a timely basis to keep pace with technological developments, and to maintain compatibility with a wide range of connected devices in residential and commercial properties.
−Removed: We may change aspects of our platforms and may utilize open source technology in the future, which may cause difficulties including compatibility, stability and time to market.
+Added: We may change
+Added: aspects of our platforms and may utilize open source technology in the future, which may cause difficulties including compatibility, stability and time to market.
The success of any enhanced or new product or solution will depend on several factors, including the timely completion and market acceptance of the enhanced or new product or solution.
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The discontinuation of cellular communication technology, cellular networks or other services by telecommunications service providers can affect our services and require our subscribers to upgrade to alternative and potentially more expensive, technologies.
−Removed: For example, certain cellular carriers have announced their intention to shut down their 3G and CDMA wireless networks by the end of 2022.
−Removed: We intend to work with our service providers to develop a transition plan over the next year to convert or upgrade the equipment of end user accounts reliant upon 3G or CDMA networks, and we expect to incur incremental costs over the next year related to the planned 3G and CDMA network shutdown.
−Removed: If our service providers are not able to convert or upgrade the equipment of their customers
−Removed: who are currently using 3G or CDMA network technology, then those accounts may be terminated with us when such networks are no longer available.
+Added: For example, certain cellular carriers shut down their 3G and CDMA wireless networks in 2022.
+Added: We worked with our service providers to convert or upgrade the equipment of end user accounts reliant upon 3G or CDMA networks, and we incurred costs and may continue to incur costs related to the 3G and CDMA network shutdown.
+Added: If our service providers are not able to convert or upgrade the equipment of their customers who are currently using 3G or CDMA network technology, then those accounts may be terminated with us or we may not be able to bill for such accounts when such networks are no longer available which could adversely affect our business, financial condition, cash flows and results of operations.
It is also possible that one or more of our competitors could develop a significant technical advantage that allows them to provide additional or superior quality products or services, or to lower their price for similar products or services, which could put us at a competitive disadvantage.
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Our hardware products depend on the availability and quality of components that we procure from third-party suppliers, some of which are supplied by single or limited source suppliers.
−Removed: Reliance on suppliers, as well as industry supply conditions, generally involves several risks, including the possibility of defective parts, which can adversely affect the reliability and reputation of our platforms and solutions, and a shortage of components and reduced control over delivery schedules and increases in component costs, which can adversely affect our profitability.
−Removed: Further, from time to time we provide advance payments or loans to our vendors to, for example, secure procurement of long lead time parts or to provide bridge financing to ensure continuity of operations.
−Removed: These supply chain risks are heightened in the current environment where continuing travel restrictions and shelter-in-place orders as well as limitations on factory capacity, including labor shortages, and delays in shipping times due to the COVID-19 pandemic have and may continue to adversely affect production of and the timing of delivery of components.
−Removed: For example, there is currently a global shortage of semiconductors used in our video, cellular communicator, and other products.
−Removed: Shortages of essential components of our products or significantly increased lead times for obtaining such components may lead to delays in our production, and we may be unable to fulfill orders for our hardware products on a timely basis or at all.
+Added: Reliance on suppliers generally involves several risks, including increased costs, the possibility of defective parts, and loss of a supplier due to their ability to effectively manage their own supply chain, ability to obtain a contract on commercially reasonable terms, bankruptcy, or other events, which can adversely affect the reliability and reputation of our platforms and solutions and our profitability.
+Added: In addition, from time to time we provide advance payments or loans to our vendors to, for example, secure procurement of long lead time parts or to provide bridge financing to ensure continuity of operations.
+Added: We are also dependent on industry supply conditions and subject to supply chain risks, including a shortage of components and reduced control over delivery schedules and increases in component costs, which can also adversely affect the reliability and reputation of our platforms and solutions and our profitability.
+Added: These supply chain risks would be heightened in the event health precautions such as travel restrictions and shelter-in-place orders are implemented.
+Added: In addition, limitations on factory capacity, including labor shortages, and delays in shipping times due to the COVID-19 pandemic and Macroeconomic Conditions have recently in the past and may in the future adversely affect production of and the timing of delivery of components.
+Added: While the global shortage of semiconductors used in our video, cellular communicator, and other products has eased, shortages of essential components of our products or significantly increased lead times for obtaining such components may lead to delays in our production, and we may be unable to fulfill orders for our hardware products on a timely basis or at all.
Even if we are able to procure components from alternative sources, we may be required to pay more for them, which could adversely affect our profitability.
−Removed: We are working with our suppliers to secure components and materials to account for longer lead times and limited availability, but we cannot assure you that our efforts will be successful or that demand for our hardware products will continue at the same level.
−Removed: 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.
+Added: We are working with our suppliers to secure components and materials to account for the continued longer lead times and limited availability, but we cannot assure you that our efforts will be successful or that demand for our hardware products will continue at the same level.
+Added: In addition, global transportation disruptions have led to slower shipping times generally, while fluctuations 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.
−Removed: 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 over 50% of our hardware and other revenue for the year ended December 31, 2021 (20%, 18% and 15% of hardware and other revenue, respectively).
+Added: 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 year ended December 31, 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.
−Removed: For example, on February 21, 2022, we were notified of a likely parts shortage of a critical semiconductor subcomponent that impacts products manufactured by our largest key hardware supplier in 2021 and another smaller vendor.
−Removed: We are working with the impacted suppliers and their subcomponent provider to determine the amount and timing of any shortfall and to mitigate risks in this part of our supply chain, but we may not be successful.
−Removed: If our suppliers are unable to continue to provide agreed upon supply, we could experience interruptions in delivery of our platforms and solutions to our service provider partners, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
+Added: We are working with any impacted suppliers and their subcomponent provider to determine the amount and timing of any shortfall and to mitigate risks in this part of our supply chain, but we may not be successful.
+Added: If our suppliers are unable to continue to provide agreed upon supply, we could experience interruptions in delivery of our platforms and solutions to our
+Added: service provider partners, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
If we were required to find alternative sources of supply, qualification of alternative suppliers and the establishment of reliable supplies could result in delays, loss of sales and/or less profitable sales, any of which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
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Risks of liability from our operations are significant.
−Removed: The nature of the solutions we provide, including our interactive security solutions, and new technologies we may acquire, such as in our acquisition of Shooter Detection Systems, LLC, potentially exposes us to greater risks of liability for data privacy and security, employee acts or omissions, or technology or system failure than may be inherent in other businesses.
+Added: The nature of the solutions we provide, including our interactive security solutions, and new technologies and companies we may acquire, potentially exposes us to greater risks of liability for data privacy and security, employee acts or omissions, or technology or system failure than may be inherent in other businesses.
Substantially all of our service provider partner agreements contain provisions limiting our liability to service provider partners and our subscribers in an attempt to reduce this risk.
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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.
−Removed: 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.
+Added: 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.
−Removed: We have also acquired other businesses in the past.
−Removed: For example, we acquired the assets of HiValley Technology Inc.
−Removed: in March 2015, assets of ObjectVideo, Inc.
−Removed: in January 2017 and Icontrol's Connect and Piper business units in March 2017.
−Removed: These acquisitions and any other acquisitions we may complete in the future will give rise to certain risks, including:
+Added: These acquisitions and any other acquisitions we may complete in
+Added: the future will give rise to certain risks, including:
• incurring higher than anticipated capital expenditures and operating expenses;
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We obtain our data from a variety of sources, including our service provider partners, our subscribers and third-party providers.
−Removed: 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.
+Added: 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.
−Removed: 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.
+Added: 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.
−Removed: The CCPA governs the collection, sale and use of California residents’ personal information, and
−Removed: significantly impacts businesses’ handling of personal information and privacy policies and procedures.
−Removed: 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.
+Added: 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.
+Added: 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.
−Removed: 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.
−Removed: 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.
+Added: In addition, the California Privacy Rights Act of 2020, or CPRA, was approved by California voters and became effective as of January 1, 2023.
+Added: The CPRA, among other things, amended 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.
+Added: The CPRA also extended the CCPA’s scope to include employees’ and business contacts’ personal information, which may increase our compliance costs, legal costs and other costs of doing business.
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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In June 2021, the European Commission adopted a new version of the SCCs, which we began using on September 27, 2021.
−Removed: 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.
−Removed: Moreover, the UK data protection regulator is developing new SCCs for transferring personal data from the UK that are expected to be finalized in March 2022.
−Removed: When the new UK-specific SCCs are finalized, we will be required to execute the new UK SCCs with our current and future customers in the UK.
+Added: 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.
−Removed: 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.
+Added: 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
+Added: 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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As guidance on compliance with GDPR from the EU data protection authorities evolves over time, our privacy or data security measures may be deemed or perceived to be in noncompliance with current or future laws and regulations, which may subject us to litigation, regulatory investigations or other liabilities and could limit the products and services we can offer in certain jurisdictions.
−Removed: Further, in the event of a breach of
−Removed: personal information that we hold, we may be subject to governmental fines, individual claims, remediation expenses and/or harm to our reputation.
+Added: Further, in the event of a breach of personal information that we hold, we may be subject to governmental fines, individual claims, remediation expenses and/or harm to our reputation.
Moreover, if future laws, regulations, or court rulings, such as the CJEU’s decision invalidating the EU-U.S.
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We terminated the 2017 Facility effective January 20, 2021.
−Removed: We intend to invest a portion of the proceeds in a portfolio of securities and other investments and although we plan to follow an established investment policy and seek to minimize the credit risk associated with investments by limiting exposure to any one issuer depending on credit quality, we cannot give assurances that the assets in our investment portfolio will not lose value, become impaired or suffer from illiquidity.
+Added: We currently intend to invest a portion of the proceeds in a portfolio of securities and other investments and although we plan to follow an established investment policy and seek to minimize the credit risk associated with investments by limiting exposure to any one issuer depending on credit quality, we cannot give assurances that the assets in our investment portfolio will not lose value, become impaired or suffer from illiquidity.
Our overall leverage and certain obligations contained in the related documentation could adversely affect our financial health and business and future operations by, among other things:
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We received proceeds from the issuance of the 2026 Notes of $484.3 million, net of $15.7 million of transaction fees and other debt issuance costs.
−Removed: We may require additional capital to respond to the significant uncertainty arising from the COVID-19 pandemic and we may not be able to timely secure additional debt or equity financing on favorable terms or at all.
+Added: We may require additional capital to respond to the significant uncertainty arising from the Macroeconomic Conditions and we may not be able to timely secure additional debt or equity financing on favorable terms or at all.
+Added: If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be limited.
Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
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We review such assets for impairment at least annually.
−Removed: Impairment may result from, among other things, deterioration in performance, adverse market conditions, including adverse market conditions arising from the COVID-19 pandemic, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the solutions we offer, challenges to the validity of certain registered intellectual property, reduced sales of certain products or services incorporating registered intellectual property, increased attrition and a variety of other factors.
+Added: Impairment may result from, among other things, deterioration in performance, adverse market conditions, including adverse market conditions arising from the COVID-19 pandemic and geopolitical tensions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the solutions we offer, challenges to the validity of certain registered intellectual property, reduced sales of certain products or services incorporating registered intellectual property, increased attrition and a variety of other factors.
The amount of any quantified impairment must be expensed immediately as a charge to results of operations.
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Comprehensive tax reform bills could adversely affect our business and financial condition.
−Removed: Proposed legislative changes in the U.S.
+Added: Legislative changes in the U.S.
and other countries could increase our tax liability and adversely affect our after-tax profitability.
−Removed: For example, the House of Representatives has introduced legislation proposing an increase to the U.S.
−Removed: corporate tax rate from 21% to 26.5% in addition to other changes in U.S.
−Removed: tax law that would increase our U.S.
−Removed: Additionally, the Biden Administration has introduced proposals to increase U.S.
−Removed: taxation of our international business operations by reducing the deduction for Foreign-Derived Intangible Income, or FDII.
−Removed: 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.
−Removed: 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.
−Removed: The Group of Seven countries has proposed a global minimum tax of 15%, which is supported by leadership within the U.S.
−Removed: government and anticipated to become effective in 2023.
−Removed: 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.
+Added: For example, 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.
+Added: Both provisions are effective for tax years beginning after December 31, 2022.
+Added: 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.
+Added: 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.
+Added: In addition, 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.
1 unchanged sentence
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.
−Removed: 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.
+Added: 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 and remit 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.
−Removed: An outgrowth of the original Base Erosion and Profit Shifting project is a project undertaken by the more than 130 member countries of the expanded Organization for Economic Cooperation and Development Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy." The breadth of this project is likely to impact all multinational businesses by potentially redefining jurisdictional taxation rights.
+Added: An outgrowth of the original Base Erosion and Profit Shifting project is a project undertaken by the more than 130 member countries of the expanded Organization for Economic Cooperation and Development, or OECD, Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy." Furthermore, the OECD, announced a consensus around further changes in traditional international tax principles to address, among other things, perceived challenges presented by global digital commerce, or Pillar One, and the perceived need for a minimum global effective tax rate of 15%, or Pillar Two.
+Added: On December 12, 2022, the European Union member states agreed to implement the OECD’s Pillar Two global corporate minimum tax rate of 15% on companies with revenues of at least $790.0 million, which would go into effect in 2024.
+Added: The breadth of this project is likely to impact all multinational businesses by potentially redefining jurisdictional taxation rights.
Significant judgment is required in determining our worldwide provision for income taxes.
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Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be different from our historical tax practices, provisions and accruals.
−Removed: If we receive an adverse ruling as a result of an audit, or we unilaterally determine that we have misinterpreted provisions of the tax regulations to
−Removed: which we are subject, our tax provision, results of operations or cash flows could be harmed.
+Added: If we receive an adverse ruling as a result of an audit, or we unilaterally determine that we have misinterpreted provisions of the tax regulations to which we are subject, our tax provision, results of operations or cash flows could be harmed.
In addition, liabilities associated with taxes are often subject to an extended or indefinite statute of limitations period.
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Exports of our platforms and solutions must be made in compliance with these laws and regulations.
−Removed: We may also be subject to import/export laws and regulations in other jurisdictions in which we conduct business.
+Added: We may also be subject to import/export laws and
+Added: regulations in other jurisdictions in which we conduct business.
If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges;
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Changes in laws that apply to us could result in increased regulatory requirements and compliance costs which could harm our business, financial condition, cash flows and results of operations.
+Added: For example, the SEC has proposed expansive rules requiring public companies to disclose information about the material impact of climate on their businesses, as well as information about companies’ governance, risk management and strategy related to climate risk.
In certain jurisdictions, regulatory requirements may be more stringent than in the United States.
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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.
−Removed: Revenue in countries outside of North America accounted for 3% of our total revenue for each of the years ended December 31, 2021, 2020 and 2019.
+Added: Revenue in countries outside of North America accounted for 4%, 3% and 3% of our total revenue for the years ended December 31, 2022, 2021 and 2020, 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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• increased financial accounting and reporting burdens and complexities;
−Removed: • political, social, and economic instability, terrorist attacks, and security concerns in general;
+Added: • political, social, and economic instability, such as the ongoing military conflict between Russia and Ukraine, terrorist attacks, and security concerns in general;
• reduced or varied protection for intellectual property rights in some countries.
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Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.
−Removed: An assertion by a third party that we are infringing its intellectual property could subject us to costly and time-consuming litigation or expensive licenses that could harm our business and results of operations.
+Added: Assertions by third parties that we are infringing their intellectual property subject us to costly and time-consuming litigation or expensive licenses that could harm our business and results of operations.
The industries in which we compete are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets, and by frequent litigation based on allegations of infringement or other violations of intellectual property rights.
1 unchanged sentence
For example, on June 2, 2015, Vivint filed a lawsuit against us in U.S.
−Removed: Court, District of Utah, alleging that our technology directly and indirectly infringes six patents that Vivint purchased.
+Added: District Court, District of Utah, alleging that our technology directly and indirectly infringes six patents that Vivint purchased.
Vivint is seeking permanent injunctions, enhanced damages and attorneys' fees.
6 unchanged sentences
See the section of this Annual Report titled "Legal Proceedings" for additional information on each of these matters.
−Removed: Should EcoFactor prevail in either of its district court lawsuits we could be required to pay damages in the amount of EcoFactor’s lost profits and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us or we are unable to design around such patents, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.
+Added: Should EcoFactor prevail in either of its district court lawsuits we could be required to pay damages in the amount of EcoFactor’s lost profits and/or a reasonable royalty for sales of our solution, we could
+Added: be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us or we are unable to design around such patents, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.
While we believe we have valid defenses to EcoFactor’s claims, any of these outcomes could result in a material adverse effect on our business.
6 unchanged sentences
See the section of this Annual Report titled "Legal Proceedings" for additional information on each of these matters.
−Removed: Should Causam prevail in an ITC investigation, Alarm.com thermostats manufactured abroad could be excluded from importation into the United States.
Should Causam prevail in its district court lawsuit we could be required to pay damages and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.
51 unchanged sentences
• changes in the anticipated future size and growth rate of our market;
−Removed: • general economic, regulatory and market conditions in the United States and abroad as well as the uncertainty resulting from the COVID-19 pandemic.
+Added: • general economic, regulatory and market conditions in the United States and abroad as well as the uncertainty resulting from current Macroeconomic Conditions.
The stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
11 unchanged sentences
See “Conversion of the 2026 Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock” below for further details on the risks related to the dilutive impact of the 2026 Notes.
−Removed: We are obligated to develop and maintain a system of effective internal controls over financial reporting.
+Added: We are obligated to develop and maintain a system of effective internal control over financial reporting.
These internal controls may be determined to be not effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.
4 unchanged sentences
Our independent registered public accounting firm is also required, pursuant to Section 404 of the Sarbanes-Oxley Act, to report on the effectiveness of our internal control over financial reporting.
−Removed: For future reporting periods, our independent registered
−Removed: public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
+Added: For future reporting periods, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
We may not be able to remediate any future material weaknesses, or to complete our evaluation, testing and any required remediation in a timely fashion.
−Removed: If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion that our internal controls over financial reporting are effective, investors could lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, and we could be subject to sanctions or investigations by regulatory authorities, including the SEC and Nasdaq.
+Added: If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion that our internal control over financial reporting is effective, investors could lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, and we could be subject to sanctions or investigations by regulatory authorities, including the SEC and Nasdaq.
Failure to remediate any material weakness in our internal control over financial reporting, or to maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
15 unchanged sentences
• establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for director nominees;
−Removed: • prohibit cumulative voting in the election of directors;
• provide that vacancies on our board of directors may be filled only by the vote of a majority of directors then in office, even though less than a quorum.
8 unchanged sentences
Our amended and restated certificate of incorporation provides that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing provision.
−Removed: Furthermore, our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any claims arising under the Securities Act.
+Added: Furthermore, our
+Added: amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any claims arising under the Securities Act.
The forum selection clause in our amended and restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
26 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.