−Removed: An investment in our Class A common stock involves risks.
−Removed: You should consider carefully the risks described below, together with all of the other information included in this Quarterly Report, as well as in our other filings with the SEC, in evaluating our business.
+Added: You should consider carefully the risks described below, together with all of the other information included in this Quarterly Report, as well as in our other filings with the SEC, in evaluating our business and/or an investment in our Class A common stock.
If any of the following risks actually occur, our business, financial condition, operating results and future prospects could be materially and adversely affected.
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Such restrictions or orders, or the perception that such restrictions or orders could be implemented, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, and cancellation or postponement of events, among other effects that could negatively impact our operations, as well as the operations of our customers and business partners.
+Added: These potential impacts are only amplified by the length of time they remain in place, as the cumulative effect upon our customers and their businesses may exacerbate the potential harm to our business and results of operations.
Beginning in March 2020, we restricted non-essential employee travel and transitioned our employees to a remote work environment.
−Removed: We currently expect our employees to continue working remotely at least through the end of the fiscal year.
+Added: We currently expect our employees to continue working remotely at least through the first quarter of 2021.
Although we have not experienced a material impact from shifting our employees to a remote work environment, there is no guarantee that our employees will be as effective while working remotely due to a number of factors, including the inability of team members to communicate as effectively in a remote environment, the reality that employees may have additional personal needs to attend to (such as looking after children as a result of school closures or family members who become sick), and employees may become sick themselves and unable to work.
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Further, we have a limited history of remote work and the long-term impact on, and the resulting types of continuing investments necessary for, our employee base is uncertain.
−Removed: In addition, in
−Removed: an effort to manage the financial uncertainty involved with the COVID-19 pandemic, we have delayed the hiring of certain non-essential employees.
+Added: In addition, in an effort to manage the financial uncertainty involved with the COVID-19 pandemic, we have delayed the hiring of certain non-essential employees.
The COVID-19 pandemic has resulted in a rapid rise in unemployment and a sudden decrease in global economic activity, and many businesses have experienced, or are anticipating that they may experience, a significant negative impact on their operating results.
−Removed: While we did not experience a significant impact on the demand for our core products and Value+ services during the period ended June 30, 2020, we anticipate greater demand impacts in future periods, although the timing and magnitude of these impacts is difficult to estimate.
+Added: While we did not experience a significant impact on the demand for our core products and Value+ services during the period ended September 30, 2020, we anticipate greater demand impacts in future periods, although the timing and magnitude of these impacts is difficult to estimate.
In addition, our inability to meet in-person with current or prospective customers, or the cancellation or postponement of Company-sponsored events or third-party events at which our products are featured, could have a negative impact on our customer engagement efforts, which could further impact demand in future periods.
−Removed: Furthermore, the demand for our products and services, as well as our operating results, could be adversely impacted due to number of other factors, including the following:
+Added: Furthermore, the demand for our products and services, as well as our operating results, could be adversely impacted due to a number of other factors, including the following:
▪ customers delaying decisions to adopt our core products, or expand the use of our Value+ services, as they seek to reduce or delay spending in response to the impacts of COVID-19 on their own businesses;
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The ultimate impact of the COVID-19 pandemic, or a similar public health crisis in the future, on our business is highly uncertain and subject to change.
−Removed: Further, we expect any further spread of the COVID-19 pandemic, or even the threat or perception that this could occur, could further exacerbate any negative impacts on our business, financial condition and operating results.
−Removed: We manage our business towards the achievement of long-term growth, which may not be consistent with the short-term expectations of some investors.
−Removed: We plan to continue to manage our business towards the achievement of long-term growth that we believe will positively impact long-term stockholder value, and not towards the realization of short-term financial or business metrics, or short-term stockholder value.
−Removed: If opportunities arise that might cause us to sacrifice our performance with respect to short-term financial or business metrics, but that we believe are in the best interests of our stockholders, we will take those opportunities.
−Removed: We focus on growing our customer base by developing and launching new and innovative core functionality and/or Value+ services to address our customers’ evolving business needs, developing and/or acquiring new products for adjacent markets and additional verticals consistent with our strategic plan, and improving the experience of our users across our targeted verticals.
−Removed: We prioritize product innovation and user experience over short-term financial or business metrics.
−Removed: make product decisions that may reduce our short-term operating results if we believe that these decisions are consistent with our strategic objective to achieve long-term growth.
+Added: Further, we expect that any further spread of the COVID-19 pandemic, or even the threat or perception that this could occur, could further exacerbate any negative impacts on our business, financial condition and operating results.
+Added: We manage our business to achieve long-term growth, which may not be consistent with the short-term expectations of some investors.
+Added: We plan to continue to manage our business towards the achievement of long-term growth to positively impact long-term stockholder value, and not towards the realization of short-term metrics or short-term stockholder value.
+Added: We will make product decisions and pursue opportunities that may reduce our short-term operating results if we believe that these decisions are consistent with our strategic objective to achieve long-term growth.
These decisions may not be consistent with the short-term expectations of some investors, and may cause significant fluctuations in our operating results and our stock price from period to period.
In addition, notwithstanding our intention to make strategic decisions that positively impact long-term stockholder value, the decisions we make may not produce the long-term benefits we expect.
−Removed: Our executive officers, directors and principal stockholders control a majority of the combined voting power of our outstanding capital stock.
+Added: Furthermore, our executive officers, directors and principal stockholders control a majority of the combined voting power of our outstanding capital stock.
As a result, they are able to exercise significant influence and control over the establishment and implementation of our future business plans and strategic objectives, as well as control all matters submitted to our stockholders for approval.
These persons may manage our business in ways with which you disagree and which may be adverse to your interests.
−Removed: If we fail to manage our growth effectively, it could adversely affect our operating results and preclude us from achieving our strategic objectives.
−Removed: We have experienced significant growth since our formation in 2006, and we anticipate that we will continue to experience growth and expansion of our operations, although the rate of growth may be negatively impacted by the COVID-19 pandemic.
+Added: Failure to manage our growth effectively could adversely affect our operating results and preclude our achievement of our strategic plans.
+Added: We anticipate that we will continue to experience growth and expansion of our operations, although the rate of growth may be negatively impacted by the COVID-19 pandemic.
This growth in the size, complexity and diversity of our business has placed, and we expect it will continue to place, a significant strain on our management, administrative, operational and financial resources, as well as our company culture.
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If any of these risks actually occur, it could adversely affect our operating results, and preclude us from achieving our strategic objectives.
−Removed: We have a limited operating history and limited experience selling our solutions.
−Removed: We expect to make substantial investments across our organization to grow our business and, as a result, we expect our financial results may fluctuate significantly from period to period and we may not sustain profitability.
−Removed: We were formed in 2006 and in 2008 entered the real estate vertical with our first product, APM, to serve property managers.
−Removed: We expanded our real estate offerings with the launch of APM PLUS in late 2018 and AppFolio Investment Management in April 2019.
−Removed: In 2012, we entered the legal vertical through the acquisition of MyCase, which represents approximately 10% of our total revenue for the six months ended June 30, 2020.
−Removed: As a result, we have a limited operating history and limited experience selling our software solutions in two dynamic vertical markets.
−Removed: These and other factors, including the significant disruption and uncertainty caused by the COVID-19 pandemic, combine to make it difficult for us to accurately forecast our future operating results, which in turn makes it difficult for us to prepare accurate budgets and implement strategic plans.
−Removed: We expect this uncertainty will continue to exist in our business for the foreseeable future, and the future impacts of the COVID-19 pandemic may be significantly worse than we currently expect.
−Removed: We have made substantial investments across our organization to develop our software solutions and capitalize on our market opportunity.
−Removed: In order to implement our business strategy, we intend to continue to make substantial investments in, among other things:
−Removed: ▪ our research and product development organization to enhance the ease of use and functionality of our software solutions by adding new core functionality, Value+ services and/or other improvements to address the evolving needs of our customers, as well as to develop new products for adjacent markets and new verticals consistent with our strategic plan;
−Removed: ▪ our continued efforts to identify acquisition targets that enhance the depth or functionality of our software solutions or Value+ services, or that enable our expansion into adjacent markets or new vertical markets consistent with our strategic plan;
−Removed: ▪ our customer service organization to deepen our relationships with our customers, assist our customers in achieving success through the use of our software solutions, and promote customer retention;
−Removed: ▪ our sales and marketing organization, including expansion of our direct sales organization and marketing programs, to increase the size of our customer base, increase adoption and utilization of new and existing Value+ services by our new and existing customers, and enter adjacent markets and new verticals consistent with our strategic plan;
−Removed: ▪ maintaining and expanding our technology infrastructure and operational support to promote the security and availability of our software solutions, and support our growth;
+Added: We expect to make substantial investments across our organization to grow our business and may not sustain profitability.
+Added: In order to implement our business and growth strategy, we have made and will continue to make substantial investments across our organization and, as a result, we expect our expenses to increase significantly and we may not be consistently profitable.
+Added: For example, we intend to continue to make substantial investments in, among other things:
+Added: our research and product development organization to enhance the ease of use and functionality of our software solutions and develop new products;
+Added: our continued efforts to identify acquisition targets that enhance the depth and/or functionality of our software solutions or Value+ services;
+Added: our customer service organization to deepen our relationships with our customers and promote customer retention;
+Added: our sales and marketing organization, including expansion of our direct sales organization and marketing programs, to increase the size of our customer base and increase adoption and utilization of new and existing Value+ services by our new and existing customers;
+Added: maintaining and expanding our technology infrastructure and operational support to promote the security and availability of our software solutions;
our general and administrative functions, to support our growth and assist us in maintaining compliance with legal, regulatory and other compliance-related obligations;
−Removed: ▪ the expansion of our existing facilities, including leasing and building out additional office space, to support our growth and strategic development.
−Removed: As a result of our continuing investments to grow our business in these and other areas, we expect our expenses to increase significantly, and we may not be consistently profitable.
+Added: and the expansion of our existing facilities, including leasing and building out additional office space, to support our growth and strategic development.
Even if we are successful in growing our customer base and increasing revenue from new and existing customers, we may not be able to generate additional revenue in an amount that is sufficient to cover our expenses.
−Removed: We may incur significant losses in a particular period for a number of reasons, and may experience significant fluctuations in our operating results from period to period.
We cannot assure you that we will continue to achieve profitability in the near term or that we will sustain profitability on a sequential quarterly basis or over any particular period of time.
−Removed: Any additional operating losses will have a negative impact on our stockholders’ equity.
Our quarterly results may fluctuate significantly and period-to-period comparisons of our results may not be meaningful.
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Accordingly, the results of any one quarter should not be relied upon as an indication of our future performance.
−Removed: In addition, our quarterly results may not fully reflect the underlying performance of our business.
−Removed: Factors that may cause fluctuations in our quarterly results include, but are not limited to:
−Removed: ▪ our ability to retain our existing customers, and to expand adoption and utilization of our core solutions and Value+ services by our existing customers;
−Removed: ▪ our ability to attract new customers, the type of customers we are able to attract, the size and needs of their businesses, and the cost of acquiring these customers;
−Removed: ▪ the mix of our core solutions and Value+ services sold during the period;
−Removed: ▪ the timing and impact of security breaches, service outages or other performance issues with our technology infrastructure and software solutions;
−Removed: ▪ variations in the timing of sales of our core solutions and Value+ services as a result of trends impacting the verticals in which we sell our software solutions;
−Removed: ▪ the timing and market acceptance of new core functionality, Value+ services and other products introduced by us and our competitors;
−Removed: ▪ changes in our pricing policies or those of our competitors;
−Removed: ▪ the timing of our recognition of revenue;
−Removed: ▪ the amount and timing of costs and operating expenses related to the maintenance and expansion of our business, infrastructure and operations;
−Removed: ▪ the amount and timing of costs and operating expenses associated with assessing or entering adjacent markets or new verticals;
−Removed: ▪ the amount and timing of costs and operating expenses related to the development or acquisition of businesses, services, technologies or intellectual property rights, and potential future charges for impairment of goodwill from these acquisitions;
−Removed: ▪ the timing and costs associated with legal proceedings, enforcement actions, regulatory inquiries or similar matters;
−Removed: ▪ changes in the competitive dynamics of our industry, including consolidation among competitors, strategic partners or customers;
−Removed: ▪ loss of our executive officers or other key employees;
−Removed: ▪ industry conditions and trends that are specific to the verticals in which we sell or intend to sell our software solutions;
−Removed: ▪ general economic and market conditions, including the impacts and disruptions caused by the COVID-19 pandemic, which could increase the negative impacts to our business of any of the factors discussed above.
−Removed: Our focus on managing our business towards the achievement of long-term growth, rather than the realization of short-term financial or business metrics, may also serve to exacerbate the fluctuations in our quarterly results, which could result in downward pressure on the market price of our Class A common stock.
−Removed: In addition, fluctuations in quarterly results may negatively impact the value of our Class A common stock, regardless of whether they impact or reflect the overall performance of our business.
+Added: Our focus on managing our business towards the achievement of long-term growth, rather than the realization of short-term metrics, may also exacerbate fluctuations in our quarterly results, which could negatively impact the value of our Class A common stock.
+Added: We may incur significant losses in a particular period for a number of reasons, and may experience significant fluctuations in our operating results from period to period.
+Added: These and other factors, including the significant disruption and uncertainty caused by the COVID-19 pandemic, combine to make it difficult for us to accurately forecast our future operating results, which in turn makes it difficult for us to prepare accurate budgets and implement strategic plans.
Furthermore, if our quarterly results fall below the expectations of investors or any securities analysts who follow our stock, or below any financial guidance we may provide, the price of our Class A common stock could decline substantially.
−Removed: We may require additional capital to support our operations or the growth of our business, and we cannot be certain that this capital will be available on favorable terms, or at all, which may adversely affect our business and financial condition.
−Removed: We may need additional capital to grow our business and meet our strategic objectives.
−Removed: Our ability to obtain additional capital, if and when required, will depend on numerous factors, including investor and lender demand, our compliance with debt obligations, our historical and forecasted financial and operating performance, our liquidity position, the overall condition of the capital markets, and the global economy as a whole.
−Removed: The capital markets have been negatively impacted by the COVID-19 pandemic, and the impacts may continue for the foreseeable future.
−Removed: We cannot guarantee that additional financing will be available to us on favorable terms when required, or at all.
−Removed: In addition, if we raise additional funds through the issuance of equity securities, those securities may have powers, preferences or rights senior to the rights of our Class A common stock, and our existing stockholders may experience immediate dilution.
−Removed: If we raise additional funds through the issuance of debt securities, we may incur interest expense or other costs to service the indebtedness, we may be required to encumber certain assets, and we may become subject to restrictions on our ability to conduct business, any of which could negatively impact our operating results.
−Removed: Furthermore, if we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the growth of our business and the achievement of our strategic objectives could be significantly impaired and our operating results may be harmed.
Our estimates of market opportunity are subject to significant uncertainty and, even if the markets in which we compete meet or exceed our size estimates, we could fail to increase our revenue or market share.
+Added: We determine the level of our investment in various aspects of the business, in part, based on our market opportunity estimates.
Market opportunity estimates are subject to significant uncertainty and are based on assumptions and estimates, including our internal analysis and industry experience.
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Further, market opportunity estimates sometimes change based on relevant macro-trends and market conditions, or evolving assessment methodologies.
−Removed: We determine the level of our investment in various aspects of the business, in part, based on our market opportunity estimates.
−Removed: If we had made different assumptions, our estimates of market opportunity, and/or our related investment determinations, could be materially different.
−Removed: The disruptions and impacts caused by the COVID-19 pandemic may ultimately require us to reduce, potentially by a significant margin, our estimates of the market opportunities in certain markets or industry verticals, which could negatively impact our prospects for long-term growth.
−Removed: In addition, even if the markets in which we compete meet or exceed our size estimates, our software solutions could fail to gain market acceptance and our business may not grow in line with our forecasts, or at all, which would have a material adverse impact on our financial condition and operating results.
+Added: The disruptions and impacts caused by the COVID‑19 pandemic may ultimately require us to significantly reduce our estimates of the market opportunities in certain markets or industry verticals, which could negatively impact our long-term growth prospects.
We have acquired, and may in the future acquire, other companies or technologies which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations.
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For example, in our real estate vertical, we acquired substantially all of the assets of WegoWise in 2018 and completed the acquisition of Dynasty in 2019.
−Removed: The pursuit of acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
−Removed: We have limited experience acquiring other businesses.
−Removed: We may not be able to integrate acquired assets, technologies, personnel and operations successfully or achieve the anticipated synergies or other benefits from the acquired business due to a number of risks associated with acquisitions, including:
−Removed: ▪ the aggregate cost, whether in the form of cash or equity securities, to acquire the business;
−Removed: ▪ difficulties integrating the assets, technologies, personnel or operations of the acquired business in a cost-effective manner;
−Removed: ▪ difficulties and additional expenses associated with supporting legacy products and services of the acquired business;
−Removed: ▪ difficulties converting the customers of the acquired business to our software solutions and contract terms;
−Removed: ▪ diversion of management’s attention from our business to address acquisition and integration challenges, as well as post-acquisition disputes;
−Removed: ▪ adverse effects on our existing business relationships with customers and strategic partners as a result of the acquisition;
−Removed: ▪ cultural challenges associated with integrating employees from the acquired organization into our company;
−Removed: ▪ the loss of key employees;
−Removed: ▪ use of resources that are needed in other parts of our business;
−Removed: ▪ costs associated with and exposure to new or enhanced legal, regulatory or other compliance-based and/or operational risks implicit in the acquired business;
−Removed: ▪ use of substantial portions of our available cash resources to consummate the acquisition or pay acquisition-related expenses;
−Removed: ▪ unanticipated costs or liabilities associated with the acquisition.
+Added: The identification, investigation and negotiation of acquisitions may divert the attention of management and cause us to incur various expenses, whether or not they are consummated.
+Added: We have limited experience acquiring other businesses and we may not be able to effectively integrate acquired assets, technologies, personnel and operations or achieve the anticipated synergies or other benefits from the acquired business due to the inherent risks associated with acquisitions.
If an acquisition fails to meet our expectations in terms of its contribution to our overall business strategy or operating results, or if the costs of acquiring or integrating the acquired business exceed our estimates, our business, operating results and financial condition may suffer.
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In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our operating results.
−Removed: Security vulnerabilities in our software solutions or a breach of our security controls could result in the loss, theft, misuse, unauthorized disclosure, or unauthorized access to customer or employee data, or other confidential and sensitive information, which could harm our relationships with customers or employees, expose us to litigation or regulatory proceedings, or harm our reputation, any of which could negatively impact our business and operating results.
+Added: Security vulnerabilities in our software solutions or a breach of our security controls could result in the loss, theft, misuse, unauthorized disclosure, or unauthorized access to customer or employee data, or other confidential or sensitive information, which could harm our customer and/or employee relationships, expose us to litigation or harm our reputation.
Our business involves the storage and transmission of a significant amount of confidential and sensitive information, including the personal information of our employees and other individuals, customer data, and our proprietary financial, operational and strategic information.
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Our software solutions are typically the system of record, system of engagement and, increasingly, the system of intelligence for all or a portion of our customers’ businesses, and the data processed through our software solutions is critical to their businesses.
−Removed: Cyber attacks and other malicious Internet-based activities continue on a regular basis.
−Removed: Like many other businesses,
−Removed: we have experienced, and are continually at risk of being subject to, attacks and data security incidents.
−Removed: As our business grows, the number of users of our software solutions, as well as the amount of information we collect and store, is increasing, and our brands are becoming more widely recognized.
−Removed: We believe these factors combine to make us an even greater target for this type of malicious activity.
−Removed: Although we take data security seriously, there can be no assurance that the security measures we employ will prevent malicious or unauthorized access to our systems and information.
−Removed: Techniques used to sabotage, or to obtain unauthorized access to, systems or networks change frequently and may not be recognized until launched against a target.
+Added: Like many other businesses, we have experienced, and are continually at risk of being subject to, cyber attacks and data security incidents.
+Added: As our business grows, the number of users of our software solutions, as well as the amount of information we collect and store, is increasing, and our brands are becoming more widely recognized which makes us an even greater target for malicious activity.
+Added: There can be no assurance that the security measures we employ will prevent malicious or unauthorized access to our systems and information.
Furthermore, no security program can eliminate entirely the risk of non-malicious human error, such as an employee or contractor’s failure to follow one or more security protocols.
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If we experience a widespread security breach, we cannot be certain that our insurance coverage will be sufficient to compensate us for liabilities actually incurred or that insurance will continue to be available to us on reasonable terms, or at all.
−Removed: In addition, any security breaches could result in reputational damage, adversely affect our ability to attract new customers and cause existing customers to reduce or discontinue the use of our software solutions, any of which could harm our business and operating results.
+Added: In addition, security breaches could result in reputational damage, adversely affect our ability to attract new customers and cause existing customers to reduce or discontinue the use of our software solutions.
Furthermore, the perception by our current or potential customers that our software solutions could be vulnerable to exploitation or that our security measures are inadequate, even in the absence of a particular problem or threat, could reduce market acceptance of our software solutions and cause us to lose customers.
The legal and regulatory environment around data security and governance is significantly evolving, and both regulators and consumers are increasingly taking action on data-related matters, which may contribute to increased reputational, economic and other harm in the event of a data security incident.
−Removed: Service outages due to malicious activities or performance problems associated with our technology infrastructure could harm our reputation, adversely affect our ability to attract new customers and cause us to lose existing customers.
−Removed: We have experienced significant growth in the number of users and the amount of data that our technology infrastructure supports, and we expect this growth to continue.
+Added: Service outages and other infrastructure performance problems could harm our reputation and adversely affect our ability to attract and retain customers.
We seek to maintain sufficient excess capacity in our technology infrastructure to meet the needs of all of our customers, including facilitating the expansion of existing customer deployments and the provisioning of new customer deployments.
−Removed: In addition, we need to properly manage our technology infrastructure in order to support version control, changes in hardware and software parameters, and the evolution of our software solutions.
We have experienced, and may in the future experience, website disruptions, service outages and other performance problems with our technology infrastructure.
These problems may be caused by a variety of factors, including infrastructure changes, power or network outages, fire, flood or other natural disasters affecting our data centers, human or software errors, viruses, security breaches, fraud or other malicious activity, spikes in customer usage and distributed denial of service attacks.
−Removed: In some instances, we may not be able to identify the cause or causes of these service outages and performance problems within an acceptable period of time.
If our technology infrastructure fails to keep pace with the increased number of users and amount of data, or if we are unable to avoid service outages and performance problems, or to resolve them quickly, this could adversely affect our ability to attract new customers, result in the loss of existing customers and harm our reputation, any or all of which could adversely affect our business and operating results.
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Our customers use our software solutions to manage critical aspects of their businesses, and any errors, defects or other disruptions in the performance of our software solutions, including with respect to third party partners upon which certain of our software solutions are dependent, may result in loss of or damage to our customers’ data and disruption to our customers’ businesses, which could harm our reputation.
−Removed: We provide continuous updates to our software solutions and, while our software updates undergo extensive testing prior to their release, these updates may contain undetected errors when first introduced.
+Added: We provide continuous updates to our software solutions and these updates may contain undetected errors when first introduced.
In the past, we have discovered errors, failures, vulnerabilities and bugs in our software updates after they have been released, and similar problems may arise in the future.
−Removed: Real or perceived errors, failures, vulnerabilities or bugs in our software solutions
−Removed: could result in negative publicity, reputational harm, loss of customers, delay in market acceptance of our software solutions, loss of competitive position, withholding or delay of payment to us, claims by customers for losses sustained by them and potential litigation or regulatory action.
−Removed: In any such event, we may be required to expend additional resources in order to help correct the problem or, in order to address customer service or reputational concerns, we may choose to expend additional resources to take corrective action even where not required.
+Added: Real or perceived errors, failures, vulnerabilities or bugs in our software solutions could result in negative publicity, reputational harm, loss of customers, delay in market acceptance of our software solutions, loss of competitive position, withholding or delay of payment to us, claims by customers for losses sustained by them and potential litigation or regulatory action.
+Added: In any such event, we may be required to expend additional resources in order to help correct the problem or we may choose to expend additional resources to take corrective action even where not required.
The costs incurred in correcting any material errors, defects or other disruptions could be substantial and there may not be any corresponding increase in revenue to offset these costs.
In addition, we may not carry insurance sufficient to compensate us for any losses that may result from claims arising from errors, defects or other disruptions in our software solutions.
−Removed: Government regulation is evolving and unfavorable changes could adversely affect our operating results, subject us to litigation or governmental investigation, or otherwise harm our business.
−Removed: We are subject to general business regulations and laws, as well as regulations and laws specifically governing the highly regulated real estate and legal markets, electronic payment, background screening and insurance services markets, the Internet itself, the use of mobile devices to conduct business and communicate, and many other products and services we provide.
−Removed: Existing and future laws and regulations may impede our growth.
−Removed: These regulations and laws may cover privacy, data protection, artificial intelligence and related technologies, pricing, content, intellectual property, mobile, cellular or other telecommunications matters, electronic contracts and other communications, competition, consumer protection, employment, trade and protectionist measures, web services, the provision of online payment and tenant screening services, information reporting requirements, unencumbered Internet access to our products or services, and the design and operation of websites.
−Removed: It is not clear how existing laws governing issues such as property ownership, management, rental and investment, data protection, and personal privacy apply to the Internet, digital content, web services, and artificial intelligence technologies and services.
−Removed: Unfavorable regulations, laws, and administrative or judicial decisions interpreting or applying those laws and regulations could diminish the demand for, or availability of, our products and services, subject us to litigation or governmental investigation and increase our cost of doing business, any of which may adversely affect our operating results.
−Removed: Privacy and data security laws and regulations could impose additional costs on us and reduce the demand for our software solutions.
+Added: Privacy and data security laws and regulations could impose additional costs and reduce demand for our software solutions.
We store and transmit personal information relating to our employees and other individuals, and our customers use our technology platform to store and transmit a significant amount of personal information relating to their clients, vendors, employees and other industry participants.
−Removed: Privacy and data security have become significant issues in the United States and in other jurisdictions where we may operate or offer our software solutions.
−Removed: The regulatory framework relating to privacy and data security worldwide is rapidly evolving, and is likely to remain uncertain for the foreseeable future.
Federal, state and foreign government bodies and agencies have in the past adopted, and may in the future adopt, laws and regulations regarding the collection, use, processing, storage and disclosure of personal or identifying information obtained from customers and other individuals.
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In addition to government regulation, privacy advocates and industry groups may propose various self-regulatory standards that may legally or contractually apply to our business.
−Removed: Because the interpretation and application of many privacy and data security laws, regulations and applicable industry standards are uncertain, it is possible that these laws, regulations and standards may be interpreted and applied in a manner inconsistent with our existing privacy and data management practices.
As new laws, regulations and industry standards take effect, and as we expand into new jurisdictions, adjacent markets or verticals consistent with our strategic plan, we will need to understand and comply with various new requirements, which may result in significant additional costs.
−Removed: To the extent applicable to our business or the businesses of our customers, these laws, regulations and industry standards could have negative effects on our business, including by increasing our costs and operating expenses, and/or delaying or impeding our deployment of new or existing core functionality or Value+ services.
−Removed: Compliance with these laws, regulations and industry standards requires significant management time and attention, and failure to comply could result in negative publicity, subject us to fines or penalties, expose us to litigation, or result in demands that we modify or cease existing business practices.
+Added: These laws, regulations and industry standards could have negative effects on our business, including by increasing our costs and operating expenses, and/or delaying or impeding our deployment of new or existing core functionality or Value+ services.
+Added: Failure to comply with these laws, regulations and industry standards could result in negative publicity, subject us to fines or penalties, expose us to litigation, or result in demands that we modify or cease existing business practices.
In addition, the costs of compliance with, and other burdens imposed by, such laws, regulations and industry standards may adversely affect our customers’ ability or desire to collect, use, process and store personal information using our software solutions, which could reduce overall demand for them.
−Removed: Even the perception of privacy and data security concerns, whether or not valid, may inhibit market acceptance of our software solutions.
−Removed: Furthermore, privacy and data security concerns
−Removed: may cause our customers’ clients, vendors, employees and other industry participants to resist providing the personal information necessary to allow our customers to use our applications effectively.
+Added: Furthermore, privacy and data security concerns may cause our customers’ clients, vendors, employees and other industry participants to resist providing the personal information necessary to allow our customers to use our applications effectively.
Any of these outcomes could adversely affect our business and operating results.
−Removed: We face a number of risks in our electronic payment services business that could adversely affect our business or operating results.
+Added: We face risks in our electronic payment services business that could adversely affect our business and/or operating results.
In our electronic payments services business, we facilitate the processing of both inbound and outbound payments for our customers.
These payments are settled through our sponsoring clearing bank, card payment processors, and other third-party electronic payment services providers that we may contract with from time to time.
−Removed: Our electronic payment services subject us to a number of risks, including, but not limited to:
−Removed: ▪ liability for customer costs related to disputed or fraudulent transactions if those costs exceed the amount of the customer reserves we have, if any, during the clearing period or after payments have been settled to our customers;
−Removed: ▪ electronic processing limits on the amounts that any single electronic payment services provider, or collectively all of our electronic payment services providers, will underwrite;
−Removed: ▪ our reliance on sponsoring clearing banks, card payment processors and other electronic payment providers to process electronic transactions;
−Removed: ▪ failure by us, our electronic payment services providers or our customers to adhere to applicable laws, regulations and standards that apply to the provision of electronic payment services;
−Removed: ▪ continually evolving laws and regulations governing money transmission and anti-money laundering, the application or interpretation of which is not clear in some jurisdictions;
−Removed: ▪ incidences of fraud in our electronic payment services ecosystem, security breaches, errors, defects, failures, vulnerabilities or bugs in our electronic payment services business, or our failure to comply with required external audit standards;
−Removed: ▪ our inability to increase our fees as the business evolves in a sufficient amount to maintain our existing margins.
−Removed: If any of these risks related to our electronic payment services were to materialize, our business or operating results could be negatively affected.
−Removed: Although we attempt to structure and adapt our electronic payment services to comply with complex and evolving laws, regulations and standards, our underwriting efforts do not guarantee compliance.
+Added: Our electronic payment services subject us to a number of risks, including, but not limited to, liability for customer costs related to disputed or fraudulent transactions and other incidences of fraud in our electronic payment services ecosystem.
In the event that we are found to be in violation of our legal, regulatory or contractual requirements, we may be subject to monetary fines or penalties, cease-and-desist orders, mandatory product changes, or other liabilities that could have an adverse effect on our operating results.
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Electronic payment transactions between our customer and another user may be returned for various reasons such as insufficient funds, fraud or stop payment orders.
−Removed: If we or our electronic payment services provider is unable to collect such amounts from the customer’s account (such as if the customer is illegitimate, or if the customer refuses or is unable to reimburse us for the amounts charged back), we bear the ultimate risk of loss for the transaction amount.
−Removed: While we have not experienced material losses resulting from amounts charged back in the past, there can be no assurance that we will not experience these types of losses in the future.
−Removed: In addition, there is an overarching risk stemming from the potential widespread adoption of quickly evolving financial technology products, including, for example, blockchain or other distributed ledger technologies, that could materially impact the manner in which payments are processed, the mix of payment methodologies conventionally utilized by payors and payees, and the regulatory framework applicable to such payments.
−Removed: The adoption of disruptive financial technologies could significantly reduce the volume of our electronic payment services business or change the transaction costs associated with or potential revenue derived from those payments, thereby reducing our revenue and increasing our associated expenses, which could materially impact our business, financial condition, and operating results.
+Added: If we or our electronic payment services provider is unable to collect such amounts from the customer’s account, we bear the ultimate risk of loss for the transaction amount.
+Added: Further, there is an overarching risk stemming from the potential widespread adoption of quickly evolving financial technology products, including, for example, blockchain or other distributed ledger technologies, that could materially impact the manner in which payments are processed, the mix of payment methodologies conventionally utilized by payors and payees, and the regulatory framework applicable to such payments.
+Added: The adoption of disruptive financial technologies could significantly reduce the volume of our electronic payment services business and/or change the transaction costs associated with those payments, thereby reducing our revenue and increasing our associated expenses, which could materially impact our business, financial condition, and operating results.
Evolution and expansion of our electronic payment services may subject us to additional risks and regulatory requirements.
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While we maintain a compliance program focused on applicable laws and regulations throughout our applicable industries, there is no guarantee that we will not be subject to fines, penalties or other regulatory actions in one or more jurisdictions, or be required to adjust our business practices to accommodate future regulatory requirements.
−Removed: We face a number of risks in our tenant screening services business that could adversely affect our business or operating results.
−Removed: Our tenant screening services business is subject to a number of complex laws that are subject to varying interpretations, including without limitation the Fair Credit Reporting Act (the "FCRA") and related regulations.
+Added: We face risks in our tenant screening services business that could adversely affect our business and/or operating results.
+Added: Our tenant screening services business is subject to a number of complex laws that are subject to varying interpretations, including the FCRA and related regulations.
The FCRA has recently been the subject of multiple class-based litigation proceedings, as well as numerous regulatory inquiries and enforcement actions.
−Removed: In addition, entities such as the Federal Trade Commission (the "FTC") and the Consumer Financial Protection Bureau ("CFPB") have the authority to promulgate rules and regulations that may impact our customers and our business.
−Removed: Although we attempt to structure and adapt our tenant screening services to comply with these and other relevant laws and regulations, we may from time to time be found to be in violation of them.
−Removed: Further, regardless of our compliance with applicable laws and regulations, we may from time to time be subject to regulatory inquiries, enforcement actions, class-based litigation or indemnity demands.
+Added: In addition, entities such as the FTC and the Consumer Financial Protection Bureau ("CFPB") have the authority to promulgate rules and regulations that may impact our customers and our business.
+Added: Although we attempt to structure our tenant screening services to comply with the relevant laws and regulations, we may be found to be in violation of them and we be subject to routine regulatory inquiries, enforcement actions, class-based litigation or indemnity demands.
As previously disclosed, we received a Civil Investigative Demand from the FTC in December 2018 requesting certain information relating to our compliance with the FCRA in connection with our tenant screening services business (the "FTC Investigation").
On April 30, 2020, the FTC staff informed us of its belief that there is a reasonable basis for asserting claims against us for our alleged failure to comply with certain sections of the FCRA that could result in monetary penalty and injunctive relief.
−Removed: We disagree with the stated belief of the FTC and have vigorously defended our position.
−Removed: Notwithstanding our disagreement with the FTC's position, and primarily in an effort to avoid protracted litigation and potential distraction to our business, we have entered into settlement negotiations with the FTC in an effort to resolve all claims and allegations arising out of or relating to the FTC Investigation.
+Added: Notwithstanding our disagreement with the FTC's position and vigorous defense of our position, and primarily in an effort to avoid protracted litigation and potential distraction to our business, we have entered into settlement negotiations with the FTC to resolve all claims and allegations arising out of or relating to the FTC Investigation.
Although the final outcome of the FTC Investigation is subject to ongoing settlement discussions and therefore remains uncertain, we have determined that a loss is probable and that a reasonable estimate of the loss is approximately $4.3 million.
−Removed: Accordingly, we have recognized an accrual of $4.3 million during the three months ended June 30, 2020 within accrued expenses on our Condensed Consolidated Balance Sheet.
−Removed: While this amount represents our best judgment of the probable loss based on information currently available to us, it is subject to significant judgments and estimates and numerous factors beyond our control, including without limitation the FTC's position with respect to the ongoing settlement negotiations.
+Added: Accordingly, we recognized an accrual of $4.3 million within accrued expenses on our Condensed Consolidated Balance Sheet for the nine month period ended September 30, 2020.
+Added: While this amount represents our best judgment of the probable loss based on information currently available to us, it is subject to significant estimates and numerous factors beyond our control, including without limitation the FTC's position with respect to the ongoing settlement negotiations.
In the event that the FTC Investigation results in a settlement payment by us, or a judgment against us, in an amount significantly in excess of our accrual, the resulting liability could have a material adverse effect upon our financial condition, results of operations and liquidity.
−Removed: In addition, we completed the settlement of a class action lawsuit related to alleged violations of the FCRA in 2019.
−Removed: Further, we received a Request for Information from the Civil Rights Division (Housing and Civil Enforcement Section) of the U.S.
−Removed: Department of Justice in July 2019 requesting certain information relating to our compliance with the Servicemembers Civil Relief Act in connection with our tenant screening services business.
−Removed: Due to the large number of tenant screening transactions in which we participate, our potential liability in an enforcement action or a class action lawsuit could have a material impact on our business, especially given that certain applicable laws and regulations provide for fines or penalties on a per occurrence basis.
+Added: In addition, we received a Request for Information from the DOJ in July 2019 requesting certain information relating to our compliance with the SCRA in connection with our tenant screening services business.
+Added: On November 6, 2020, the DOJ issued a no action letter, declining to take any action against us and closing its investigation.
+Added: Due to the large number of tenant screening transactions in which we participate, our potential liability in any enforcement action or a class action lawsuit could have a material impact on our business, especially given that certain applicable laws and regulations provide for fines or penalties on a per occurrence basis.
The existence of any such enforcement action or class action lawsuit, whether meritorious or not, may adversely affect our ability to attract customers, result in the loss of existing customers, harm our reputation and cause us to incur defense costs or other expenses.
−Removed: Any of the foregoing events may have a material adverse impact on our business, financial condition, and operating results.
−Removed: We use third-party service providers for important electronic payment and tenant screening services, and their failure to fulfill their contractual obligations could harm our reputation, disrupt our business and adversely affect our operating results.
−Removed: We use third-party electronic payment services providers to enable us to provide electronic payment services to our customers, and third-party tenant screening services providers to enable us to provide tenant screening services, such as background and credit checks, to our customers.
−Removed: We rely on these service providers to provide us with accurate and timely
−Removed: information, and therefore have significantly less control over our electronic payment and tenant screening services than if we were to maintain and operate them ourselves.
+Added: We use third-party service providers for electronic payment and tenant screening services, and their failure to fulfill their contractual obligations could harm our reputation, disrupt our business and adversely affect our operating results.
+Added: We use third-party electronic payment services providers to enable us to provide electronic payment services, and third-party tenant screening services providers to enable us to provide tenant screening services such as background and credit checks to our customers.
In some cases, functions necessary to our business are performed on proprietary third-party systems and software to which we have no access.
−Removed: We also generally do not have long-term contracts with these service providers.
−Removed: In addition, some of these service providers compete with us directly or indirectly in the markets we serve.
−Removed: The failure of these service providers to provide us with accurate and timely information, to fulfill their contractual obligations to us, or to renew their contracts with us, all of which may be more likely in light of the impacts and disruptions caused by the COVID-19 pandemic, could result in direct liability to us, harm our reputation, result in significant disruptions to our business, and adversely affect our operating results.
+Added: The failure of these service providers to provide us with accurate and timely information, to fulfill their contractual obligations to us, or to renew their contracts with us, could result in direct liability to us, harm our reputation, result in significant disruptions to our business, and adversely affect our operating results.
Our corporate culture has contributed to our success and, if we cannot continue to foster this culture as we grow, we could lose the passion, creativity, teamwork, focus and innovation fostered by our culture.
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This difficulty will only be exacerbated by the COVID-19 pandemic, which has resulted in travel restrictions, quarantines, shelter-in-place orders and similar government orders and restrictions that collectively make it more difficult for employees to interact, communicate and innovate.
−Removed: If we lose key members of our management team, our business may be harmed.
+Added: We depend on highly skilled personnel and, if we are unable to retain or hire additional qualified personnel or if we lose key members of our management team, we may not be able to achieve our strategic objectives and our business may be harmed.
Our success and future growth depend, in part, upon the continued services of our executive officers and other key employees.
−Removed: From time to time, there may be changes in our executive officers or other key employees resulting from the hiring or departure of these personnel, which may disrupt our business.
−Removed: Our executive officers and other key employees are generally employed on an at-will basis, which means that these personnel could terminate their employment with us at any time.
−Removed: Additionally, the equity awards held by many of our executive officers and other key employees are close to fully vested, and these employees may not have sufficient financial incentive to stay with us.
−Removed: The loss of one or more of our executive officers or other key employees, or the failure by our executive team to work effectively with our employees and lead our company, could have an adverse effect on our business.
−Removed: We depend on highly skilled personnel and, if we are unable to retain or hire additional qualified personnel, we may not be able to achieve our strategic objectives.
−Removed: To execute our growth plan and achieve our strategic objectives, we must continue to attract and retain highly qualified and motivated personnel across our organization.
+Added: There may be changes in our executive officers or other key employees resulting from the hiring or departure of these personnel, which may disrupt our business.
+Added: The loss of one or more of our executive officers or other key employees could have an adverse effect on our business.
+Added: In addition, to execute our growth plan and achieve our strategic objectives, we must continue to attract and retain highly qualified and motivated personnel across our organization.
In particular, in order to continue to enhance our software solutions, add new and innovative core functionality and/or Value+ services, as well as develop new products, it will be critical for us to increase the size of our research and product development organization, including hiring highly skilled software engineers.
Competition for software engineers is intense within our industry and there continues to be upward pressure on the compensation paid to these professionals.
−Removed: In addition, in order for us to achieve broader market acceptance of our software solutions, grow our customer base, and pursue adjacent markets and new verticals, we will need to continue to increase the size of our sales and marketing and customer service and support organizations.
−Removed: Identifying and recruiting qualified personnel, training them in the use of our software solutions, and ensuring they are well-equipped to provide great service to our customers, requires a significant investment of time and resources, and it can be particularly difficult to retain these individuals.
+Added: Further, in order for us to achieve broader market acceptance of our software solutions, grow our customer base, and pursue adjacent markets and new verticals consistent with our strategic plan, we will need to continue to increase the size of our sales and marketing and customer service and support organizations.
+Added: Identifying, recruiting, training and retaining qualified personnel is difficult requires a significant investment of time and resources.
Many of the companies with which we compete for experienced personnel have greater name recognition and financial resources than we have.
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If we are unable to attract and retain the personnel necessary to execute our growth plan, we may be unable to achieve our strategic objectives and our operating results may suffer.
−Removed: As of March 2020, in an effort to manage the financial uncertainty involved with the COVID-19 pandemic, we have delayed the hiring of certain non-essential employees and deferred the retention of certain contractors.
−Removed: The timeline for when we may resume ordinary hiring activities is highly uncertain and subject to change.
−Removed: The markets in which we participate are intensely competitive and, if we do not compete effectively, our business could be harmed.
−Removed: The overall market for business management software is global, highly competitive and continually evolving in response to a number of factors, including changes in technology, operational requirements, and laws and regulations.
−Removed: The market for cloud-based business management software is also highly competitive and subject to similar market factors.
−Removed: While we focus on providing industry-specific, cloud-based business management software solutions in our targeted verticals, we compete with other vertical cloud-based solution providers, as well as with horizontal cloud-based solution providers that provide broad cloud-based solutions across multiple verticals.
+Added: The markets we participate in are intensely competitive and our business could be harmed if we do not compete effectively.
+Added: The overall market for cloud-based business management software is global, highly competitive and continually evolving in response to a number of factors, including changes in technology, operational requirements, and laws and regulations.
+Added: While we focus on providing industry-specific, cloud-based business management software solutions, we compete with other vertical cloud-based solution providers, as well as with horizontal cloud-based solution providers that provide broad cloud-based solutions across multiple verticals.
Our competitors include established vertical software vendors, as well as newer entrants in the market.
−Removed: We also face competition from numerous cloud-based solution providers that focus almost exclusively on one or more point solutions.
+Added: We also face competition from numerous cloud-based solution providers that focus almost exclusively
+Added: on one or more point solutions.
Continued consolidation among cloud-based providers could lead to significantly increased competition.
−Removed: Although the domain expertise required to successfully develop, market and sell cloud-based business management software solutions in the real estate and legal verticals may hinder new entrants that are unable to invest the necessary resources to develop and deploy cloud-based solutions with the same level of functionality as ours, many of our competitors and potential competitors are larger and have greater name recognition, longer operating histories, and significantly greater resources than we do.
+Added: Many of our competitors and potential competitors are larger and have greater name recognition, longer operating histories, and significantly greater resources.
As a result, our competitors may be able to respond more quickly and effectively to new or changing opportunities, technologies, operational requirements and industry standards, as well as to new challenges such as those resulting from the COVID-19 pandemic.
−Removed: Some of these competitors may have more established customer relationships or strategic partnerships with third parties that enhance their products and services.
−Removed: Other competitors may offer products or services that address one or a number of business functions on a standalone basis at lower prices or bundled as part of a broader product sale, or with greater depth than our software solutions.
−Removed: In addition, our current and potential competitors may develop, market and sell new technologies with comparable functionality to our software solutions, which could cause us to lose customers, slow the rate of growth of new customers and cause us to decrease our prices in order to remain competitive.
+Added: In addition, our current and potential competitors may develop, market and sell new technologies with comparable functionality to our software solutions, which could cause us to lose customers, slow the rate of growth of new customers and/or cause us to decrease our prices in order to remain competitive.
For all of these reasons, we may not be able to compete effectively against our current and future competitors, which could harm our business.
−Removed: Business management software for small and medium-sized businesses ("SMBs") is a relatively new and developing market and, if the market is smaller than we estimate or develops more slowly than we expect, our operating results could be adversely affected.
−Removed: We provide cloud-based business management software for SMBs in the real estate and, to a lesser extent, legal markets and will assess entry into new or adjacent markets consistent with our strategic plan.
−Removed: Our success will depend, in part, on the continued widespread adoption by SMBs of cloud computing in general and of cloud-based business management software in particular.
−Removed: The market for industry-specific, cloud-based business management software for SMBs, both generally, and specifically within the real estate and legal markets, is evolving and, in comparison to the overall market for cloud-based solutions, is relatively small.
−Removed: The continued expansion of this market depends on numerous factors, including:
−Removed: ▪ the cost and perceived value associated with cloud-based business management software relative to on-premise software applications and disparate point solutions;
−Removed: ▪ the ability of cloud-based solution providers to offer SMBs the functionality they need to operate and grow their businesses;
−Removed: ▪ the willingness of SMBs to transition from their existing software systems, or otherwise alter their existing businesses practices, to migrate their businesses to a vertical cloud-based business management software solution;
−Removed: ▪ the ability of cloud-based solution providers to address security, privacy, availability and other concerns.
−Removed: Notwithstanding our efforts to increase sales of our software solutions to larger customers, if cloud-based business management software does not continue to achieve widespread market acceptance among SMBs, our revenue may increase at a
−Removed: slower rate than we expect and may even decline, which could adversely affect our operating results.
−Removed: In addition, it is difficult to estimate the rate at which SMBs will be willing to transition to vertical cloud-based business management software in any particular period, which makes it difficult to estimate the overall size and growth rate of the market for cloud-based business management software for SMBs at any given point in time or to forecast growth in our revenue or market share.
−Removed: This transition rate may be negatively impacted by the COVID-19 pandemic as customers may delay decisions to adopt our core products, or expand the use of our Value+ services, as they seek to reduce or delay spending within their businesses.
−Removed: If we are unable to introduce successful enhancements, including new and innovative core functionality and/or Value+ services, or new products for adjacent markets or additional verticals, our operating results could be adversely affected.
−Removed: The software industry in general, and our targeted verticals in particular, are characterized by rapid technological advances, changing industry standards, evolving customer requirements and intense competition.
−Removed: Our ability to attract new customers, increase revenue from our existing customers, and expand into adjacent markets or new verticals depends, in part, on our ability to enhance the functionality of our existing software solutions by introducing new and innovative core functionality and/or Value+ services that keep pace with technological developments and address the evolving business needs of our customers.
−Removed: In addition, our growth over the long term depends, in part, on our ability to introduce new products for adjacent markets and, potentially, additional verticals that we identify through our market validation process.
−Removed: Market acceptance of our current and future software solutions will depend on numerous factors, including:
−Removed: ▪ the unique functionality and ease of use of our software solutions and the extent to which our software solutions meet the business needs of our customers;
−Removed: ▪ the perceived benefits and security of our cloud-based business management software solutions relative to on-premise software applications or other competitive products;
−Removed: ▪ the pricing of our software solutions relative to competitive products;
−Removed: ▪ the availability of financial resources to new and existing customers to allow them to acquire or expand the use of our software solutions;
−Removed: ▪ perceptions about the security, privacy and availability of our software solutions relative to competitive products;
−Removed: ▪ time-to-market of the updates and enhancements to our core functionality, Value+ services and new products;
−Removed: ▪ perceptions about the quality and responsiveness of our customer service organization.
−Removed: If we are unable to successfully enhance the functionality of our existing software solutions, including our core solutions and Value+ services, and timely develop or acquire new products that gain market acceptance in adjacent markets and additional verticals consistent with our strategic plan, our revenue may increase at a slower rate than we expect and may even decline, which could adversely affect our operating results.
−Removed: These efforts to enhance our existing software solutions and develop new products, as well as our overall research and product development efforts, may be negatively impacted by the COVID-19 pandemic.
−Removed: Our business depends substantially on existing customers renewing their subscriptions with us and expanding their use of our Value+ services, and a decline in customer renewal rates, or failure to convince existing customers to adopt and utilize our Value+ services, could adversely impact our operating results.
−Removed: In order for us to maintain or increase our revenue and improve our operating results, it is important that our existing customers continue to pay subscription fees for the use of our core solutions, which tend to incrementally rise over time, as well as increase their adoption and utilization of our Value+ services.
−Removed: Our customers have no obligation to renew their subscriptions with us upon expiration of their subscription periods, which typically range from one month to one year.
−Removed: We cannot assure you that our customers will renew their subscriptions with us.
−Removed: In addition, our law firm customers that start their accounts using a 10-day free trial have no obligation to begin a paid subscription.
−Removed: Furthermore, although a significant portion of our revenue growth has historically resulted from the adoption and utilization of our Value+ services by our existing customers, we cannot assure you that our existing customers will continue to broaden their adoption and utilization of our Value+ services, or use our Value+ services at all.
−Removed: If our existing customers do not renew their subscriptions and increase their adoption and utilization of our existing or newly developed Value+ services, our revenue may increase at a slower rate than we expect and may even decline, which could adversely impact our financial condition and operating results.
−Removed: We may experience lower rates of
−Removed: subscription renewals, as well as lower rates of adoption and utilization of Value+ services, as a result of the COVID-19 pandemic as customers may seek to reduce or delay spending within their businesses.
−Removed: Word-of-mouth referrals represent a significant source of new customers for us and provide us with an opportunity to cost-effectively market and sell our software solutions.
−Removed: The loss of our existing customers could have a significant impact on our reputation in our targeted verticals and our ability to acquire new customers cost-effectively.
−Removed: A reduction in the number of our existing customers, even if offset by an increase in new customers, could have the impact of reducing our revenue and operating margins.
−Removed: In an effort to retain our customers and to expand our customers’ adoption and utilization of our Value+ services, we may choose to use increasingly costly sales and marketing efforts.
−Removed: In addition, we may make significant investments in research and product development to introduce Value+ services that ultimately are not broadly adopted by our customers.
−Removed: In either of those cases, we could incur significantly increased costs without a corresponding increase in revenue.
−Removed: Furthermore, we may fail to identify Value+ services that our customers need for their businesses, in which case we could miss opportunities to increase our revenue.
−Removed: Pricing pressure may cause us to change our pricing model, which could hurt our renewal rates and our ability to attract new customers, as well as our ability to increase adoption and usage of our Value+ services, which could adversely affect our operating results.
As the markets for our existing software solutions mature, or as current and future competitors introduce new products or services that compete with ours, we may experience pricing pressure and be unable to renew our subscription agreements with existing customers or increase adoption and usage of our Value+ services, or attract new customers at prices that are consistent with our current pricing model and operating budget.
−Removed: If this were to occur, it is possible that we would have to change our pricing model, offer pricing incentives, or generally reduce our prices, which may adversely affect our revenue even if adoption and utilization remain constant.
−Removed: In addition, many of our customers are smaller companies or firms, which are typically more cost sensitive than larger enterprises.
+Added: We may ultimately have to change our pricing model or offer pricing incentives which may adversely affect our revenue even if adoption and utilization remain constant.
Changes to our pricing model could harm our customer retention rates and our ability to attract new customers, whether in connection with our core solutions or our Value+ services, which could adversely affect our operating results.
−Removed: We expect to continue to derive a significant portion of our revenue from our real estate customers, and factors resulting in a loss of these customers could adversely affect our operating results.
−Removed: Historically, more than 90% of our revenue has been derived from real estate customers, and we expect that our real estate customers will continue to account for a significant portion of our revenue for the foreseeable future.
−Removed: We could lose real estate customers as a result of numerous factors, including:
−Removed: ▪ the expiration and non-renewal of subscriptions or termination of subscription agreements;
−Removed: ▪ the introduction of competitive products or technologies;
−Removed: ▪ our failure to provide updates and enhancements to our core functionality and/or Value+ services, and to introduce new Value+ services to our customers;
−Removed: ▪ changes in pricing policies by us or our competitors;
−Removed: ▪ acquisitions or consolidations within the real estate vertical;
−Removed: ▪ bankruptcies or other financial difficulties facing our real estate customers, especially in light of the impacts and disruptions caused by the COVID-19 pandemic;
−Removed: ▪ new or enhanced legal or regulatory regimes that negatively impact the real estate vertical;
−Removed: ▪ conditions or trends that are specific to the real estate vertical such as the economic factors that impact the rental market.
−Removed: The loss of a significant number of our real estate customers, or the loss of even a small number of our larger real estate customers, could cause our revenue to increase at a slower rate than we expect or even decline.
−Removed: In addition, even if we are able to retain our real estate customers, we may be unable to grow revenue from these real estate customers by increasing their adoption and utilization of our Value+ services.
−Removed: Any of these outcomes could adversely affect our operating results.
+Added: Business management software for small and medium-sized businesses ("SMBs") is a new and developing market.
+Added: If the market is smaller than estimated or develops more slowly than expected, our operating results could be adversely affected.
+Added: We provide cloud-based business management software for SMBs in the real estate market and will assess entry into new or adjacent markets consistent with our strategic plan.
+Added: Our success will depend, in part, on the continued widespread adoption by SMBs of cloud computing in general and of cloud-based business management software in particular.
+Added: The market for industry-specific, cloud-based business management software for SMBs, both generally, and specifically within the real estate market, is evolving and is relatively small.
+Added: The continued expansion of this market depends on numerous factors, including the cost and perceived value associated with cloud-based business management software relative to on-premise software applications and disparate point solutions, the ability of cloud-based solution providers to offer SMBs the functionality they need to operate and grow their businesses, the willingness of SMBs to transition from their existing software systems or otherwise alter their existing businesses practices to migrate their businesses to a vertical cloud-based business management software solution, and the ability of cloud-based solution providers to address security, privacy, availability and other concerns.
+Added: If cloud-based business management software does not continue to achieve widespread market acceptance among SMBs, our revenue may increase at a slower rate than we expect and may even decline, which could adversely affect our operating results.
+Added: In addition, it is difficult to estimate the rate at which SMBs will be willing to transition to vertical cloud-based business management software in any particular period, which makes it difficult to estimate the overall size and growth rate of the market for cloud-based business management software at any point in time or to forecast revenue growth or market share.
+Added: This transition rate may be negatively impacted by the COVID-19 pandemic as customers may delay decisions to adopt our core products, or expand the use of our Value+ services, as they seek to reduce or delay spending within their businesses.
If we are unable to increase sales of our software solutions to larger customers while mitigating the risks associated with serving such customers, our business and operating results may suffer.
−Removed: While we plan to continue to market and sell our software solutions to smaller companies or firms, our growth strategy is dependent, in part, upon increasing sales of our software solutions to larger customers within the real estate and legal markets.
+Added: While we plan to continue to market and sell our software solutions to smaller companies or firms, our growth strategy is dependent, in part, upon increasing sales of our software solutions to larger customers within the real estate vertical.
Sales to larger customers may involve risks that are not present, or are present to a lesser extent, in sales to smaller businesses.
As we seek to increase our sales to larger customers, we may invest considerably greater amounts of time and financial resources in our sales and marketing efforts.
−Removed: In addition, we may face longer sales cycles and experience less predictability and greater competition in completing some of our sales than we have in selling our software solutions to smaller businesses.
−Removed: Although we generally have not configured our software solutions or negotiated our pricing for specific customers, which has historically resulted in reduced upfront selling costs, our ability to successfully sell our software solutions to larger customers may be dependent, in part, on our ability to develop functionality, or to implement pricing policies, that are unique to particular customers or are necessary for success in a market segment dominated by larger customers.
−Removed: It may also be dependent on our ability to attract and retain sales personnel with experience selling to larger organizations.
+Added: In addition, we may face longer sales cycles and experience less predictability and greater competition in completing some of our sales.
+Added: Our ability to sell our software solutions to larger customers may be dependent, in part, on our ability to develop functionality, or to implement pricing policies, that are unique to particular customers or are necessary for success in a market segment dominated by larger customers.
Also, because security breaches or other performance problems with respect to larger customers may result in greater economic harm to these customers and more adverse publicity, there is increased financial and reputational risk associated with serving such customers.
−Removed: Further, our ability to sell our software solutions to larger customers may depend largely upon our successful acquisition and integration of synergistic businesses and, if we are unable to acquire and integrate such businesses successfully, our business and operating results may be negatively impacted.
If we are unable to increase sales of our software solutions to larger customers, while mitigating the risks associated with serving such customers, our business and operating results may suffer.
−Removed: Our growth depends in part on the success of our strategic relationships with third parties, and if we are unsuccessful in establishing or maintaining these relationships, our ability to compete in our targeted markets or grow our revenue could be impaired.
+Added: If we are unable to introduce successful enhancements, including new and innovative core functionality and/or Value+ services, or new products for adjacent markets or additional verticals, our operating results could be adversely affected.
+Added: The software industry is characterized by rapid technological advances, changing industry standards, evolving customer requirements and intense competition.
+Added: Our ability to attract new customers, increase revenue from our existing customers, and expand into adjacent markets or, potentially, new verticals depends, in part, on our ability to enhance the functionality of our existing software solutions by introducing new and innovative core functionality and/or Value+ services that keep pace with technological developments and address the evolving business needs of our customers.
+Added: In addition, our growth over the long term depends, in part, on our ability to introduce new products for adjacent markets and, potentially, additional verticals that we identify through our market validation process consistent with our strategic plan.
+Added: Market acceptance
+Added: of our current and future software solutions will depend on numerous factors, including the pricing of our software solutions relative to competitive products, perceptions about the security, privacy and availability of our software solutions relative to competitive products, and the time-to-market of our updates and enhancements to our core functionality, Value+ services and products.
+Added: If we are unable to successfully enhance the functionality of our existing software solutions and timely develop or acquire new products that gain market acceptance in adjacent markets and additional verticals consistent with our strategic plan, our revenue may increase at a slower rate than we expect and may even decline, which could adversely affect our operating results.
+Added: Our business depends substantially on existing customers renewing their subscriptions with us and expanding their use of our Value+ services, and a decline in either could adversely impact our operating results.
+Added: In order for us to maintain or increase our revenue and improve our operating results, it is important that our existing customers continue to pay subscription fees for the use of our core solutions, which tend to incrementally rise over time, as well as increase their adoption and utilization of our Value+ services.
+Added: We cannot assure you that our customers will renew their subscriptions with us, that our existing customers will continue to broaden their adoption and utilization of our Value+ services, or that they will use our Value+ services at all.
+Added: If our existing customers do not renew their subscriptions and increase their adoption and utilization of our existing or newly developed Value+ services, our revenue may increase at a slower rate than we expect and may even decline, which could adversely impact our financial condition and operating results.
+Added: The loss of our existing customers could have a significant impact on our reputation and our ability to acquire new customers cost-effectively via word-of-mouth.
+Added: A reduction in the number of our existing customers, even if offset by an increase in new customers, could reduce our revenue and operating margins.
+Added: We may need to employ increasingly costly sales and marketing efforts and make significant investments in research and product development to introduce Value+ services that ultimately are not broadly adopted by our customers.
+Added: In either of those cases, we could incur significantly increased costs without a corresponding increase in revenue.
+Added: Furthermore, we may fail to identify Value+ services that our customers need for their businesses, in which case we could miss opportunities to increase our revenue.
+Added: We may experience lower rates of subscription renewals, as well as lower rates of adoption and utilization of Value+ services, as a result of the COVID-19 pandemic as customers may seek to reduce or delay spending within their businesses.
+Added: All of our revenues are presently generated by sales to customers in the real estate vertical, and factors that adversely affect that vertical, or our customers within it, could also adversely affect us.
+Added: We expect that our real estate customers will continue to account for a significant portion or all of our revenue for the foreseeable future.
+Added: Demand for our software solutions and services could be affected by factors that are unique to and adversely affect the real estate vertical and our customers within it.
+Added: If the vertical itself declines, our customers may decide not to renew their subscriptions or they may cease using our Value+ services in order to reduce costs to remain competitive.
+Added: Further, we could lose real estate customers as a result of acquisitions or consolidations within the real estate vertical, bankruptcies or other financial difficulties facing our real estate customers, new or enhanced legal or regulatory regimes that negatively impact the real estate vertical, and conditions or trends specific to the real estate vertical such as the economic factors that impact the rental market.
+Added: It is possible that the significant increase in unemployment rates, regulation and financial uncertainty caused by the COVID-19 pandemic could have a disproportionate impact on businesses within the real estate vertical, which may, in turn, disproportionately affect our customers and, therefore, our business, financial condition and operating results.
+Added: In addition to the foregoing risks, there is an overarching risk stemming from potential widespread adoption of quickly evolving financial or other disruptive technology products that could significantly impact the real estate vertical, even if the disruptive technology is not specifically designed to apply directly to it.
+Added: The adoption of these new technologies could significantly reduce the volume or demand of our customers, thereby reducing our revenue, which could materially impact our business, financial condition and operating results.
+Added: Our growth depends in part on our strategic relationships with third parties and, if we are unsuccessful in establishing or maintaining these relationships, our ability to compete in our targeted markets or grow our revenue could be impaired.
In order to grow our business, we anticipate that we will continue to depend on our relationships with third parties, including our data center operators, cloud computing service providers, electronic payment, tenant screening and insurance services providers, and other third parties that support delivery of our software solutions.
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If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, which could negatively impact our operating results.
−Removed: Even if we are successful, we cannot assure you that these relationships will result in increased customer adoption and usage of our software solutions or improved operating results.
−Removed: Furthermore, if our partners fail to perform as expected, we may be subjected to litigation, our reputation may be harmed, and our business and operating results could be adversely affected.
We depend on data centers and computing infrastructure operated by third parties and any disruption in these operations could adversely affect our operating results.
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While we control and have access to our own servers and the other components of our network that are located in our third party data centers, we do not control the operation of any of these third party data center facilities.
−Removed: The owners of our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all.
−Removed: If we are unable to renew these agreements on commercially reasonable terms, or if one of our third party data center operators is acquired, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and possible service interruptions in connection with doing so.
+Added: The owners of our data center facilities have no obligation to renew their agreements with us.
+Added: If we are unable to renew these agreements on commercially reasonable terms, or if one of our third party data center operators is acquired, we may be required to transfer our servers and other infrastructure to new facilities, and we may incur significant costs and possible service interruptions.
Further, our third party data center providers could experience significant outages outside of our control that could adversely affect our business.
Problems faced by our third party data center operators, or with any of the service providers with whom we or they contract, could adversely affect the experience of our customers.
−Removed: Our third party data center operators could decide to close their facilities without adequate notice.
−Removed: In addition, any financial difficulties or bankruptcies, faced by our third party data center operators, or any of the service providers with whom we or they contract, including as a result of the impacts and disruptions caused by the COVID-19 pandemic, may have a negative effect on our business.
−Removed: Additionally, if our data centers are unable to keep up with our growing needs for capacity or any spikes in customer demand, this could have an adverse effect on our business.
−Removed: Any changes in third party service levels at our data centers could result in loss of or damage to our customers’
−Removed: stored information and service interruptions, which could harm our reputation.
−Removed: These issues could also cause us to lose customers, harm our ability to attract new customers, and subject us to potential liability, any of which could adversely affect our operating results.
+Added: Additionally, if our data centers are unable to keep up with our growing needs for capacity or any spikes in customer demand, this could result in loss of or damage to our customers’ stored information and service interruptions, which could harm our reputation, impair our ability to attract and retain customers, and subject us to potential liability, any of which could adversely affect our operating results.
The cloud computing service providers with which we contract may experience service interruptions across multiple regions that are outside of our control.
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If any of these issues arise, we may be required to migrate our cloud computing resources, or add new computing resources, to other cloud computing service providers.
−Removed: Although our infrastructure is redundant across multiple geographic regions, it might require significant effort to migrate all of our services to a different region if we are forced to recover from a data center’s severe impairment or total destruction, or from a regional, or multi-regional, outage by any of our cloud computing service providers.
+Added: It may require significant effort to migrate all of our services to a different region if we are forced to recover from a data center’s severe impairment or total destruction, or from a regional, or multi-regional, outage by any of our cloud computing service providers.
Any changes in service levels by our cloud computing service providers could result in loss of or damage to our customers’ stored information and service interruptions, which could harm our reputation, subject us to potential liability, and adversely affect our operating results.
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We offer our software solutions across a variety of operating systems and through the Internet.
−Removed: We are dependent on the interoperability of our platform with third party devices, desktop and mobile operating systems, as well as web browsers that we do not control.
−Removed: Any changes in such devices, systems or web browsers that degrade the functionality of our software solutions or give preferential treatment to competitive services could adversely affect adoption and usage of our software solutions.
+Added: We depend on the interoperability of our platform with third party devices, desktop and mobile operating systems, as well as web browsers that we do not control.
+Added: Any changes in such devices, systems or web browsers that degrade the functionality of our software solutions or give preferential treatment to competitive services could adversely affect the adoption and usage of our software solutions.
In addition, in order to deliver high quality software solutions, we will need to continuously enhance and modify our functionality to keep pace with changes in Internet-related hardware, mobile operating systems such as iOS and Android, browsers and other software, communication, network and database technologies.
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If our property management customers stop requiring residents to provide proof of legal liability to landlord insurance or elect to enroll residents in insurance programs offered by competing providers, or if insurance premiums otherwise decline, our revenues from insurance services could be adversely affected.
−Removed: Additionally, our legal liability to landlord insurance policies are underwritten by us, and we are required by our insurance partner to maintain a reserve to cover potential claims under the policies.
−Removed: While our policies have a limit of $100,000 per occurrence, there is no limit on the dollar amount of claims that could be made against us in any particular period or in the aggregate.
+Added: Additionally, we underwrite our legal liability to landlord insurance policies, and we are required by our insurance partner to maintain a reserve to cover potential claims under the policies.
+Added: While our policies have per-occurrence limits, there is no limit on the dollar amount of claims that could be made against us in any particular period or in the aggregate.
In the event that claims by the insureds increase unexpectedly, our reserve may not be sufficient to cover our resulting liability under the policies.
−Removed: To the extent we are required to pay out amounts to insureds that are significantly higher than our current reserves, this could have a material adverse impact on our operating results.
+Added: If we are required to pay out significantly higher amounts to insureds than our current reserves, this could have a material adverse impact on our operating results.
Our insurance business is subject to state governmental regulation, which could limit the growth of our insurance business and impose additional costs on us.
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Collectively, we are subject to state governmental regulation and supervision in connection with the operation of our insurance business, which includes both our legal liability to landlord insurance and renters insurance businesses.
−Removed: This state governmental supervision could limit the growth of our insurance business by increasing the costs of regulatory compliance, limiting or restricting the products or services we provide or the methods by which we provide them, and subjecting us to the possibility of regulatory actions or proceedings.
−Removed: Our continued ability to
−Removed: maintain these insurance licenses in the jurisdictions in which we are licensed depends on our compliance with the rules and regulations promulgated from time to time by the regulatory authorities in each of these jurisdictions.
−Removed: Furthermore, state insurance departments conduct, and we are routinely subject to, periodic examinations, audits and investigations of the affairs of insurance companies and agencies, any of which could result in the expenditure of significant management time or financial resources.
−Removed: In all jurisdictions, the applicable laws and regulations are subject to amendment and interpretation by regulatory authorities.
+Added: Such supervision could limit the growth of our insurance business by increasing the costs of regulatory compliance, limiting or restricting the products or services we provide or the methods by which we provide them, and subjecting us to regulatory actions or proceedings.
+Added: Our continued ability to maintain these insurance licenses in the jurisdictions in which we are licensed depends on our compliance with the rules and regulations promulgated from time to time by the regulatory authorities in each of these jurisdictions.
+Added: Furthermore, we are routinely subject to periodic state examinations, audits and investigations of the affairs of insurance companies and agencies, any of which could result in the expenditure of significant management time or financial resources.
Generally, such authorities are vested with relatively broad discretion to grant, renew and revoke licenses and approvals and to implement and interpret rules and regulations.
−Removed: Accordingly, we may be precluded or temporarily suspended from carrying on some or all of the activities of our insurance business or otherwise be fined or penalized in a given jurisdiction.
+Added: Accordingly, we may be precluded or temporarily suspended from carrying on some or all of the activities of our insurance business or otherwise be fined or penalized.
No assurances can be given that our insurance business can continue to be conducted in any given jurisdiction as it has been conducted in the past or that we will be able to expand our insurance business in the future.
−Removed: If we are unable to enter new verticals, or if our software solution for any new vertical fails to achieve market acceptance, our operating results could be adversely affected and we may be required to reconsider our growth strategy.
−Removed: Our growth strategy is dependent, in part, on our ability to expand into new verticals, beyond the real estate and legal markets.
−Removed: However, we may be unable to identify new verticals that meet our criteria for selecting industries that cloud-based solutions are ideally suited to address.
−Removed: In addition, our market validation process may not support entry into selected verticals due to our perception of the overall market opportunity or of the willingness of market participants within those verticals to adopt our software solutions.
−Removed: Further, instead of pursuing new verticals, we may prefer for various reasons to pursue alternative growth strategies, such as entry into markets that are adjacent to the markets in which we currently participate within our existing verticals, or the development of additional products or services for our existing markets.
−Removed: Even if we choose to enter new verticals, our market validation process does not guarantee our success.
−Removed: We may be unable to develop a software solution for a new vertical or, in the event that we enter a new vertical by way of a strategic acquisition, we may be unable to leverage the acquired software solution in time to take advantage of the identified market opportunity, and any delay in our time-to-market could expose us to additional competition or other factors that could impede our success.
−Removed: In addition, any software solution we develop or acquire for a new vertical may not provide the functionality required by potential customers and, as a result, may not achieve widespread market acceptance within the new vertical.
−Removed: To the extent we choose to enter new verticals, whether organically or via strategic acquisition, we may invest significant resources to develop and expand the functionality of our software solutions to meet the needs of customers in those verticals, which investments will occur in advance of our realization of revenue from them.
−Removed: In addition, while we expedited our entry into the legal vertical through the acquisition of MyCase in 2012, our practice and case management solution is in an earlier stage of development than APM, our property management solution, and we are at an earlier stage in the process of expanding the core functionality and Value+ services associated with our legal software.
−Removed: We face significant competition in the legal market from both vertical software vendors and cloud-based solution providers that offer one or more point solutions.
−Removed: There can be no assurance that we will be able to achieve market acceptance for our legal software at or near the levels achieved by our property management software.
−Removed: All of our revenues are generated by sales to customers in our targeted verticals, and factors that adversely affect the applicable industry could also adversely affect us.
−Removed: Currently, all of our sales are to customers in the real estate market and, to a lesser extent, the legal market.
−Removed: Demand for our software solutions and services could be affected by factors that are unique to and adversely affect our targeted verticals.
−Removed: In particular, the real estate and legal markets, as well as many of the software solutions and services we offer in those markets, are highly regulated across multiple federal, state and local jurisdictions, subject to intense competition and impacted by changes in general economic and market conditions.
−Removed: For example, changes in applicable laws and regulations could significantly impact the features and functionality demanded by our customers and require us to expend significant resources to ensure our software solutions continue to meet their evolving needs.
−Removed: In addition, other industry-specific factors, such as industry consolidation or the introduction of competing or disruptive technology, could lead to a significant reduction in the number of customers that use our software solutions or the Value+ services demanded by these customers.
−Removed: Further, if the real estate or legal markets decline, our customers may decide not to renew their subscriptions or they may cease using our Value+ services in order to reduce costs to remain competitive.
−Removed: It is possible that the significant increase in unemployment rates and financial uncertainty caused by the COVID-19 pandemic could have a disproportionate impact on businesses within the real estate and legal markets.
−Removed: As a result, our ability to generate revenue from our real estate and legal market customers could be adversely affected, which could have a material adverse impact on our business, financial condition and operating results.
−Removed: In addition to the foregoing risks associated with our targeted verticals themselves, there is an overarching risk stemming from potential widespread adoption of quickly evolving financial or other disruptive technology products that could significantly impact our targeted verticals, even if that technology is not specifically designed to apply directly to our targeted verticals.
−Removed: The adoption of these new technologies could significantly reduce the volume or demand of customers in our targeted verticals, thereby reducing our revenue, which could materially impact our business, financial condition and operating results.
−Removed: If we are unable to deliver effective customer service, it could harm our relationships with our existing customers and adversely affect our ability to attract new customers.
−Removed: Our business depends, in part, on our ability to satisfy our customers, both by providing software solutions that address their business needs, and by providing onboarding services and ongoing customer service, which contributes to retaining customers and increasing adoption and utilization of our Value+ services by our existing customers.
+Added: If we are unable to deliver effective customer service and/or effectively maintain and promote our brands, it could harm our relationships with our existing customers and adversely affect our ability to attract new customers and our operating results.
+Added: Our business depends, in part, on our ability to satisfy our customers, both by providing software solutions that address their business needs, and by providing onboarding services and ongoing customer service.
Once our software solutions are deployed, our customers depend on our customer service organization to resolve technical issues relating to their use of our solutions.
−Removed: We may be unable to respond quickly to accommodate short-term increases in customer demand for support services or may otherwise encounter a customer issue that is difficult to resolve.
−Removed: If a customer is not satisfied with the quality or responsiveness of our customer service, we could incur additional costs to address the situation.
As we do not separately charge our customers for support services, increased demand for our support services would increase costs without corresponding revenue, which could adversely affect our operating results.
−Removed: In addition, regardless of the quality or responsiveness of our customer service efforts, a customer that is not satisfied with an outcome may choose to terminate, or not to renew, their relationship with us.
−Removed: Our sales process is highly dependent on the ease of use of our software solutions, our reputation and positive recommendations from our existing customers.
+Added: Further, our sales process is highly dependent on the ease of use of our software solutions, our reputation and positive recommendations from our existing customers.
Any failure to maintain high-quality or responsive customer service, or a market perception that we do not maintain high-quality or responsive customer service, could harm our reputation, cause us to lose customers and adversely impact our ability to sell our software solutions to prospective customers.
−Removed: Challenges associated with maintaining a responsive customer service organization may be exacerbated as a result of the COVID-19 pandemic, especially as we transition to a remote work environment.
−Removed: Our software solutions address functions within the heavily regulated real estate and legal markets, and our customers’ failure to comply with applicable laws and regulations could subject us to litigation.
−Removed: We sell our software solutions to customers within the real estate market and, to a lesser extent, the legal market.
−Removed: Our customers use our software solutions for business activities that are subject to a number of laws and regulations, including without limitation federal, state and local real property laws and legal ethics rules.
−Removed: Any failure by our customers to comply with laws and regulations applicable to their businesses could result in fines, penalties or claims for substantial damages against our customers.
−Removed: To the extent our customers believe, or any other potentially aggrieved stakeholder believes, that our software solutions or our customer service and support organization caused or contributed to such failures, our customers and/or other third parties may make claims for damages against us, regardless of whether we are responsible for the failure.
−Removed: As a result, we may be subject to lawsuits or other proceedings that, even if unsuccessful, could divert our resources and our management’s attention and adversely affect our business, and our insurance coverage may not be sufficient to cover such claims against us.
−Removed: If we are unable to maintain and promote our brands, or to do so in a cost-effective manner, our ability to maintain and expand our customer base will be impaired, and our operating results could be adversely affected.
We believe that maintaining and promoting our brands is critical to achieving widespread awareness and acceptance of our software solutions, and maintaining and expanding our customer base.
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If we fail to deliver products and functionality that address our customers’ business needs, or if we fail to meet our customers’ expectations for customer service, it could weaken our brands and harm our reputation.
−Removed: Our inability to meet in person with prospective or existing customers during the COVID-19 pandemic may have an adverse impact on our relationships with current or prospective customers, and reduce the demand for our software solutions.
−Removed: Additionally, the actions of third parties which are out of our control may affect our brands and reputation if customers do not have a positive experience using the services of our third party partners that support our software solutions.
Maintaining and enhancing our brands may require us to make substantial investments, and these investments may not result in commensurate increases in our revenue.
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We may be sued by third parties for alleged infringement of their proprietary rights, which could cause us to incur significant expenses and require us to pay substantial damages.
−Removed: There is considerable patent, trademark, copyright, trade secret and other intellectual property development activity in our industry.
Our success depends, in part, on our not infringing upon the intellectual property rights of others.
−Removed: Our competitors, as well as a number of other entities and individuals, may legally own or claim to own intellectual property relating to our technology or software solutions, including without limitation technology we develop and build internally and that which we acquire.
+Added: Our competitors, as well as a number of other entities and individuals, may legally own or claim to own intellectual property relating to our technology or software solutions, including without limitation technology we develop and build internally and/or acquire.
From time to time, our competitors or other third parties may claim that we are infringing upon their intellectual property rights.
−Removed: However, we may be unaware of the intellectual property rights that others may claim cover some or all of our technology or software solutions.
Any claims or litigation, regardless of merit, could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages, settlement costs or ongoing royalty payments, require that we comply with other unfavorable license and other terms, or prevent us from offering our software solutions in their current form.
Even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the attention of our management and key personnel from our business operations and harm our operating results.
−Removed: We have incurred and expect to continue to incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance with legal requirements and corporate governance initiatives.
−Removed: As a public company, we have incurred and expect to continue to incur significant legal, accounting, compliance and other expenses.
−Removed: We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002, the listing requirements of the NASDAQ Global Market, and other applicable securities rules and regulations.
−Removed: Compliance with these rules and regulations will continue to increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increase demand on our systems and resources.
−Removed: In addition, changing laws, regulations and standards relating to corporate governance and public disclosure requirements are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more difficult and time consuming.
−Removed: These laws, regulations and standards are subject to varying interpretations and their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
−Removed: This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to governance practices.
−Removed: We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.
−Removed: If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us, which could result in a material adverse impact on our business.
Because we recognize revenue from subscriptions for our software solutions over the term of each subscription agreement, downturns or upturns in new business may not be immediately reflected in our operating results.
−Removed: We recognize revenue from customers ratably over the term of each subscription agreement, which typically ranges from one month to one year.
−Removed: As a result, some of the revenue we report in each period is derived from the recognition of deferred revenue relating to subscription agreements entered into during previous periods.
−Removed: Consequently, a decline in new or renewed subscriptions in any one period may not be reflected in our revenue results for that period.
−Removed: However, any such decline will negatively affect our revenue in future quarters.
+Added: A portion of the revenue we report in each period is derived from the recognition of deferred revenue relating to subscription agreements entered into during previous periods.
+Added: Consequently, while a decline in new or renewed subscriptions in any one period may not be reflected in our revenue results for that period, any such decline will negatively affect our revenue in future quarters.
Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription period.
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In addition to risks related to license requirements, usage of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software.
−Removed: These risks could be difficult to eliminate or manage, and could have a negative impact on our business and operating results.
We also use third-party commercial software in our software solutions and expect to continue to do so in the future.
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These risks could also be difficult to eliminate or manage, and could have a negative impact on our business and operating results.
−Removed: There are risks associated with our outstanding and future indebtedness that could adversely affect our financial condition.
−Removed: As of June 30, 2020, we had $48.0 million of outstanding indebtedness under a term loan that will mature on December 24, 2023 (the "Term Loan"), pursuant to our Credit Agreement with Wells Fargo, and we may incur additional indebtedness in the future and/or enter into new financing arrangements.
−Removed: In addition, as of June 30, 2020, we had $49.0 million outstanding under our Revolving Facility with Wells Fargo.
−Removed: Our ability to meet expenses, to remain in compliance with the covenants under our debt instruments, and to pay fees, interest and principal on our substantial level of indebtedness depends on, among other things, our operating performance and market conditions, which are likely to be impacted by the significant disruptions caused by the COVID-19 pandemic.
+Added: There are risks associated with our outstanding and future indebtedness that may adversely affect our financial condition and our existing and future financing agreements may contain restrictive operating and financial covenants.
+Added: On September 30, 2020, our Credit Agreement with Wells Fargo was terminated and all obligations outstanding under the Term Loan and Revolving Facility thereunder were satisfied in full and extinguished.
+Added: We may, however, incur additional indebtedness in the future and/or enter into new financing arrangements.
+Added: Our ability to meet expenses, to remain in compliance with the covenants under our existing and future debt instruments, and to pay fees, interest and principal on our indebtedness will depend on, among other things, our operating performance and market conditions.
Accordingly, our cash flow may not be sufficient to allow us to pay principal and interest on our debt and meet our other obligations.
−Removed: Our level of indebtedness could have important consequences, including the following:
−Removed: ▪ We must use a portion of our cash flow from operations to pay fees, interest and principal on the Term Loan and Revolving Facility which reduces funds available to us for other purposes such as working capital, capital expenditures, other general corporate purposes, and potential acquisitions;
−Removed: ▪ We may be unable to refinance our indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes;
−Removed: ▪ We are exposed to fluctuations in interest rates because borrowings under our credit facilities bear interest at variable rates;
−Removed: ▪ Our leverage may be greater than that of some of our competitors, which may put us at a competitive disadvantage and reduce our flexibility in responding to current and changing industry and financial market conditions;
−Removed: ▪ We may be more vulnerable to an economic downturn and adverse developments in our business;
−Removed: ▪ We may be unable to comply with financial and other covenants in our debt agreements, which could result in an event of default that, if not cured or waived, may result in acceleration of certain of our debt, have an adverse effect on our business and prospects and force us into bankruptcy or liquidation.
−Removed: There can be no assurance that we will be able to manage any of these risks successfully.
−Removed: In addition, we conduct a portion of our operations through our subsidiaries.
−Removed: Accordingly, repayment of our indebtedness will be dependent in part on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, distribution or otherwise.
−Removed: Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness.
−Removed: Each subsidiary is a distinct legal entity, and under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries.
−Removed: In the event that we do not receive distributions from our subsidiaries, we may be unable to make the required fee, interest and principal payments on our indebtedness.
−Removed: Financing agreements that we are party to or may become party to may contain operating and financial covenants that restrict our business and financing activities.
−Removed: Failure to comply with these covenants, or other restrictions, could result in default under these agreements.
−Removed: Our existing Credit Agreement with Wells Fargo as administrative agent, and the lenders that are parties thereto, which we refer to as the Second Amendment of our Original Credit Agreement, contains certain operating and financial restrictions and covenants, including limitations on dividends, dispositions of all or substantially all of our assets, mergers or consolidations, incurrence of indebtedness and liens, and other corporate activities.
−Removed: These restrictions and covenants, as well as those contained in any future financing agreements that we may enter into, may restrict our ability to finance our operations, and to engage in, expand or otherwise pursue our business activities and strategic objectives.
−Removed: The substantial uncertainty and financial impacts caused by the COVID-19 pandemic may cause Wells Fargo to seek to amend the Second Amendment of our Original Credit Agreement, which could, among other things, result in greater operational or financial restrictions on our business.
−Removed: Our ability to comply with these restrictions and covenants may be affected by events beyond our control, including disruptions to our business relating to the COVID-19 pandemic, and breaches of these covenants could result in a default under the Second Amendment of our Original Credit Agreement and any future financing agreements that we may enter into.
−Removed: If not waived, defaults could cause any outstanding indebtedness under the Second Amendment of our Original Credit Agreement and any future financing agreements that we may enter into to become immediately due and payable, and allow the lenders to proceed against any collateral securing that indebtedness.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
−Removed: As of December 31, 2019, the date of our most recent audited financial statements, we had federal net operating loss carryforwards of $82.1 million, which will begin to expire in 2031.
−Removed: As of December 31, 2019, we had state net operating loss carryforwards of $65.9 million, which will begin to expire in 2028.
−Removed: As of December 31, 2019, we also had federal and state research and development credit carryforwards of $11.4 million and $10.8 million, respectively.
+Added: As of September 30, 2020, we had federal and state net operating loss carryforwards, which, if not utilized, will begin to expire in 2031 for federal purposes and in 2028 for state purposes.
+Added: As of September 30, 2020, we also had federal and state research and development credit carryforwards.
The federal credit carryforwards will begin to expire in 2027, while the majority state credits carryforwards apply indefinitely.
9 unchanged sentences
Any such limitations on our ability to use our net operating loss carryforwards and other tax assets could adversely impact our business, financial condition and operating results.
−Removed: Tax laws or regulations could be enacted or changed and existing tax laws or regulations could be applied to us or to our customers in a manner that could increase the costs of our software solutions and adversely impact our operating results.
−Removed: The application of federal, state, local and foreign tax laws to services provided electronically is continuously evolving.
−Removed: New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted or amended at any time, possibly with retroactive effect, and could be applied solely or disproportionately to services provided over the Internet.
−Removed: These enactments or amendments could adversely affect our sales activity due to the inherent cost increase the taxes would represent and could ultimately result in a negative impact on our operating results.
−Removed: In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, modified or applied adversely to us, possibly with retroactive effect, which could require us or our customers to pay additional tax amounts, as well as require us or our customers to pay fines or penalties, as well as interest on past amounts.
−Removed: If we are unsuccessful in collecting such taxes due from our customers, we could be held liable for such costs, thereby adversely impacting our operating results.
−Removed: Because our long-term growth strategy involves expansion of our sales to customers outside the United States, our business will be susceptible to the risks associated with international operations.
−Removed: A component of our growth strategy involves the expansion of our international operations and worldwide customer base.
+Added: Because our long-term growth strategy involves potential expansion of our sales to customers outside the United States, our business may be susceptible to the risks associated with international operations.
To date, we have realized an immaterial amount of revenue from customers outside the United States.
−Removed: Operating in international markets will require significant resources and management attention and will subject us to regulatory, economic, geographic and political risks, including but not limited to the risk of disruptions caused by regional natural disasters or health epidemics, that are different from those in the United States.
−Removed: Because of our limited experience with international operations and significant differences between the United States and international markets, our international expansion efforts may not be successful in creating demand for our software solutions outside of the United States or in effectively selling our software solutions in any international markets we may enter.
+Added: To the extent that we decide to expand our operations to international markets, such expansion will require significant resources and management attention and will subject us to regulatory, economic, geographic and political risks, including but not limited to the risk of disruptions caused by regional natural disasters or health epidemics, that are different from those in the United States.
+Added: Because of our limited experience with international operations and significant differences between the United States and international markets, any international expansion efforts may not be successful in creating demand for our software solutions outside of the United States or in effectively selling our software solutions in any international markets we may enter.
The significant disruptions caused by the COVID-19 pandemic, especially in certain countries in the European Union and Asia, could have a prolonged negative impact on our ability to expand our sales to customers outside the United States.
3 unchanged sentences
The market price of our Class A common stock has been, and is likely to continue to be, highly volatile, and fluctuations in the price of our Class A common stock could cause you to lose all or part of your investment.
−Removed: For example, from June 30, 2019 to June 30, 2020, the share price of our Class A common stock on the NASDAQ Global Market fluctuated between $81.01 and $180.56.
−Removed: There are numerous factors that could cause fluctuations in the market price of our Class A common stock, including:
−Removed: ▪ volatility in the trading volume of our Class A common stock;
−Removed: ▪ price and volume fluctuations in the overall stock market;
−Removed: ▪ volatility in the market prices and trading volumes of securities issued by software companies;
−Removed: ▪ changes in operating performance and stock market valuations of software companies generally or those in our markets in particular;
−Removed: ▪ sales of shares of our Class A common stock by us or our stockholders, or perceptions that such sales may occur;
−Removed: ▪ any future announcements to repurchase our Class A common stock, and any actual share repurchases that we may undertake from time to time;
−Removed: ▪ failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow us, or our failure to meet these estimates or the expectations of investors;
−Removed: ▪ the guidance we may provide to the public, any changes in that guidance, and our performance relative to that guidance;
−Removed: ▪ announcements by us or our competitors of new products or services;
−Removed: ▪ public reaction to our press releases, filings with the SEC and other public announcements;
−Removed: ▪ rumors and market speculation involving us or other software companies;
−Removed: ▪ actual or anticipated changes in our operating results or fluctuations in our operating results;
−Removed: ▪ actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;
−Removed: ▪ impacts from widespread public health crises, including the COVID-19 global pandemic;
−Removed: ▪ legal proceedings, enforcement actions or regulatory inquiries relating to us or our competitors or to the markets in which we operate;
−Removed: ▪ developments or disputes concerning our intellectual property or other proprietary rights;
−Removed: ▪ announced or completed acquisitions of businesses or technologies by us or our competitors;
−Removed: ▪ new laws or regulations or new interpretations of existing laws or regulations applicable to our business or the markets in which we operate;
−Removed: ▪ changes in accounting standards, policies, guidelines, interpretations or principles;
−Removed: ▪ changes in our management;
−Removed: ▪ general economic conditions and trends, including the impacts and disruptions caused by the COVID-19 pandemic.
−Removed: In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies.
−Removed: If instituted against us, any such litigation, regardless of its merit or final outcome, could result in substantial costs and a diversion of our management’s attention, thereby adversely affecting our operating results and, potentially, the price of our Class A common stock.
−Removed: The dual class structure of our common stock has the effect of concentrating voting control with a limited number of stockholders, including our executive officers, directors and principal stockholders, which will limit your ability to influence corporate matters.
+Added: There are a wide variety of factors, many of which are outside our control, that could cause fluctuations in the market price of our Class A common stock and, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies.
+Added: If instituted against us, any such litigation, regardless of its merit or final outcome, could result in substantial costs and a diversion of our management’s attention, thereby adversely affecting our operating results and/or the price of our Class A common stock.
+Added: The dual class structure of our common stock concentrates voting control with a limited number of stockholders, including our executive officers, directors and principal stockholders, effectively limiting your ability to influence corporate matters.
Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share.
−Removed: As of December 31, 2019, the holders of the outstanding shares of our Class B common stock, including our executive officers, directors, and principal stockholders, collectively hold approximately 91% of the combined voting power of our outstanding capital stock.
+Added: As of September 30, 2020, the holders of the outstanding shares of our Class B common stock, including our executive officers, directors, and principal stockholders, collectively held approximately 90% of the combined voting power of our outstanding capital stock.
Because of the 10-to-1 voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock collectively control a majority of the combined voting power of our outstanding capital stock and therefore are able to exercise significant influence and control over the establishment and implementation of our future business plans and strategic objectives, as well as to control all matters submitted to our stockholders for approval.
1 unchanged sentence
This concentrated control may also have the effect of delaying, deterring or preventing a change-in-control transaction, depriving our stockholders of an opportunity to receive a premium for their capital stock or negatively affecting the market price of our Class A common stock.
−Removed: Transfers by holders of our Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions.
+Added: In addition, transfers by holders of our Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions.
The conversion of our Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of the holders of our Class B common stock who retain their shares over the long term.
3 unchanged sentences
Additionally, FTSE Russell, another provider of widely followed stock indices, requires new constituents of its indices to have at least five percent of their voting rights in the hands of public stockholders.
−Removed: As of June 30, 2020, the
−Removed: holders of the outstanding shares of our Class B common stock, including our executive officers, directors, and principal stockholders, collectively hold approximately 91% of the combined voting power of our outstanding capital stock.
Many investment funds are precluded from investing in companies that are not included in such indices, and these funds would be unable to purchase our Class A common stock.
−Removed: We cannot assure you that other stock indices will not take a similar approach in the future.
−Removed: Exclusion from indices could make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected.
+Added: Exclusion from these and other indices could make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected.
In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structures.
−Removed: As a result, the dual class structure of our common stock may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure.
+Added: As a result, shareholder advisory firms may publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure.
Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A common stock.
−Removed: Share repurchases could increase the volatility of the trading price of our common stock and diminish our cash reserves, and we cannot guarantee that our share repurchase program will enhance long-term stockholder value.
−Removed: In October 2018, our Board of Directors adopted a $30.0 million Share Repurchase Program relating to our outstanding shares of our Class A common stock.
−Removed: In February 2019, our Board of Directors adopted a $100.0 million Share Repurchase Program relating to our outstanding shares of our Class A common stock, which is inclusive of, and not in addition to, the remaining availability under the October 2018 authorization.
−Removed: Although our Board of Directors has authorized the Repurchase Program, it does not obligate us to repurchase any specific dollar amount or number of shares, there is no expiration date for the Repurchase Program, and the Repurchase Program may be modified, suspended or terminated at any time and for any reason.
−Removed: The timing and actual number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the acquisition price of the shares, our liquidity position, general market and economic conditions, legal and regulatory requirements and other considerations.
−Removed: Our ability to repurchase shares may also be limited by restrictive covenants in our existing Credit Agreement or in future borrowing arrangements we may enter into from time to time.
−Removed: Repurchases of our shares could increase the volatility of the trading price of our shares, which could have a negative impact on the trading price of our shares.
−Removed: Similarly, the future announcement of the termination or suspension of the Repurchase Program, or our decision not to utilize the full authorized repurchase amount under the Repurchase Program, could result in a decrease in the trading price of our shares.
−Removed: In addition, the Repurchase Program could have the impact of diminishing our cash reserves, which may impact our ability to finance our growth, complete acquisitions and execute our strategic plan.
−Removed: There can be no assurance that any share repurchases we do elect to make will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased our shares.
−Removed: Although our share repurchase program is intended to enhance long-term stockholder value, we cannot guarantee that it will do so and short-term stock price fluctuations could reduce the effectiveness of the Repurchase Program.
−Removed: Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
−Removed: Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could have the effect of rendering more difficult hostile takeovers, change-in-control transactions or changes in our Board of Directors or management.
−Removed: Among other things, these provisions:
−Removed: ▪ authorize the issuance of preferred stock with powers, preferences and rights that may be senior to our common stock, which can be created and issued by our Board of Directors without prior stockholder approval;
−Removed: ▪ provide for the adoption of a staggered Board of Directors whereby our Board of Directors is divided into three classes, each of which has a different three-year term;
−Removed: ▪ provide that the number of directors will be fixed by our Board of Directors;
−Removed: ▪ prohibit our stockholders from filling vacancies on our Board of Directors;
−Removed: ▪ provide for the removal of a director only for cause and then only by the affirmative vote of the holders of a majority of the combined voting power of our outstanding capital stock;
−Removed: ▪ prohibit stockholders from calling special stockholder meetings;
−Removed: ▪ prohibit stockholders from acting by written consent without holding a meeting of stockholders;
−Removed: ▪ require the vote of at least two-thirds of the combined voting power of our outstanding capital stock to approve amendments to our certificate of incorporation or bylaws;
−Removed: ▪ require advance written notice of stockholder proposals and director nominations;
−Removed: ▪ provide for a dual-class common stock structure, as discussed above;
−Removed: ▪ require the approval of the holders of at least a majority of the outstanding shares of our Class B common stock, voting as a separate class, prior to consummating a change-in-control transaction.
−Removed: As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which may delay, deter or prevent a change-in-control transaction.
−Removed: Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock.
−Removed: Any provision of Delaware law, our amended and restated certificate of incorporation, or our amended and restated bylaws, that has the effect of rendering more difficult, delaying, deterring or preventing a change-in-control transaction could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock, and could also affect the price that some investors are willing to pay for our Class A common stock.
Future sales of shares of our Class A common stock, or the perception that these sales could occur, could depress the market price of our Class A common stock.
1 unchanged sentence
We are unable to predict the effect that sales, or the perception that our shares may be available for sale, will have on the prevailing market price of our Class A common stock.
−Removed: As of June 30, 2020, we had an aggregate of 1.2 million options outstanding that, if fully exercised, would result in the issuance of additional shares of Class A common stock or Class B common stock, as applicable.
+Added: As of September 30, 2020, we had an aggregate of 1.2 million options outstanding that, if fully exercised, would result in the issuance of additional shares of Class A common stock or Class B common stock, as applicable.
Our Class B common stock converts into Class A common stock on a one-for-one basis.
−Removed: In addition, as of June 30, 2020, we had 0.6 million RSUs, outstanding which, if fully vested and settled in shares, would result in the issuance of additional shares of Class A common stock.
+Added: In addition, as of September 30, 2020, we had 0.5 million RSUs, outstanding which, if fully vested and settled in shares, would result in the issuance of additional shares of Class A common stock.
All of the shares of Class A common stock issuable upon the exercise of options (or upon conversion of shares of Class B common stock issued upon the exercise of options), or upon the vesting and settlement of RSUs, have been registered for public resale under the Securities Act.
Accordingly, these shares will be able to be freely sold in the public market upon issuance.
−Removed: Certain holders of our Class A common stock and Class B common stock have rights, subject to certain conditions, to require us to file registration statements for the public resale of such shares (in the case of Class B common stock, the Class A common stock issuable upon conversion of such shares) or to include such shares in registration statements that we may file for us or other stockholders.
+Added: In addition, certain holders of our Class A common stock and Class B common stock have rights, subject to certain conditions, to require us to file registration statements for the public resale of such shares (in the case of Class B common stock, the Class A common stock issuable upon conversion of such shares) or to include such shares in registration statements that we may file for us or other stockholders.
Any sales of securities by these stockholders could have a material adverse effect on the market price of our Class A common stock.
−Removed: If securities or industry analysts do not publish or cease publishing research or reports about us, our business, our market or our competitors, or if they adversely change their recommendations regarding our Class A common stock, the market price and trading volume of our Class A common stock could decline.
−Removed: The trading market for our Class A common stock is influenced, to some extent, by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors.
−Removed: If any of the analysts who cover us adversely change their recommendations regarding our Class A common stock or provide more favorable recommendations about our competitors, the market price of our Class A common stock may decline.
−Removed: If any of the analysts who cover us were to cease coverage of us or fail to regularly publish reports, we could lose visibility in the financial markets, which in turn could cause the market price and trading volume of our Class A common stock to decline.
−Removed: We do not expect to declare any dividends in the foreseeable future.
−Removed: We have never declared or paid any cash dividends on our existing common stock.
−Removed: We do not anticipate declaring or paying any cash dividends to holders of our Class A common stock in the foreseeable future and intend to retain all future earnings for use in the growth of our business.
−Removed: In addition, the terms of our Credit Agreement restrict our ability to pay
+Added: We do not expect to declare any dividends in the foreseeable future and may repurchase stock in accordance with our Share Repurchase Program.
+Added: We have never declared, and we do not anticipate declaring or paying, any cash dividends to holders of our Class A common stock in the foreseeable future.
+Added: In addition, the terms of our future borrowing arrangements we may enter into from time to time may restrict our ability to pay dividends.
Consequently, investors may need to rely on sales of our Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
−Removed: Investors should not purchase our Class A common stock with the expectation of receiving cash dividends.
−Removed: See the Exhibit Index immediately following the signature page of this Quarterly Report, which is incorporated herein by reference.
−Removed: Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
−Removed: AppFolio, Inc.
−Removed: August 3, 2020 By:
−Removed: Chief Financial Officer
−Removed: (Principal Financial and Accounting Officer)
−Removed: EXHIBIT INDEX
+Added: Price appreciation, which may never occur, may be further impacted by repurchases of our shares in accordance with our Share Repurchase Program.
+Added: Repurchases of our shares could increase the volatility of the trading price of our shares, which could have a negative impact on the trading price of our shares.
+Added: Similarly, the future announcement of the termination or suspension of the Share Repurchase Program, or our decision not to utilize the full authorized repurchase amount under the Share Repurchase Program, could result in a decrease in the trading price of our shares.
+Added: In addition, the Share Repurchase Program could have the impact of diminishing our cash reserves, which may impact our ability to finance our growth, complete acquisitions and execute our strategic plan.
+Added: For additional information regarding our Share Repurchase Program, refer to Note 10, Share Repurchase Program , of our Condensed Consolidated Financial Statements.
+Added: General Risk Factors
+Added: Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
+Added: Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could have the effect of rendering more difficult hostile takeovers, change-in-control transactions or changes in our Board of Directors or management.
+Added: Among other things, these provisions authorize the issuance of preferred stock with powers, preferences and rights that may be senior to our common stock, provide for the adoption of a staggered three-class Board of
+Added: Directors, prohibit our stockholders from filling vacancies on our Board of Directors or calling special stockholder meetings, require the vote of at least two-thirds of the combined voting power of our outstanding capital stock to approve amendments to our certificate of incorporation or bylaws, and require the approval of the holders of at least a majority of the outstanding shares of our Class B common stock voting as a separate class prior to consummating a change-in-control transaction.
+Added: As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which may delay, deter or prevent a change-in-control transaction.
+Added: Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock.
+Added: Any provision of Delaware law, our amended and restated certificate of incorporation, or our amended and restated bylaws that has the effect of rendering more difficult, delaying, deterring or preventing a change-in-control transaction could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our Class A common stock.
+Added: Government regulations and laws are continuously evolving and unfavorable changes could adversely affect our operating results, subject us to litigation or governmental investigation, or otherwise harm our business.
+Added: We are subject to general business regulations and laws, as well as regulations and laws specifically governing the highly regulated real estate market, electronic payment, background screening and insurance services markets, the Internet itself, the use of mobile devices to conduct business and communicate, and many other products and services we provide.
+Added: It is not clear how existing laws governing issues such as property ownership, management, rental and investment, data protection, and personal privacy apply to the Internet, digital content, communication services, web services, and artificial intelligence technologies and services.
+Added: Unfavorable regulations, laws, and administrative or judicial decisions interpreting or applying those laws and regulations could diminish the demand for, or availability of, our products and services, subject us to litigation or governmental investigation and increase our cost of doing business, any of which may adversely affect our operating results.
+Added: In addition, the application of federal, state, local and foreign tax laws to services provided electronically is continuously evolving.
+Added: New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted or amended at any time, possibly with retroactive effect, and could be applied solely or disproportionately to services provided over the Internet.
+Added: These enactments or amendments could adversely affect our sales activity due to the inherent cost increase such taxes would represent and could ultimately result in a negative impact on our operating results.
+Added: In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, modified or applied adversely to us, possibly with retroactive effect, which could require us or our customers to pay additional tax amounts, as well as require us or our customers to pay fines or penalties, as well as interest on past amounts.
+Added: If we are unsuccessful in collecting such taxes due from our customers, we could be held liable for such costs, thereby adversely impacting our operating results.
+Added: We may require additional capital to support our operations or the growth of our business, and we cannot be certain that this capital will be available on favorable terms, or at all, which may adversely affect our business and financial condition.
+Added: Our ability to obtain additional capital, if and when required, will depend on numerous factors, including investor and lender demand, our compliance with debt obligations, our historical and forecasted financial and operating performance, our liquidity position, the overall condition of the capital markets, and the global economy as a whole.
+Added: We cannot guarantee that additional financing will be available to us on favorable terms when required, or at all.
+Added: In addition, if we raise additional funds through the issuance of equity securities, those securities may have powers, preferences or rights senior to the rights of our Class A common stock, and our existing stockholders may experience immediate dilution.
+Added: If we raise additional funds through the issuance of debt securities, we may incur interest expense or other costs to service the indebtedness, we may be required to encumber certain assets, and we may become subject to restrictions on our ability to conduct business, any of which could negatively impact our operating results.
+Added: Furthermore, if we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the growth of our business and the achievement of our strategic objectives could be significantly impaired and our operating results may be harmed.
Number Description of Document
−Removed: 3.1 Amended and Restated Bylaws of AppFolio, Inc.
−Removed: (as updated through May 20, 2020)
+Added: 2.3 Stock Purchase Agreement, dated as of September 7, 2020, by and among Mockingbird AcquisitionCo, Inc.
+Added: and MyCase, Inc.† (1)
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
2 unchanged sentences
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
−Removed: 101.INS XBRL Instance Document.
−Removed: 101.SCH XBRL Taxonomy Extension Schema Document.
−Removed: 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
−Removed: 101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
−Removed: 101.LAB XBRL Taxonomy Extension Label Linkbase Document.
−Removed: 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
+Added: 101.INS Inline XBRL Instance Document.
+Added: 101.SCH Inline XBRL Taxonomy Extension Schema Document.
+Added: 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
+Added: 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
+Added: 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
+Added: 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
+Added: Filed as Exhibit 2.1 to the registrant’s Current Report on Form 8-K (File No.
+Added: 001-37468) filed with the U.S.
+Added: Securities and Exchange Commission on September 8, 2020, and incorporated herein by reference.
+Added: † Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K.
+Added: The registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the U.S.
+Added: Securities and Exchange Commission upon request.
* The certifications attached as Exhibit 32.1 accompany this Quarterly Report pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act, and are not to be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report, irrespective of any general incorporation language contained in any such filing.
+Added: Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
+Added: AppFolio, Inc.
+Added: November 9, 2020 By:
+Added: Chief Financial Officer
+Added: (Principal Financial and Accounting Officer)
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.