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In that event, the market price of our Class A common stock could decline.
−Removed: Risk Factors Summary
−Removed: The following is a summary of the principal risks that could adversely affect our business, results of operations and financial condition.
Risks Related to Our Business
−Removed: • The success of our growth and expansion plans depends on a number of factors that are beyond our control.
−Removed: • The recent COVID-19 pandemic and the global attempt to contain it may harm our business.
−Removed: • The market in which we participate is highly competitive, and we may not compete effectively.
−Removed: • We may not be able to attract new customers in a cost-effective manner.
−Removed: • The market for some of our services is new and unproven.
−Removed: • We must increase the network traffic and revenue to meet our growth targets.
−Removed: • Our business depends on customers increasing their use of our services.
−Removed: • We may not be able to increase the revenue that we derive from enterprises.
−Removed: • We may not be able to develop service enhancements or new services that achieve market acceptance.
−Removed: • We have grown rapidly, expect our growth to continue, and may not be able to manage the growth effectively.
−Removed: • Our pricing and billing systems are complex, and errors could adversely affect our revenue and profits.
−Removed: • We must continue to develop effective systems to implement customer orders and to provide and bill for services.
−Removed: • We may not be able to maintain and enhance our brand and increase market awareness.
−Removed: • Failure to deliver high-quality support may adversely affect our customer relationships.
−Removed: • We are expanding our operations internationally, which exposes us to significant risks.
−Removed: • Our revenue is concentrated in a limited number of enterprise customers.
−Removed: • Breaches of our networks or systems, or those of third parties upon which we rely, could harm our business.
−Removed: • We are currently subject to litigation related to taxes and charges associated with our provision of 911 services.
−Removed: • Customer misuse of our services and software could result in litigation and harm our business.
−Removed: • The communications industry faces significant regulatory uncertainties.
−Removed: • The effects of increased regulation of IP-based service providers are unknown.
−Removed: • We must obtain and maintain permits and licenses to operate our network.
−Removed: • If we violate regulatory requirements that apply to our operations, we may not be able to conduct our business.
−Removed: • The FCC’s repeal of its Network Neutrality Rules could harm our business.
−Removed: • Any failure to comply with privacy and data security obligations may harm our business.
−Removed: • Our business is subject to complex and evolving foreign laws regarding privacy and data protection.
−Removed: • Our business may be harmed if we cannot obtain, retain and distribute local or toll-free numbers.
−Removed: • Foreign currency exchange rate fluctuations may harm our business.
−Removed: • We may be exposed to liabilities under anti-corruption, export control and economic sanction regulations.
−Removed: • Third party intellectual property rights could prevent us from using technologies needed to provide our services.
−Removed: • Our use of open source software could negatively affect our ability to sell our services and subject us to litigation.
−Removed: • Indemnity provisions in various agreements potentially expose us to substantial liability.
−Removed: • Our use of personal information subjects us to evolving governmental laws and other legal obligations.
−Removed: • We may fail to protect our internally developed systems, technology and software and our intellectual property.
−Removed: • We are subject to litigation in the ordinary course of business, which may harm our business.
−Removed: • We may be liable for the information that content owners or distributors distribute over our network.
−Removed: • Third parties may use our services to commit fraud or steal our services.
−Removed: • We may lose customers if our platform or network fails or is disrupted.
−Removed: • Defects or errors in our services could harm our business.
−Removed: • If our emergency services do not function properly, we may be exposed to significant liability.
−Removed: • Termination of relationships with key suppliers could cause delay and additional costs.
−Removed: • Our customer churn rate may increase.
−Removed: • The prices for some of our services have decreased in the past and may do so again in the future.
−Removed: • The need to obtain additional IP circuits or interconnect with other networks could increases our costs.
−Removed: • The loss of any member of our senior management team or key employees could harm our business.
−Removed: • If we are unable to hire, retain and motivate qualified personnel, our business will suffer.
−Removed: • Our management team has limited experience managing a public company.
−Removed: • We could be subject to liability for historic and future sales, use and similar taxes.
−Removed: • We may be subject to significant tax-related liabilities and indemnity obligations if the Spin-Off (as defined below) is taxable.
−Removed: • Our estimates or judgments relating to our critical accounting policies may prove to be incorrect.
−Removed: • We may be unable to maintain an effective system of disclosure controls and internal control over financial reporting.
−Removed: • If our goodwill or intangible assets become impaired, we may be required to record a significant charge.
−Removed: • Natural disasters, pandemics, power outages, terrorist attacks and similar events could harm our business.
−Removed: • We may acquire other businesses, which may divert our management’s attention and impact our stock price.
−Removed: • Our credit facility contains restrictive and financial covenants that may limit our operating flexibility.
−Removed: • An inability to comply with the covenants in our credit facility could result in an accelerated repayment obligation.
−Removed: Risks Related to the Acquisition of Voxbone
−Removed: • The Voxbone acquisition may not yield the synergies and other benefits that we anticipated.
−Removed: • Purchase price accounting for the Voxbone acquisition requires estimates that could change.
−Removed: Risks Related to Ownership of Our Class A Common Stock
−Removed: • The trading price of our Class A common stock may be volatile and you could lose all or part of your investment.
−Removed: • Substantial future sales of shares of our Class A common stock could cause the price of our Class A to decline.
−Removed: • Our dual class capital structure concentrates voting control.
−Removed: • We cannot predict the impact our capital structure may have on our stock price.
−Removed: • Our stock price and trading volume could decline if securities or industry analysts stop covering our Class A Common Stock.
−Removed: • Anti-takeover provisions in our organizational documents and Delaware law, could impair a takeover attempt.
−Removed: • Our certificate of incorporation and bylaws include super-majority voting provisions.
−Removed: • Our bylaws provide that Delaware will generally be the sole and exclusive forum for certain stockholder litigation.
−Removed: • We may need additional capital in the future and such capital may be limited or unavailable.
−Removed: • We do not intend to pay dividends for the foreseeable future.
−Removed: Risks Related to the Convertible Notes and Our Indebtedness
−Removed: • Servicing our future indebtedness may require a significant amount of cash, which we may not have.
−Removed: • Our credit facility may limit our ability to pay off the Convertible Notes (as defined below).
−Removed: • We may not have the ability to raise the funds necessary for cash settlement of the Convertible Notes.
−Removed: • The conditional conversion feature of the Convertible Notes may adversely affect us financially.
−Removed: • The accounting method for our Convertible Notes could have a material effect on our reported financial results.
−Removed: • The capped call transactions may affect the value of the Convertible Notes and our Class A common stock.
−Removed: The following is a more complete discussion of the material risks facing our business.
−Removed: Risks Related to Our Business
−Removed: The success of our growth and expansion plans depends on a number of factors that are beyond our control.
+Added: Our future growth and the success of our expansion plans depend on a number of factors that are beyond our control.
We have grown our business considerably over the last several years.
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Our success in achieving continued growth depends upon several factors including:
−Removed: • the availability and retention of qualified and effective personnel with the expertise required to sell and operate effectively or successfully;
+Added: • our ability to hire and retain qualified and effective personnel, including, but not limited to, those with the expertise required to develop and maintain our service offerings, to sell those offerings and to operate our business effectively;
• the overall economic health of new and existing markets;
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• the pricing structure under which we will be able to purchase services required to serve our customers;
+Added: • our ability to introduce new service offerings and maintain or enhance existing offerings;
• the availability to us of technologies needed to remain competitive;
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• changes in industry standards, laws, regulations, or regulatory enforcement in the United States and internationally.
−Removed: The recent COVID-19 pandemic and the global attempt to contain it may harm our business and results of operations.
−Removed: The global spread of novel coronavirus disease ( “ COVID-19 ” ) and the various measures to contain its effects have created significant volatility, uncertainty, and economic disruption worldwide.
−Removed: The pandemic has severely curtailed all travel and most of our employees now work from home, which disrupts how we typically operate.
−Removed: We may experience slowdowns in customer payments, increased customer churn, and reduced usage of our communications platform by some customers.
−Removed: The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict.
+Added: The ongoing COVID-19 pandemic and efforts to contain it may harm our business and results of operations.
+Added: The global spread of novel coronavirus disease (“COVID-19”) and efforts to manage its impact have created significant volatility, uncertainty and economic disruption worldwide, and may continue to do so for an extended period of time.
+Added: The pandemic could result in decreased business spending by our customers and prospective customers, lower renewal rates by our customers, longer or delayed sales cycles, or reduced budgets or minimum commitments for the services that we offer, any of which could have an adverse impact on our financial condition and results of operations.
+Added: The pandemic has also severely curtailed travel, which has adversely affected our ability to grow and maintain relationships with existing and prospective customers.
+Added: The COVID-19 pandemic has also disrupted, and may continue to disrupt, our day-to-day operations and the operations of our customers, partners and vendors.
+Added: We have experienced, and may continue to experience, voluntary attrition at a rate that exceeds our historical average.
+Added: While the global economy is reopening in various parts of the world, some countries and locations are reinstating lockdowns and other restrictions that make a recovery difficult to predict.
+Added: This may result in differing levels of demand for our service offerings as the priorities, resources, financial condition and economic outlook of our customers change, which could have an adverse impact on our financial results.
+Added: We may also experience slowdowns in customer payments, increased customer churn and reduced usage of our communications platform by some customers.
+Added: In addition, as businesses continue to support a workforce that is partially or fully remote, there may be increasing demand for the services we provide, which could increase strain on our telecommunications infrastructure.
+Added: Supporting increased demand may require additional investments to increase network capacity, the availability of which may be limited.
+Added: If we are unable to keep up with capacity needs, our customers may experience delays, interruptions or outages in service, which could harm our reputation, cause customers to reduce or cease the use of our services, adversely impact our ability to increase the revenue derived from existing customers or to grow our customer base, and subject us to financial penalties and liabilities under our agreements with our customers.
+Added: The extent to which the COVID-19 pandemic impacts our business, operations and financial results in the short- and long-term will depend on numerous evolving factors that we may not be able to accurately predict.
These include:
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and any effects of the pandemic on our customers, suppliers and vendors.
−Removed: If we need to access the capital markets and other sources of liquidity, there can be no assurance that financing may be available on attractive terms, if at all.
−Removed: The market in which we participate is highly competitive, and if we do not compete effectively, our business, results of operations and financial condition could be harmed.
+Added: The market in which we participate is highly competitive, and if we do not compete effectively, our business, results of operations and financial condition could be adversely affected.
The market for cloud communications is rapidly evolving, significantly fragmented and highly competitive, with relatively low barriers to entry in some segments.
−Removed: The principal competitive factors in our market include completeness of offering, credibility with enterprises and developers, global reach, ease of integration and programmability, product features, platform scalability, reliability, deliverability, security and performance, brand awareness and reputation, the strength of sales and marketing efforts and customer support, as well as the cost of deploying and using our services.
+Added: The principal competitive factors in our market include completeness of our suite of service offerings, credibility with enterprises and developers, global reach, ease of integration and programmability, product features, platform scalability, reliability, deliverability, security and performance, brand awareness and reputation, the strength of sales and marketing efforts and customer support, as well as the cost of deploying and using our services.
Our competitors fall into two primary categories:
−Removed: • CPaaS companies that offer a narrower set of software APIs, less robust customer support and fewer other features, while relying on third-party networks and physical infrastructure;
+Added: • CPaaS companies that offer software APIs, less robust customer support and fewer other features, while relying on third-party networks and physical infrastructure;
• network service providers that offer limited developer functionality on top of their own networks and physical infrastructure.
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In addition, some of our competitors have lower list prices than us, which may be attractive to certain customers even if those services have different or lesser functionality.
−Removed: If we are unable to maintain our current pricing due to competitive pressures, our margins will be reduced and our business, results of operations and financial condition would be adversely affected.
+Added: If we are unable to maintain our current pricing due to competitive pressures, our revenue and margins will be reduced and our business, results of operations and financial condition would be adversely affected.
Customers utilize our services in many ways and use varying levels of functionality that our services offer or are capable of supporting or enabling within their applications.
−Removed: Customers that use many of the features of our services or use our services to support or enable core functionality for their applications may have difficulty or find it impractical to replace our services with a competitor’s
−Removed: services, while customers that use only limited functionality may be able to more easily replace our services with competitive offerings.
+Added: Customers that use many of the features of our services or use our services to support or enable core functionality for their applications may have difficulty or find it impractical to replace our services with a competitor’s services, while customers that use only limited functionality may be able to more easily replace our services with competitive offerings.
With the introduction of new services and new market entrants, we expect competition to intensify in the future.
−Removed: In addition, some of our customers choose to use our services and our competitors’ services at the same time.
+Added: In addition, some of our customers choose to use our services and our competitors’ services at the same time in order to provide redundancy in their ability to deliver their own product offerings.
Moreover, as we expand the scope of our services, we may face additional competition.
−Removed: Further, customers and consumers may choose to adopt other forms of electronic communications or alternative communication platforms, including developing necessary networks and platforms in-house.
−Removed: Furthermore, if our competitors were to merge such that the combined entity would be able to compete fully with our service offering, then our business, results of operations and financial condition may be adversely effected.
−Removed: If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could also adversely affect our ability to compete effectively.
+Added: If one or more of our competitors were to merge or partner with another of our competitors, this change in the competitive landscape could further adversely affect our ability to compete effectively.
In addition, pricing pressures and increased competition generally could result in reduced revenue, reduced margins, increased losses or the failure of our services to achieve or maintain widespread market acceptance, any of which could harm our business, results of operations and financial condition.
−Removed: Our current and potential competitors have developed and may develop in the future product solutions that are available internationally as well as domestically.
−Removed: To the extent that customers seek product solutions that include support and scaling internationally, they may choose to use other service providers to fill their communication service needs before we can fully develop and integrate our international offerings.
+Added: Our current and potential competitors have developed and may develop in the future service offerings that are available internationally, as well as domestically.
+Added: To the extent that customers seek service offerings that include support and scaling internationally, they may choose to use other service providers to fill their communication service needs before we can fully develop and integrate our international offerings.
Each of these factors could lead to reduced revenue, slower growth and lower brand name recognition amongst our industry competitors, any or all of which could harm our business, results of operations and financial condition.
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As we add to or change the mix of our marketing strategies, we may need to expand into more expensive channels than those we are currently in, which could adversely affect our business, results of operations and financial condition.
−Removed: We also cannot predict the extent to which COVID-19 may cause us to adjust how we promote our services, including adjustments to our use of marketing channels.
+Added: We also cannot predict the extent to which COVID-19 may cause us to adjust how we promote our services.
We will incur marketing expenses before we are able to recognize any revenue that the marketing initiatives may generate, and these expenses may not result in increased revenue or brand awareness.
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If we are unable to maintain effective marketing programs, then our ability to attract new customers could be materially and adversely affected, our advertising and marketing expenses could increase substantially and our results of operations may suffer.
−Removed: The market for some of our services and platform is new and unproven, may decline or experience limited growth and is dependent in part on enterprises and developers continuing to adopt our platform and use our services.
+Added: The market for some of our services is new and unproven, may decline or experience limited growth and is dependent in part on enterprises and developers continuing to adopt our platform and use our services.
We have been developing and providing a cloud-based platform that enables developers and organizations to integrate voice and messaging communications capabilities into their software applications.
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For example, the utilization of software APIs by developers and organizations to build communications functionality into their applications is still relatively new, and developers and organizations may not recognize the need for, or benefits of, our services and platform.
−Removed: Moreover, if they do not recognize the need for and benefits of our services and platform, they may decide to adopt alternative services and/or develop the necessary services in-house to satisfy their business needs.
−Removed: In order to grow our business and expand our market position, we intend to focus on educating enterprise customers about the benefits of our services and platform, expanding the functionality of our
−Removed: services and bringing new technologies to market to increase market acceptance and use of our platform.
+Added: If they do not recognize the need for and benefits of our services and platform, they may decide to adopt alternative services and/or develop the necessary services in-house to satisfy their business needs.
+Added: In order to grow our business and expand our market position, we intend to focus on educating enterprise customers about the benefits of our services and platform, expanding the functionality of our services and bringing new technologies to market to increase market acceptance and use of our platform.
Our ability to expand the market that our services and platform address depends upon a number of factors, including the cost, performance and perceived value associated with such services and platform.
−Removed: The market for our services and platform could fail to grow significantly or there could be a reduction in demand for our services and platform as a result of a lack of customer acceptance, technological changes or challenges, competing services, platforms and services, decreases in spending by current and prospective customers, weakening economic conditions, geopolitical developments, global pandemics or other causes.
+Added: The market for our services and platform could fail to grow significantly or there could be a reduction in demand for our services and platform as a result of a lack of customer acceptance, technological changes or challenges, our inability to successfully introduce new product offerings, competing services and platforms, decreases in spending by current and prospective customers, weakening economic conditions, geopolitical developments, global pandemics, adverse regulatory developments or other causes.
If our market does not experience significant growth or demand for our services and platform decreases, then our business, results of operations and financial condition could be adversely affected.
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• we are not able to expand the available capacity on our network to meet our customers’ demands in a timely manner;
−Removed: • we do not develop new large enterprise customers;
−Removed: • our customers determine to obtain these services from either their own network or from one of our competitors,
+Added: • we do not develop and maintain relationships with new large enterprise customers;
+Added: • our customers choose to obtain these services from either their own network or from one of our competitors,
then we may be unable to increase or maintain our revenue at acceptable margins.
Our business depends on customers increasing their use of our services, and any loss of customers or decline in their use of our services could materially and adversely affect our business, results of operations and financial condition.
−Removed: Our ability to grow and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing customers and to have them increase their usage of our Bandwidth Communications Platform.
+Added: Our ability to grow and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing customers and to have them increase their usage of our communications platform.
If our customers do not increase their use of our services, then our revenue may decline and our results of operations may be harmed.
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If we are unable to increase the revenue that we derive from enterprises, our business, results of operations and financial condition may be adversely affected.
−Removed: We currently generate all of our revenue from enterprise customers.
Our ability to expand our sales to enterprise customers will depend, in part, on our ability to effectively organize, focus and train our sales and marketing personnel and to attract and retain sales personnel with experience selling to enterprises.
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In addition, while enterprise customers may quickly deploy our services on a limited basis, before they will commit to deploying our services at scale, they often require extensive education about our services and significant customer support time, engage in protracted pricing negotiations and seek to secure readily available development resources.
−Removed: In addition, sales cycles for enterprises are inherently complex, and some enterprise customers may not generate revenue that justifies the cost to obtain such customers.
+Added: In addition, sales cycles for enterprises are inherently complex and lengthy, and some enterprise customers may not generate revenue that justifies the cost to obtain such customers.
In addition, these complex and resource-intensive sales efforts could place additional strain on our limited product and engineering resources.
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If we do not develop enhancements to our services and introduce new services that achieve market acceptance, our business, results of operations and financial condition could be adversely affected.
−Removed: Our ability to attract new customers and increase revenue from existing customers depends in part on our ability to enhance and improve our existing services, increase adoption and usage of our services and introduce new services.
+Added: Our ability to attract new customers and increase revenue from existing customers depends in part on our ability to enhance and improve our existing services, increase adoption and usage of our services and introduce new
The success of any enhancements or new services depends on several factors, including timely completion, adequate quality testing, actual performance quality, market-accepted pricing levels and overall market acceptance.
−Removed: Enhancements and new services that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, may have interoperability difficulties with our communications platform or other services or may not achieve the broad market acceptance necessary to generate significant revenue.
+Added: Enhancements and new services that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, may have interoperability difficulties with our communications platform, network or other services or may not achieve the broad market acceptance necessary to generate significant revenue.
We also must integrate with a variety of network, hardware, mobile and software platforms and technologies, which requires us to enhance and modify our products and our communications platform to adapt to changes and innovation in these technologies.
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Any failure to operate effectively with evolving or new technologies could reduce the demand for our services.
−Removed: If we cannot respond to these changes cost-effectively, our services may become less marketable and less competitive or obsolete, and our business, results of operations and financial condition could be adversely affected.
+Added: If we cannot respond to these changes in a cost-effective manner, our services may become less competitive or obsolete, and our business, results of operations and financial condition could be adversely affected.
To the extent that upgrades of existing products, services and technology are required for the introduction of new services, the success of these upgrades also may be dependent on reaching mutually acceptable terms with vendors and on vendors meeting their obligations in a timely manner.
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If we are unable to successfully enhance our existing services to meet evolving customer requirements, increase adoption and usage of our services or develop new services, or if our efforts to increase the usage of our services are more expensive than we expect, then our business, results of operations and financial condition would be adversely affected.
−Removed: We have experienced rapid growth and expect our growth to continue, and if we fail to effectively manage our growth, then our business, results of operations and financial condition could be adversely affected.
−Removed: We have experienced substantial growth in our business since inception, which has placed and may continue to place significant demands on our corporate culture, operational infrastructure and management.
+Added: Our rapid growth may impact our corporate culture, operational infrastructure and management, and if we fail to effectively manage our continuing growth, then our business, results of operations and financial condition could be adversely affected.
+Added: We have experienced substantial growth in our business, which has placed and may continue to place significant demands on our corporate culture, operational infrastructure and management.
We believe that our corporate culture has been a critical component of our success.
We have invested substantial time and resources in building our team and nurturing our culture.
−Removed: As we expand our business, grow internationally and mature as a public company, we may find it difficult to maintain our corporate culture while managing this growth, particularly if governmental responses to COVID-19 require that many of our employees work remotely for a prolonged period of time.
−Removed: Any failure to manage our anticipated growth and organizational changes in a manner that preserves the key aspects of our culture could hurt our chance for future success, including our ability to recruit and retain personnel, and effectively
−Removed: focus on and pursue our corporate objectives.
+Added: As we expand our business, grow internationally and mature as a public company, we may find it difficult to maintain our corporate culture while managing this growth, particularly if governmental responses to COVID-19 require many of our employees to work remotely for a prolonged period of time.
+Added: Any failure to manage our anticipated growth and organizational changes in a manner that preserves the key aspects of our culture could hurt our chance for future success, including our ability to recruit and retain personnel, and effectively focus on and pursue our corporate objectives.
This, in turn, could adversely affect our business, results of operations and financial condition.
In addition, as we have rapidly grown, our organizational structure has become more complex.
−Removed: In order to manage these increasing complexities, we will need to continue to scale and adapt our operational, financial and management controls, as well as our reporting systems and procedures.
+Added: In order to manage these increasing complexities, we will need to continue to scale and adapt the way in which we are organized, our operational, financial and management controls, and our reporting systems and procedures.
The expansion of our systems and infrastructure will require us to commit substantial financial, operational and management resources before our revenue increases and without any assurances that our revenue will increase.
−Removed: Finally, if this growth continues, it could strain our ability to maintain reliable service levels for our customers.
+Added: This growth could strain our ability to maintain reliable service levels for our customers.
If we fail to achieve the necessary level of efficiency in our organization as we grow, then our business, results of operations and financial condition could be adversely affected.
−Removed: Our pricing and billing systems are complex and errors could adversely affect our revenue and profits.
−Removed: Our pricing and billing efforts are complex to develop and challenging to implement.
+Added: Our pricing and billing systems are complex, and errors could adversely affect our results of operations.
+Added: Our pricing and billing systems are complex to develop and challenging to implement.
To be profitable, we must have accurate and complete information about the costs associated with voice and messaging, and properly incorporate such information into our pricing model.
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We may determine pricing for our services based on data that is outdated or otherwise flawed.
−Removed: Even if we have complete and accurate market information, we may not set prices to optimize both revenue and profitability.
+Added: Even if we have complete and accurate market information, we may not set prices that optimize both revenue and profitability.
If we price our services too high, the amount of traffic that our customers may route to our network may decrease and accordingly our revenue may decline.
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If we fail to adapt quickly and effectively to changes affecting our costs, pricing and billing, our profitability and cash flow will be adversely affected.
−Removed: We must continue to develop effective business support systems to implement customer orders and to provide and bill for services.
+Added: We must continue to develop effective business support systems to implement customer orders and to provide and bill our customers for services.
We depend on our ability to continue to develop effective business support systems.
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• billing for services.
−Removed: Because our business provides for continued rapid growth in the number of customers that we serve, the volume of services offered, as well as the integration of any acquired companies’ business support systems, we must continue to develop our business support systems on a schedule sufficient to meet proposed milestone dates.
−Removed: If we fail to develop effective business support systems or complete the data migration into these systems, it could materially adversely affect our ability to implement our business plans, realize anticipated benefits from our acquisitions, if any, and meet our financial goals and objectives.
+Added: On November 2, 2020, we acquired Voice Topco Limited, a private limited liability company incorporated under the laws of England and Wales (together with its subsidiaries, “Voxbone”), which directly or indirectly holds all of the issued and outstanding shares of Voxbone, S.A., a private limited liability company registered under the laws of Belgium.
+Added: Prior to the completion of the acquisition of Voxbone, we and Voxbone operated independently.
+Added: The integration process, including efforts to combine business support systems, is ongoing and continues to require significant time and resources.
+Added: Because we are experiencing rapid growth in the number of customers we serve and the volume of services we deliver, through both organic growth and the Voxbone acquisition, we must continue to develop our business support systems on a schedule sufficient to meet customer demands.
+Added: If we fail to develop effective business support systems, integrate our business support systems with those of businesses that we may acquire, or complete data migration between these systems, it could materially adversely affect our ability to implement our business plans, realize anticipated benefits from our acquisitions, if any, and meet our financial goals and objectives.
If we are not able to maintain and enhance our brand and increase market awareness of our company and services, then our business, results of operations and financial condition may be adversely affected.
−Removed: We believe that maintaining and enhancing our brand identity and increasing market awareness of our company and services are critical to achieving widespread acceptance of our company and our communications platform, as well as to strengthen our relationships with our existing customers and to our ability to attract new customers.
−Removed: The successful promotion of our brand will depend largely on our continued marketing efforts, our ability to continue to offer high quality services and our ability to successfully differentiate our services from competing products and services.
+Added: We believe that maintaining and enhancing our brand identity and increasing market awareness of our company and services are critical to achieving widespread acceptance of our company and our communications platform, as well as to strengthen our relationships with our existing customers and to our ability to attract new
+Added: The successful promotion of our brand will depend largely on our continued marketing efforts, our ability to continue to offer high quality services that meet the evolving needs of our existing and prospective customers and our ability to successfully differentiate our services from competing products and services.
Our brand promotion activities may not be successful or yield increased revenue.
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From time to time, our customers have complained about our services, such as complaints about our pricing and customer support.
+Added: Additionally, we sometimes experience customer complaints relating to disruption to, or outage of, our services.
If we do not handle customer complaints effectively, then our brand and reputation may suffer, our customers may lose confidence in us and they may reduce or cease their use of our services.
−Removed: In addition, many of our customers post and discuss on social media about products and services, including our services and our Bandwidth Communications Platform.
+Added: In addition, many of our customers post and discuss on social media about products and services, including our services and our communications platform.
Our success depends, in part, on our ability to generate positive customer feedback and minimize negative feedback on social media channels where existing and potential customers seek and share information.
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We operate internationally, which exposes us to significant risks.
−Removed: We have expanded our international operations, including the deployment of two data centers in Frankfurt and London, the establishment of a limited presence in each of Frankfurt and Madrid primarily for regulatory purposes, and
−Removed: the acquisition of Voxbone as further described below under “-Risks Related to the Acquisition of Voxbone.” As part of our growth strategy, we will continue to evaluate potential opportunities for further international expansion.
−Removed: Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks in addition to those we face in the United States.
−Removed: We have limited experience with international operations, and our further international expansion efforts may not be successful.
+Added: We have expanded our international operations, including the deployment of data centers in Europe and the acquisition of Voxbone as further described below under “—Risks Related to the Acquisition of Voxbone.” As part of our growth strategy, we will continue to evaluate potential opportunities for further international expansion.
+Added: Operating in international markets requires significant resources and management attention, and subjects us to legal, regulatory, economic and political risks in addition to those we face in the United States.
+Added: We have limited experience with international operations, and further international expansion efforts may not be successful.
In addition, we face risks in doing business internationally that could adversely affect our business, including:
−Removed: • exposure to political developments in the United Kingdom (“U.K.”), including the January 2020 departure of the U.K.
+Added: • exposure to political developments in the United Kingdom (“U.K.”) as a result of the January 2020 departure of the U.K.
from the European Union (“EU”), which has created an uncertain political and economic environment, instability for businesses and volatility in global financial markets and the value of foreign currencies, all of which could disrupt trade, the sale of our services and the mobility of our employees and contractors between the U.K., EU and other jurisdictions;
−Removed: • difficulties in managing and staffing international operations, including difficulties related to the increased operations, travel, infrastructure and legal compliance costs associated with numerous international locations;
+Added: • difficulties in managing and staffing international operations, including difficulties related to the increased operations, travel, infrastructure, employee attrition and legal compliance costs associated with numerous international locations;
• our ability to effectively price our products in competitive international markets;
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• the need to adapt and localize our products for specific countries;
−Removed: • difficulties in understanding and complying with local laws, regulations and customs in foreign jurisdictions, particularly in the areas of data privacy and security;
−Removed: • difficulties related to differing technical standards, data privacy and telecommunications regulations and certification requirements outside the United States, which could prevent customers from deploying our products or limit their usage;
+Added: • challenges in understanding and complying with local laws, regulations and customs in foreign jurisdictions, particularly in the areas of telecommunications, data privacy and security;
+Added: • complexities related to differing technical standards, data privacy and telecommunications regulations and certification requirements outside the United States, which could prevent customers from deploying our products or limit their usage;
• export controls and economic sanctions administered by the Bureau of Industry and Security of the U.S.
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• more limited protection for intellectual property rights in some countries;
−Removed: • adverse tax consequences;
+Added: • adverse consequences relating to the complexity of operating in multiple international jurisdictions with different laws, regulations and case law which are subject to interpretation by taxpayers, including the Company;
• fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk;
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• public health epidemics, such as COVID-19, or natural disasters, which could have an adverse impact on our employees, contractors, customers, partners, travel and the global economy;
−Removed: • political or social unrest or economic instability in a specific country or region in which we operate, which could have an adverse impact on our operations in that location.
+Added: • political or social unrest, acts of war or economic instability in a specific country or region in which we operate, which could have an adverse impact on our operations in that location.
In addition, due to potential costs from our international expansion efforts and network service provider fees outside of the United States, our gross margin for international customers may be lower than our gross margin for domestic customers.
−Removed: As a result, our gross margin may fluctuate as we further expand our operations and customer base internationally.
+Added: As a result, our overall gross margin may fluctuate as we further expand our operations and customer base internationally.
Our failure to manage any of these risks successfully could harm our international operations, and adversely affect our business, results of operations and financial condition.
−Removed: Our revenue is concentrated in a limited number of enterprise customers.
−Removed: A significant portion of our revenue is concentrated among a limited number of enterprise customers.
+Added: Our revenue is concentrated in a limited number of customers.
+Added: A significant portion of our revenue is concentrated among a limited number of customers.
If we lost one or more of our top ten customers, or, if one or more of these major customers significantly decreased orders for our services, our business would be materially and adversely affected.
−Removed: Breaches of our networks or systems, or those of third parties upon which we rely, could degrade our ability to conduct our business, compromise the integrity of our services and our communications platform, result in significant data losses and the theft of our intellectual property, damage our reputation, expose us to liability to third parties and require us to incur significant additional costs to maintain the security of our networks and data.
+Added: Attacks on or breaches of our networks or systems, or those of third parties upon which we rely, could degrade our ability to conduct our business, compromise the integrity of our services and our communications platform, result in service degradation or outages, significant data losses, the theft of our intellectual property, investigations by government agencies and damage to our reputation, and could expose us to liability to third parties and require us to incur significant additional costs to maintain the security of our networks and data.
We depend upon our IT systems to conduct virtually all of our business operations, ranging from our internal operations and R&D activities to our marketing and sales efforts and communications with our customers and business partners.
−Removed: Cyber-attacks, including through the use of malware, computer viruses, dedicated denial of services attacks, credential harvesting and other means for obtaining unauthorized access to or disrupting the operation of our networks and systems and those of our suppliers, vendors and other service providers, could cause harm to our business, including by misappropriating our proprietary information or that of our customers, employees and business partners or to cause interruptions of our services and our Bandwidth Communications Platform.
−Removed: Cyber-attacks may cause equipment failures, loss of information, including sensitive personal information of customers or employees or valuable technical and marketing information, as well as disruptions to our or our customers’ operations.
+Added: Cyber-attacks, including through the use of malware, computer viruses, distributed denial of services (“DDoS”) attacks, credential harvesting and other means for obtaining unauthorized access to or disrupting the operation of our networks and systems and those of our suppliers, vendors and other service providers, could cause harm to our business, including by misappropriating our proprietary information or that of our customers, employees and business partners or to cause interruptions of our services and our communications platform.
+Added: Cyber-attacks may cause service degradation or outages, equipment failures, loss of information, including sensitive personal information of customers or employees or valuable technical and marketing information, as well as disruptions to our or our customers’ operations.
Cyber-attacks against companies have increased in frequency, scope and potential harm in recent years.
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These attacks may be committed by company employees or external actors operating in any geography, including jurisdictions where law enforcement measures to address such attacks are unavailable or ineffective, and may even be launched by or at the behest of nation states.
−Removed: While, to date, we have not been subject to cyber-attacks which, individually or in the aggregate, have been material to our operations or financial condition, the preventive actions we take to reduce the risks associated with cyber-attacks, including protection of our systems and networks, may be insufficient to repel or mitigate the effects of a major cyber-attack in the future.
−Removed: Because the techniques used by such individuals or entities to access, disrupt or sabotage devices, systems and networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques, and we may not become aware in a timely manner of such a security breach, which could exacerbate any damage we experience.
+Added: Despite our efforts to reduce the risks associated with cyber-attacks, including the implementation of a number of defensive measures and protocols designed to protect our systems and networks, such efforts may be insufficient to repel or mitigate the effects of a major cyber-attack.
+Added: For example, beginning on September 25, 2021, our communications network was subjected to a DDoS attack that caused intermittent service disruptions affecting certain of our markets and customers.
+Added: A DDoS attack is a malicious attempt to disrupt the normal traffic of a targeted server, service or network by overwhelming the target or its surrounding infrastructure with a flood of unwanted internet traffic from multiple sources, resulting in the slowdown or blockage of legitimate traffic.
+Added: The techniques employed by the DDoS attackers continued to evolve, and we implemented a number of additional DDoS mitigation techniques as the incident unfolded.
+Added: We will continue to deploy security enhancements in an effort to further secure our network, and while we believe we have remediated the immediate consequences of this incident, cybersecurity events may have cascading effects that unfold over time and result in additional costs, including costs associated with defensive measures, investigations, contractual claims, performance penalties, litigation, the loss of future business and other losses and liabilities that may be difficult to foresee.
+Added: Any perception
+Added: by existing and prospective customers that our network and systems are not secure could result in a material loss of business and revenue and damage our reputation.
+Added: Moreover, while we currently have no indication that our systems were breached or that data was exfiltrated in the DDoS attack, we cannot guarantee we will not uncover evidence of exfiltration or misuse of data or systems as a result of this incident.
+Added: In addition, we cannot guarantee we will not experience a future cyber-attack or incident resulting in exfiltration or misuse of data or systems.
+Added: The techniques used by individuals or entities to access, disrupt or sabotage devices, systems and networks change frequently and may not be recognized until launched against a target.
+Added: We may be unable to anticipate these techniques, and we may not become aware in a timely manner of a security breach, which could exacerbate the negative impact of such an event on our business or that of our customers.
Additionally, we depend upon our employees and contractors to appropriately handle confidential and sensitive data, including customer data and customer proprietary network information pursuant to applicable federal law, and to deploy our IT resources in a safe and secure manner that does not expose our network systems to security breaches or the loss of data.
Any data security incidents, including inadvertent disclosure or internal malfeasance by our employees, unauthorized access or usage, virus or similar breach or disruption of us or our services providers, could result in a loss of confidential information, theft of our intellectual property, damage to our reputation, loss of customers, litigation, regulatory investigations, fines, penalties and other liabilities.
−Removed: Our existing general liability and cyber liability insurance policies may not cover, or may cover only a portion of, any potential claims related to security breaches to which we are exposed or may not be adequate to indemnify us for all or any portion of liabilities that may be imposed.
+Added: Our existing general liability and cyber liability insurance policies may not cover, or may cover only a portion of, any potential claims related to cyber incidents or security breaches that we experience or may not be adequate to indemnify us for all or any portion of liabilities that may be imposed.
We also cannot be certain that our existing insurance coverage will continue to be available on acceptable terms or in amounts sufficient to cover the potentially significant losses that may result from a security incident or breach or that the insurer will not deny coverage of any future claim.
−Removed: Accordingly, if our cybersecurity measures and those of our service providers, fail to protect against unauthorized access, attacks (which may
−Removed: include sophisticated cyber-attacks) and the mishandling of data by our employees and contractors, then our reputation, business, results of operations and financial condition could be adversely affected.
+Added: Accordingly, if our cybersecurity measures and those of our service providers fail to protect against unauthorized access, attacks (which may include sophisticated cyber-attacks) and the mishandling of data by our employees and contractors, then our reputation, business, results of operations and financial condition could be adversely affected.
We are currently subject to litigation related to taxes and charges associated with our provision of 911 services, which could divert management’s attention and adversely affect our results of operations.
−Removed: We, along with many other telecommunications companies and similar service providers, currently are subject to litigation regarding our billing, collection and remittance of non-income-based taxes and other similar charges regarding 911 services alleged to apply in certain states, counties, and municipalities located in Illinois, New York, Pennsylvania, and Rhode Island.
−Removed: See the section titled “Item 3.
−Removed: Legal Proceedings.” We may face similar litigation in other jurisdictions in the future.
+Added: We, along with many other telecommunications companies and similar service providers, currently are subject to litigation regarding our billing, collection and remittance of non-income-based taxes and other similar charges regarding 911 services alleged to apply in certain states, counties, and municipalities located in California, Illinois, New York, Pennsylvania, and Rhode Island.
+Added: Legal Proceedings,” in this Annual Report on Form 10-K.
+Added: We may face similar litigation in other jurisdictions in the future.
While we are vigorously defending these lawsuits, litigation is inherently uncertain.
Tax assessments, penalties and interest or future requirements arising from these lawsuits, or any other lawsuits that may arise in other jurisdictions, may adversely affect our business, results of operations and financial condition.
−Removed: We face a risk of litigation resulting from customer misuse of our services and software to make or send unauthorized calls and/or messages, including those in violation of the Telephone Consumer Protection Act.
+Added: We face a risk of litigation resulting from customer misuse of our services and software to make or send unauthorized and/or unsolicited calls and/or messages, including those in violation of the Telephone Consumer Protection Act.
Customer misuse of our services and software also could damage our reputation.
−Removed: Calls and/or text messages originated by our customers may subject us to potential risks, including litigation, regulatory enforcement, fines, and reputational damage.
+Added: Calls and/or text messages originated or passed to us by our customers may subject us to potential risks, including litigation, regulatory enforcement, fines, and reputational damage.
For example, the Telephone Consumer Protection Act of 1991 (the “TCPA”) restricts telemarketing and the use of technologies that enable automatic calling and/or messaging without proper customer consent.
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Legal Proceedings.” Internationally, we also may become subject to similar laws imposing limitations on marketing calls to wireline and wireless numbers.
−Removed: The scope and interpretation of the laws that are or may be applicable to the making and/or delivery of calls and/or messages are continuously evolving and developing.
−Removed: If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper customer consent, we could become subject to lawsuits, fines, civil penalties, potentially significant statutory damages, consent decrees, injunctions, adverse publicity, loss of user confidence in our services, loss of users and other adverse consequences, which could materially harm our business.
−Removed: Some of our customers may use our platform to transmit illegal, offensive or unauthorized calls and messages, including spam, phishing scams, and links to harmful applications.
+Added: The scope and
+Added: interpretation of the laws that are or may be applicable to the making and/or delivery of calls and/or messages are continuously evolving and developing.
+Added: If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by taking mandatory actions such as obtaining proper customer consent, we could become subject to lawsuits, fines, civil penalties, potentially significant statutory damages, consent decrees, injunctions, adverse publicity, loss of user confidence in our services, loss of users and other adverse consequences, which could materially harm our business.
+Added: Some of our customers may use our platform to transmit illegal, offensive, unsolicited and/or unauthorized calls and messages, including spam, phishing scams, and links to harmful applications.
Some of our customers also may reproduce and distribute copyrighted material or the trademarks of others without permission.
Such actions violate our practices and policies, including our Acceptable Use Policy, which applies to all customers.
−Removed: We generally complete considerable “know-your-customer” reviews before a customer can use our platform, although we cannot always conduct proactive audits of our customers thereafter to confirm compliance with our practices and policies, including our Acceptable Use Policy.
+Added: We generally complete considerable “know-your-customer” reviews before a customer, and in certain jurisdictions, an end user, can use our platform, although we cannot always conduct proactive audits of our customers thereafter to confirm compliance with our practices and policies, including our Acceptable Use Policy.
We generally rely on our customers’ contractual representations to us that their use of our platform will comply with applicable law and our practices and policies.
+Added: In cases where our customers are reselling our services, we are relying on a contractual pass-through by our customers of similar contractual representations from their end users.
We also generally evaluate complaints that we receive regarding our customers’ use of our platform.
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Even if claims asserted against us do not result in liability, we may incur substantial costs to investigate and defend such claims.
−Removed: If we are liable for our customers’ activities, we could be required to pay fines or penalties, redesign our business methods, or otherwise expend resources to remedy any damages caused by such actions and avoid future liability.
+Added: If we are liable for our customers’ activities, we could be required to pay fines or penalties, redesign our business methods, limit our provision of certain services or otherwise expend resources to remedy any damages caused by such actions and avoid future liability.
+Added: We are also subject to litigation in the ordinary course of business, and uninsured judgments or a rise in insurance premiums may adversely affect our results of operations.
+Added: In the ordinary course of business, we are subject to various claims and litigation.
+Added: Any such claims, regardless of merit, could be time-consuming and expensive to defend and could divert management’s attention and resources.
+Added: In accordance with customary practice, we maintain insurance against some, but not all, of these potential claims.
+Added: We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented.
+Added: The levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities.
+Added: Further, we may not be able to maintain insurance at commercially acceptable premium levels or at all.
+Added: If any significant judgment, claim (or a series of claims) or other event is not fully insured or indemnified against, it could have a material adverse impact on our business, financial condition and results of operations.
+Added: There can be no assurance as to the actual amount of these liabilities or the timing thereof.
+Added: We cannot be certain that the outcome of current or future litigation will not have a material adverse impact on our business and results of operations.
The communications industry faces significant regulatory uncertainties and the resolution of these uncertainties could harm our business, results of operations and financial condition.
−Removed: If current or future regulations change, the FCC, state or international regulators may not grant us required regulatory authorizations or may take action against us if we are found to have provided services without obtaining the necessary authorizations, or to have violated other requirements of their rules and orders.
−Removed: Delays in receiving required
−Removed: regulatory approvals or the enactment of new adverse regulation or regulatory requirements may slow our growth and have a material adverse effect on our business, results of operations and financial condition.
−Removed: Proceedings before the FCC or international regulators could limit our access to various network services or further increase the rates we must pay for such services.
−Removed: For example, the availability and price of special access facilities could be affected by proceedings before the FCC, changes to applicable FCC rules and FCC forbearance from the enforcement of obligations on incumbent LECs.
−Removed: Other proceedings before the FCC could result in an increase in the amount we pay to other carriers or a reduction in the revenue we derive from other carriers in, or retroactive liability for, access charges and reciprocal compensation.
−Removed: For example, on December 17, 2019, t he FCC issued an order that revised its interpretation of the VoIP symmetry rule.
+Added: If current or future regulations change, the Federal Communications Commission (the “FCC”), state regulators or regulators in other jurisdictions may not grant us required regulatory authorizations or may take action against us if we are found to have provided services without obtaining the necessary authorizations, or to have violated other requirements of their rules and orders.
+Added: Delays in receiving required regulatory approvals or the enactment of new adverse regulation or regulatory requirements may slow our growth and have a material adverse effect on our business, results of operations and financial condition.
+Added: Proceedings before the FCC or regulators from foreign jurisdictions could limit our access to various network services or further increase the rates we must pay for such services.
+Added: For example, proceedings before the FCC could result in an increase in the amount we pay to other carriers or a reduction in the revenue we derive from other carriers in, or retroactive liability for, access charges and reciprocal compensation.
+Added: For example, on December
+Added: 17, 2019, the FCC issued an order that revised its interpretation of the Voice-over Internet Protocol (“VoIP”) symmetry rule.
The FCC now concludes that LECs may assess end office switched access charges only if the LEC or its VoIP partner provides a physical connection to the last-mile facilities used to serve an end user.
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We cannot predict the outcome of these proceedings or legislative initiatives or the effects, if any, that these proceedings or legislative initiatives may have on our business and operations.
−Removed: While we believe we are currently in compliance with all federal, state, local and international rules and regulations, these regulations are subject to interpretation and the relevant regulators may determine that our application of these rules and regulations is not consistent with their interpretation.
+Added: While we believe we are currently in compliance in all material respects with all material federal, state, local and international rules and regulations, these regulations are subject to interpretation and the relevant regulators may determine that our application of these rules and regulations is not consistent with their interpretation.
Additionally, in certain instances, third parties or government agencies may bring action with federal, state, local or international regulators if they believe a provider has breached applicable rules and regulations.
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While the FCC has to date generally subjected IP-based service providers in the United States to less stringent regulatory oversight than traditional common carriers, the FCC has imposed certain regulatory obligations on providers of interconnected and non-interconnected VoIP services, including the obligations to contribute to the Universal Service Fund, to provide 911 services, and to comply with the Communications Assistance for Law Enforcement Act.
−Removed: The recently enacted TRACED Act aims to mitigate illegal robocalls by directing the FCC to conduct certain rulemaking proceedings that include adopting rules that require participation in the technical standard known as STIR/SHAKEN, among other requirements.
−Removed: The TRACED Act applies to both IP-based and non-IP-based service providers.
−Removed: Further, some states have imposed taxes, fees and/or surcharges on interconnected VoIP telephony services.
−Removed: The imposition of additional regulations could have a material adverse effect on our business.
−Removed: We must obtain and maintain permits and licenses to operate our network.
−Removed: If we are unable, on acceptable terms and on a timely basis, to obtain and maintain the permits and licenses needed to expand and operate our network, our business could be materially adversely affected.
−Removed: In addition, the cancellation or non-renewal of the permits or licenses that are obtained could materially adversely affect our business.
−Removed: In the event we are the target of an acquisition, the regulatory agencies responsible for granting, renewing or transferring permits and licenses may delay or reject applications to transfer such permits or licenses and as a result these uncertainties, we may not be as attractive an acquisition target.
−Removed: Our operations are subject to regulation and require us to obtain and maintain several governmental licenses and permits.
−Removed: If we violate those regulatory requirements or fail to obtain and maintain those licenses and permits,
−Removed: including payment of related fees, if any, we may not be able to conduct our business.
−Removed: Moreover, those regulatory requirements could change in a manner that significantly increases our costs or otherwise adversely affects our operations.
−Removed: In the ordinary course of operating our network and providing our services, we must obtain and maintain a variety of telecommunications and other licenses and authorizations.
−Removed: We also must comply with a variety of regulatory obligations.
−Removed: There can be no assurance we can maintain our licenses or that they will be renewed upon their expiration.
−Removed: Our failure to obtain or maintain necessary licenses, authorizations or to comply with the obligations imposed upon license holders, including the payment of fees, may cause sanctions or additional costs, including the revocation of authority to provide services.
−Removed: Our operations are subject to regulation at the national level and, often, at the state and local levels.
−Removed: Our operations are also subject to additional regulation by other countries in international markets.
−Removed: Changes to existing regulations or rules, or the failure to regulate going forward in areas historically regulated on matters such as network neutrality, licensing fees, environmental, health and safety, privacy, intercarrier compensation, emergency services, interconnection, illegal robocalling, extra-territorial use of telephone numbers, and other areas, in general or particular to our industry, may increase costs, restrict operations or decrease revenue.
−Removed: For example, the TRACED Act aims to mitigate illegal robocalls by directing the FCC to develop rules requiring participation in the technical standard known as STIR/SHAKEN among other things.
−Removed: We are also subject to telecommunications laws and regulations in the non-US countries where we offer our products.
−Removed: Our international operations are subject to country-specific laws and governmental regulation that may increase our costs or impact our products and communications platform or prevent us from offering or providing our products in certain countries.
−Removed: M any existing non-US laws and regulations may not fully contemplate CPaaS solutions and the interpretation and enforcement of non-US laws and regulations may involve significant uncertainties.
−Removed: For example, several European countries have adopted “know your customer” requirements regarding end users and have mandated the real-time provisioning of the data to national law enforcement authorities.
−Removed: Future legislative, regulatory or judicial actions impacting CPaaS solutions also could increase the cost and complexity of compliance and expose us to liability.
−Removed: Our inability or failure to comply with telecommunications and other laws and regulations could cause the temporary or permanent suspension of our operations, and if we cannot provide emergency calling functionality through our communications platform to meet any new federal or state requirements, or any applicable requirements from other countries, the competitive advantages that we currently have may not persist, adversely affecting our ability to obtain and to retain enterprise customers, which could have an adverse impact on our business.
+Added: The recently enacted TRACED Act aims to mitigate illegal robocalls by directing the FCC to conduct certain rulemaking proceedings that include adopting rules that require participation in the technical standard known as the Secure Telephone Identity Revisited (“STIR”) and Signature-based Handling of Asserted Information Using toKENs (“SHAKEN”) (together, “STIR/SHAKEN”), among other requirements.
+Added: For large carriers, IP-based network equipment and the IP services that operate on such equipment were required to support the STIR/SHAKEN framework as of June 30, 2021.
+Added: Bandwidth has had a small sub-set of services and customer accounts that operate on legacy IP equipment that is not STIR/SHAKEN capable.
+Added: Bandwidth is working to retire such equipment.
+Added: There may be regulatory activity related to the timing of Bandwidth’s efforts to retire such non-STIR/SHAKEN capable equipment.
+Added: Failure to comply with existing regulations, or the imposition of additional regulations could have a material adverse effect on our business.
+Added: Our operations are subject to significant regulation and require us to obtain and maintain numerous governmental licenses and permits in the United States and internationally.
+Added: If we fail to obtain and maintain those licenses and permits, we may not be able to conduct our business.
+Added: Moreover, changes in regulatory requirements could significantly increase our costs or otherwise adversely affect our operations.
+Added: In the ordinary course of operating our network and providing our services, we must obtain and maintain a variety of telecommunications and other licenses, permits and authorizations.
+Added: We also must comply with a variety of ongoing regulatory obligations.
+Added: If we are unable to obtain and maintain the licenses and permits needed to operate and expand our network on acceptable terms and on a timely basis, our business could be materially adversely affected.
+Added: In addition, the cancellation or non-renewal of the licenses or permits we hold could materially adversely affect our business.
+Added: Our failure to comply with the obligations imposed upon license and permit holders,
+Added: including the payment of fees, may cause sanctions or additional costs, including the revocation of authority to provide services.
+Added: Our operations are subject to regulation at the national, state and local levels.
+Added: Our operations are also subject to additional regulation by other countries in our international markets.
+Added: Changes to existing regulations or rules, or the failure of regulatory agencies to regulate in areas historically regulated on matters such as network neutrality, licensing fees, environmental, health and safety, privacy, intercarrier compensation, emergency services, interconnection, illegal robocalling, extra-territorial use of telephone numbers, and other areas, in general or particular to our industry, may increase uncertainty, increase costs, restrict operations or decrease revenue.
+Added: Our inability or failure to comply with telecommunications and other laws and regulations could cause the temporary or permanent suspension of our operations.
+Added: In addition, if we cannot provide emergency calling functionality through our communications platform to meet any applicable federal, state or international requirements, the competitive advantages that we currently have may not persist, adversely affecting our ability to obtain and to retain enterprise customers which could have an adverse impact on our business.
+Added: We are subject to telecommunications laws and regulations in the non-U.S.
+Added: countries where we offer our services.
+Added: Numerous country-specific laws and governmental regulations apply to our business and may increase our costs, impact our products and communications platform or prevent us from offering or providing our products in certain countries.
+Added: Many existing non-U.S.
+Added: laws and regulations may not fully contemplate CPaaS solutions and the interpretation and enforcement of non-U.S.
+Added: laws and regulations may involve significant uncertainties.
+Added: For example, several European countries have adopted “know your customer” requirements regarding end users and have mandated the real-time provisioning of data to national law enforcement authorities’ systems.
In January 2018, the FCC repealed its Network Neutrality Rules.
−Removed: Our business could suffer with respect to the quality of the services we offer, our ability to maintain our internet-based services and our services offered through our communications platform, decrease our profitability or increase the price of our services making our offerings less competitive in the marketplace.
−Removed: In January 2018, the FCC adopted an order largely repealing its network neutrality rules.
+Added: Our business could suffer with respect to the quality of the services we offer, our ability to maintain our internet-based services and our services offered through our communications platform, a reduction in our profitability or an increase in the price of our services making our offerings less competitive in the marketplace.
+Added: In January 2018, the FCC adopted an order largely repealing its network neutrality rules (the “Order”).
Among other things, the pre-existing network neutrality rules prevented providers of broadband internet access services—like cable and telephone companies—from blocking, impairing and degrading service offerings from non-affiliated third parties like us.
−Removed: The FCC’s order repealing the pre-existing network neutrality rules was appealed by a number of parties.
−Removed: In October 2019, a three judge panel of the U.S.
−Removed: Court of Appeals for the District of Columbia Circuit issued a decision that largely affirmed the FCC's order, including the reclassification of broadband Internet access as an information service.
−Removed: The court, however, vacated the FCC’s decision that would have prospectively barred states from imposing any rule or requirement that was inconsistent with the FCC's order.
−Removed: The appellate court's decision is subject to rehearing by the full court or parties may seek to appeal the decision to the U.S.
−Removed: Supreme Court.
+Added: In 2019, the U.S.
+Added: Court of Appeals for the District of Columbia Circuit largely affirmed the Order, but vacated the portion of the Order that would bar states from imposing any rule or requirement inconsistent with the FCC’s order.
Various companies appealed the federal court of appeals decision in December 2019.
−Removed: We cannot predict whether the FCC will reverse its January 2018 order, whether the appeal will be successful, or whether any states will adopt legislation that results in restoring the pre-existing network neutrality rules that prevent broadband internet access service providers from blocking, impairing and degrading offerings from third parties like us.
−Removed: If broadband providers were to block, impair or degrade our internet-based services or services we offer through our communications platform, or if broadband internet access providers were to charge us or our customers to access and use our internet-based services or services offered through our communications platform, we could lose customers, our profitability could decrease, or we may have to raise prices, making our service less competitive in the marketplace.
−Removed: Most of the major broadband internet access providers have publicly stated that they will not block, impair
−Removed: or degrade third party offerings.
−Removed: We cannot predict the potential impact of the January 2018 FCC network neutrality order on our offerings at this time.
−Removed: We are subject to privacy and data security obligations in the United States.
−Removed: Any failure to comply with applicable laws, regulations or contractual obligations may harm our business, results of operations and financial condition.
−Removed: The FCC, other federal agencies and state attorneys’ general could fine or subject us to other adverse actions that may negatively impact our business reputation.
−Removed: If we are subject to an investigation or suffer a breach, we may incur costs or be subject to forfeitures and penalties that could reduce our profitability.
−Removed: We are subject to privacy and data security laws and regulations that impose obligations in connection with the collection, processing and use of personal data.
−Removed: Federal and state laws or proposed laws impose limits on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiable information (“PII”) of individuals.
−Removed: We see increased regulation of data privacy and security, including the adoption of more stringent subject matter specific state laws in the United States.
−Removed: For example, in 2018, California enacted the California Consumer Privacy Act (“CCPA”), which became effective on January 1, 2020.
−Removed: The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used.
−Removed: The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.
−Removed: Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.
−Removed: Further, in November 2020, California voters passed the California Privacy Rights Act (“CPRA”).
−Removed: The CPRA, which is expected to take effect on January 1, 2023 and to create obligations with respect to certain data relating to consumers as of January 1, 2022, significantly expands the CCPA, including by introducing additional obligations such as data minimization and storage limitations, granting additional rights to consumers, such as correction of personal information and additional opt-out rights, and creates a new entity, the California Privacy Protection Agency, to implement and enforce the law.
−Removed: The CCPA and CPRA may increase our compliance costs and potential liability.
−Removed: We also may be bound by contractual obligations relating to our collection, use and disclosure of personal data or may find it necessary or desirable to join industry or other self-regulatory bodies or other privacy or security related organizations that require compliance with their rules pertaining to privacy and data protection.
−Removed: We are subject to individual or joint jurisdiction of the FCC, the Federal Trade Commission, and state attorneys’ general with respect to privacy and data security obligations.
−Removed: If we were to suffer or if one of our customers were to suffer a breach, we may be subject to the jurisdiction of a variety of federal agencies’ jurisdictions, as well as state attorneys’ general.
−Removed: We may have to comply with a variety of data breach laws at the federal and state levels, comply with any resulting investigations, as well as offer mitigation to customers and potential end users of certain customers to which we provide services.
−Removed: We could also be subject to fines, forfeitures and other penalties that may adversely impact our business.
−Removed: Any failure or perceived failure by us, our products or the communications platform to comply with new or existing U.S.
−Removed: privacy or data security laws, regulations, policies, industry standards or contractual or legal obligations, or any security incident that results in the unauthorized access to, or acquisition, release or transfer of, PII or other customer data may result in governmental investigations, inquiries, enforcement actions and prosecutions, private litigation, fines and penalties, adverse publicity or potential loss of business.
−Removed: Our business is subject to complex and evolving foreign laws and regulations regarding privacy, data protection and other matters relating to information collection.
−Removed: There are numerous foreign laws, regulations and directives regarding privacy and the collection, retention, storage, transmission, use, processing, disclosure and protection of PII and other personal or customer data, the scope of which is continually evolving and subject to differing interpretations.
−Removed: We must comply with applicable laws, regulations and directives and we may be subject to significant consequences, including penalties and fines, for our failure to comply.
+Added: We cannot predict whether the FCC will reverse the Order, whether the appeal will be successful or whether any states will adopt legislation that results in restoring the pre-existing network neutrality rules.
+Added: If broadband providers were to block, impair or degrade our internet-based services or services we offer through our communications platform, or were to charge us or our customers to access and use our internet-based services or services offered through our communications platform, we could lose customers and our business could be materially adversely affected.
+Added: Most major broadband internet access providers have publicly stated they will not block, impair or degrade third party offerings.
+Added: We cannot predict the potential impact of the Order or future legal and regulatory developments that may occur.
+Added: Our business is subject to complex and evolving laws and regulations, commercial standards, contractual obligations and other requirements related to information collection.
+Added: We are subject to various federal, state, local and foreign laws and regulations, contractual commitments and industry standards that create obligations and impose restrictions with respect to the collection, storage, retention, use, processing, transmission, sharing, disclosure and protection of personal data and other customer data, including “customer proprietary network information” under applicable U.S.
+Added: We must comply with these obligations and restrictions and may be subject to significant consequences, including penalties and fines, if we fail
+Added: These obligations and restrictions continue to develop and evolve rapidly, and it is possible that we may not be, or may not have been, compliant with each such obligation and restriction.
+Added: The complexity and evolving nature of these obligations and restrictions subject us to the risk of differing interpretations, inconsistency or conflicts among countries or rules, and creates uncertainty regarding their application to our business.
Uncertainty and changes in the requirements of multiple jurisdictions may increase the cost of compliance, delay or reduce demand for our services, restrict our ability to offer services in certain locations, impact our customers’ ability to utilize our services in certain jurisdictions, or subject us to sanctions by national data protection regulators, all of which could harm our business, financial condition and results of operations.
−Removed: For example, as of May 25, 2018, the GDPR replaced the Data Protection Directive with respect to the processing of PII in the EU.
−Removed: The GDPR imposes several stringent requirements for controllers and processors of PII (including non-EU processors who process personal data on behalf of EU controllers), including, for example, more robust internal accountability controls, a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention and secondary use of information and additional obligations when we contract with third parties in connection with the processing of the PII.
−Removed: Failure to comply with the requirements of GDPR and the applicable national data protection laws of the EU member states may result in fines of up to €20 million or up to 4% of the total worldwide annual revenue for the preceding financial year, whichever is higher, and other administrative penalties.
−Removed: Complying with the GDPR has required us to implement additional mechanisms.
−Removed: As we continue to operate under the GDPR, compliance may become onerous and adversely affect our business, financial condition, results of operations and prospects.
−Removed: In addition, recent legal developments in Europe have created complexity and compliance uncertainty regarding certain transfers of information from the EU to the United States.
−Removed: On July 16, 2020, the Court of Justice of the European Union (the “CJEU”) invalidated the Privacy Shield Framework.
−Removed: The CJEU also imposed substantial requirements upon the continued use of standard contractual clauses for data transfers from the EU to the United States, which may make the use of standard contractual clauses difficult or impossible to use under some circumstances.
−Removed: We and our customers are at risk of enforcement actions taken by European regulators until such point in time that we are able to ensure that all data transfers to the United States from the EU are legitimized.
−Removed: We also may encounter additional complexity with respect to data privacy and data transfers from the U.K.
−Removed: resulting from the U.K.’s transition out of the EU.
−Removed: If we are unable to transfer PII between and among countries and regions in which we operate or may operate in the future, it could affect the manner in which we provide our services or could adversely affect our financial results.
−Removed: Furthermore, any failure, or perceived failure, by us to comply with or make effective modifications to our policies, or to comply with any federal, state or international privacy, data-retention or data-protection-related laws, regulations, orders or industry self-regulatory principles could result in proceedings or actions against us by governmental entities or others, a loss of customer confidence, damage to our brand and reputation or a loss of customers, any of which could have an adverse effect on our business.
−Removed: In addition, various federal, state and foreign legislative or regulatory bodies may enact new or additional laws and regulations concerning privacy, data-retention and data-protection issues, including laws or regulations mandating disclosure to domestic or international law enforcement bodies, which could adversely impact our business, our brand or our reputation with customers.
−Removed: For example, some countries have adopted laws mandating that PII regarding customers in their country be maintained solely in their country.
−Removed: Having to maintain local data centers and redesign product, service and business operations to limit PII processing to within individual countries could increase our operating costs significantly.
+Added: These obligations and restrictions may limit our ability to collect, store, process, use, transmit and share data with our customers, employees, consultants and third-party providers, which may result in our inability in certain cases to provide services to our customers or to offer a global customer experience.
+Added: These obligations may also limit the ability of our customers to collect, store, retain, protect, use, process, transmit, share and disclose data with others through our services.
+Added: Compliance with, and other burdens imposed by, such obligations and restrictions could increase the cost of our operations and adversely impact our business.
+Added: Any failure to comply with these obligations and restrictions or our own posted privacy policies and notices, or any security incident that results in a personal data breach or the unauthorized access to, or the acquisition, release or transfer of, other customer data, could subject us to investigations, proceedings or actions against us by governmental entities or others, lawsuits, fines, criminal penalties, statutory damages, consent decrees, injunctions, adverse publicity, contractual liability, civil liabilities, loss of customer confidence, damage to our brand and reputation or a loss of customers, any of which could materially harm our business.
+Added: If we were to suffer or if one of our customers or vendors were to suffer a personal data breach or other security incident, we may be subject to the jurisdiction of a variety of governmental agencies.
+Added: We may have to comply with a variety of data breach requirements at the national and state levels in the United States and in other countries, comply with any resulting investigations, as well as offer mitigation to customers and potential end users of certain customers to which we provide services.
+Added: We could also be subject to fines, forfeitures and other penalties that may adversely impact our business.
+Added: From time to time, various federal, state and foreign legislative or regulatory bodies may enact new or additional laws and regulations concerning data-protection issues.
+Added: For example, certain laws or regulations may mandate disclosure of customer information to domestic or international law enforcement bodies, which could adversely impact our business, our brand or our reputation with customers and may not always provide a level of protection for such information that is required by other laws or regulations.
+Added: In other cases, some countries may limit the transfer of personal data or require that that personal data regarding customers in their country be maintained solely in their country.
+Added: Having to maintain local data centers and redesign product, service and business operations to limit the processing of personal data to within individual countries could increase our operating costs significantly.
+Added: Additionally, some of our third-party vendors may have access to customer, end user or employee data.
+Added: If these third-party vendors violate obligations and restrictions related to applicable data protection laws or our policies or contractual commitments, such violations may also put us, or data relating to our customers, end users or employees, at risk and could in turn have a material and adverse effect on our business.
Our business could suffer if we cannot obtain or retain local or toll-free numbers, are prohibited from obtaining local or toll-free numbers, or are limited to distributing local or toll-free numbers to only certain customers.
Our future success depends on our ability to procure large quantities of local and toll-free numbers to meet customer demands at reasonable cost and without undue restrictions.
−Removed: Our ability to procure and distribute numbers depends on factors outside of our control, such as applicable regulations, the practices of the communications carriers that provide numbers to us in certain jurisdictions, the cost of obtaining and managing numbers and the level of demand for new numbers.
−Removed: Due to their limited availability, there are certain popular area code prefixes and specialized “vanity” toll-free numbers that we may not be able to obtain in desired quantities or at all.
+Added: Our ability to procure and distribute numbers depends on factors outside of our control, such as applicable regulations, the practices of the communications carriers that provide numbers to us in certain jurisdictions, the cost of obtaining and managing numbers and the
+Added: level of demand for new numbers.
+Added: Due to their limited availability, there are certain popular area code prefixes and specialized numbers that we may not be able to obtain in desired quantities or at all.
Our inability to acquire or retain numbers for our operations would make our services, including our communications platform, less attractive to potential customers that desire assignments of particular numbering resources.
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In addition, in order to procure, distribute and retain telephone numbers in certain foreign jurisdictions, we will be required to register with the local telecommunications regulatory authorities, some of which have been increasingly monitoring and regulating the categories of phone numbers that are eligible for provisioning to our customers, including geographical, regional, local and toll-free phone numbers.
−Removed: We have registered or obtained licenses, or are in the process of
−Removed: registering or obtaining licenses, in various countries in which we do business, but in some countries, the regulatory regime around provisioning of phone numbers is unclear, subject to change over time, and sometimes may conflict from jurisdiction to jurisdiction.
+Added: We have registered or obtained licenses, or are in the process of registering or obtaining licenses, in various countries in which we do business, but in some countries, the regulatory regime around provisioning of phone numbers is unclear, subject to change over time, and sometimes may conflict from jurisdiction to jurisdiction.
Furthermore, these regulations and governments’ approach to their enforcement, as well as our products and services, are still evolving and we may be unable to maintain compliance with applicable regulations, or enforce compliance by our customers, on a timely basis or without significant cost.
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In the event of such non-compliance, we may be forced to reclaim phone numbers from our customers, which could result in loss of customers, breach of contract claims, loss of revenue and reputational harm, all of which could have a material adverse effect on our business, results of operations and financial condition.
−Removed: We face exposure to foreign currency exchange rate fluctuations, and such fluctuations could adversely affect our business, results of operations and financial condition.
−Removed: We face exposure to the effects of fluctuations in currency exchange rates.
−Removed: While historically we have primarily transacted in U.S.
−Removed: dollars, we generally have transacted with customers and partners in Europe in British Pounds and Euros.
−Removed: We expect to expand the number of transactions with customers and partners that are denominated in foreign currencies in the future as we continue to expand our business internationally.
−Removed: We also incur expenses for some of our network service provider costs outside of the United States in local currencies and for employee compensation and other operating expenses in local currency.
−Removed: Fluctuations in the exchange rates between the U.S.
−Removed: dollar and other currencies could result in an increase to the U.S.
−Removed: dollar equivalent of such expenses.
−Removed: In addition, our international subsidiaries maintain net assets denominated in currencies other than the functional operating currencies of these entities.
−Removed: As we expand our international operations, we will become more exposed to the effects of fluctuations in currency exchange rates.
−Removed: Accordingly, changes in the value of foreign currencies relative to the U.S.
−Removed: dollar may affect our results of operations due to transactional and translational remeasurements.
−Removed: Such foreign currency exchange rate fluctuations could make it more difficult to detect underlying trends in our business and results of operations.
−Removed: The trading price of our Class A common stock also could be adversely affected if fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors and securities analysts who follow our stock.
−Removed: We do not currently maintain a program to hedge transactional exposures in foreign currencies.
−Removed: However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates.
−Removed: The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place.
−Removed: Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.
We may be exposed to liabilities under anti-corruption, export control and economic sanction regulations, and similar laws and regulations, and any determination that we violated any of these laws or regulations could have a material adverse effect on our business.
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In addition, changes in our products or services, changes in applicable regulations, or change in the target of such regulations, could also result in decreased use of our products and services, or in our decreased ability to sell our products or provide our services to existing or prospective customers with international operations.
−Removed: Any decreased use of our products and services or limitation on our ability to export our products and provide our services could adversely affect our business, results of operations and financial condition.
+Added: Any decreased use of our products and services or limitation
+Added: on our ability to export our products and provide our services could adversely affect our business, results of operations and financial condition.
Intellectual property and proprietary rights of others could prevent us from using necessary technology to provide our services or subject us to expensive intellectual property litigation.
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Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
−Removed: Our agreements with customers and other third parties typically include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons or other liabilities relating to or arising from our services or platform or other acts or omissions.
−Removed: The term of these contractual provisions often survives termination or expiration of the applicable agreement.
+Added: Our agreements with customers and other third parties typically include indemnification or other provisions under which we agree to indemnify or are otherwise liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons or other liabilities relating to or arising from our services or platform or other acts or omissions.
+Added: The term of these contractual provisions often
+Added: survives termination or expiration of the applicable agreement.
Large indemnity payments or damage claims from contractual breach could harm our business, results of operations and financial condition.
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Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other current and prospective customers, reduce demand for our services and adversely affect our business, results of operations and financial condition.
−Removed: The storage, processing and use of personal information and related data subjects us to evolving governmental laws and regulation, commercial standards, contractual obligations and other legal obligations related to consumer and data privacy, which may have a material impact on our costs, use of our services, or expose us to increased liability.
−Removed: Federal, state, local and foreign laws and regulations, commercial obligations and industry standards, each provide for obligations and restrictions with respect to data privacy and security, as well as the collection, storage, retention, protection, use, processing, transmission, sharing, disclosure and protection of personal information and other customer data, including customer proprietary network information under applicable federal law.
−Removed: The evolving nature of these obligations and restrictions subjects us to the risk of differing interpretations, inconsistency or conflicts among countries or rules, and creates uncertainty regarding their application to our business.
−Removed: These obligations and restrictions may limit our ability to collect, store, process, use, transmit and share data with our customers, employees and third-party providers and to allow our customers to collect, store, retain, protect, use, process, transmit, share and disclose data with others through our services.
−Removed: Compliance with, and other burdens imposed by, such obligations and restrictions could increase the cost of our operations and impact our ability to market our services through effective segmentation.
−Removed: Failure to comply with obligations and restrictions related to applicable data protection laws, regulations, standards, and codes of conduct, as well as our own posted privacy policies, privacy notices, and contractual commitments could subject us to lawsuits, fines, criminal penalties, statutory damages, consent decrees, injunctions, adverse publicity, loss of user confidence in our services, and loss of users, which could materially harm our business.
−Removed: Because these obligations and restrictions have continued to develop and evolve rapidly, it is possible that we may not be, or may not have been, compliant with each such obligation and restriction.
−Removed: Additionally, third-party contractors may have access to customer or employee data.
−Removed: If these or other third-party vendors violate obligations and restrictions related to applicable data protection laws or our policies, such violations may also put our customers’ or employees’ information at risk and could in turn have a material and adverse effect on our business.
If we fail to protect our internally developed systems, technology and software and our patents and trademarks, we may become involved in costly litigation or our business or brand may be harmed.
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In addition, effective protection may be unavailable or limited in some jurisdictions outside the United States.
−Removed: Litigation may be necessary in the future to enforce or protect
−Removed: our rights or to determine the validity and scope of the rights of others.
+Added: Litigation may be necessary in the future to enforce or protect our rights or to determine the validity and scope of the rights of others.
That litigation could cause us to incur substantial costs and divert resources away from our daily business, which in turn could adversely affect our business, results of operations and financial condition.
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Further, we cannot assure you that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks.
−Removed: We are subject to litigation in the ordinary course of business, and uninsured judgments or a rise in insurance premiums may adversely affect our results of operations.
−Removed: In the ordinary course of business, we are subject to various claims and litigation.
−Removed: Any such claims, regardless of merit, could be time-consuming and expensive to defend and could divert management’s attention and resources.
−Removed: In accordance with customary practice, we maintain insurance against some, but not all, of these potential claims.
−Removed: We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented.
−Removed: The levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities.
−Removed: Further, we may not be able to maintain insurance at commercially acceptable premium levels or at all.
−Removed: If any significant judgment, claim (or a series of claims) or other event is not fully insured or indemnified against, it could have a material adverse impact on our business, financial condition and results of operations.
−Removed: There can be no assurance as to the actual amount of these liabilities or the timing thereof.
−Removed: We cannot be certain that the outcome of current or future litigation will not have a material adverse impact on our business and results of operations.
We may be liable for the information that content owners or distributors distribute over our network.
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Our business continuity plans also may be inadequate to address a particular failure that we experience.
−Removed: Delays, errors or network equipment or facility failures could result from natural disasters, pandemics such as COVID-19, disease, accidents, terrorist acts, power losses, security breaches, vandalism or other illegal acts, computer viruses or other causes.
+Added: Delays, errors or network equipment or facility failures could result from natural disasters, pandemics such as COVID-19, disease, accidents, terrorist acts, acts of war, power losses, security breaches, vandalism or other illegal acts, computer viruses or other causes.
These delays, errors or failures could significantly impair our business due to:
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Real or perceived errors, failures or bugs in our services could result in negative publicity, loss of or delay in market acceptance of our platform, loss of competitive position, lower customer retention or claims by customers for losses sustained by them.
−Removed: In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem.
+Added: In such an event, we may be required, or may choose, for
+Added: customer relations or other reasons, to expend additional resources in order to help correct the problem.
In addition, we may not carry insurance sufficient to compensate us for any losses that may result from claims arising from defects or disruptions in our services.
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Certain of our IP telephony offerings, as well as the 911 and other emergency services solutions that we offer are subject to FCC and other rules governing the delivery of emergency calling services.
+Added: The rules and laws that govern emergency calling services are subject to change as communications technologies and consumer use of emergency services change.
Similar to other providers of IP telephony services, our 911 and other emergency services are different from those associated with traditional local telecommunications services.
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Similar requirements and delays applicable to relevant databases also apply to local emergency services provided outside the United States.
−Removed: Moreover, the relevant rules with respect to what address
−Removed: information should be provided to emergency call centers when the call originates from a mobile application are unsettled.
+Added: Moreover, the relevant rules with respect to what address information should be provided to emergency call centers when the call originates from a mobile application are unsettled and evolving.
As a result, we could be subject to enforcement action by the FCC or other entities — possibly exposing us to significant monetary penalties, cease and desist orders, civil liability, loss of user confidence in our services, loss of users, and other adverse consequences, which could materially harm our business.
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Our business is dependent on third-party suppliers for fiber, computers, software, transmission electronics and related network components, as well as providers of network colocation facilities that are integrated into our network, some of which are critical to the operation of our business.
−Removed: If any of these critical relationships is terminated, a supplier either exits or curtails its business as a result of economic conditions, a supplier fails to provide critical services or equipment, or the supplier is forced to stop providing services due to legal constraints, such as patent infringement, and we are unable to reach suitable alternative arrangements quickly, we may experience significant additional costs or we may not be able to provide certain services to customers.
+Added: If any of these critical relationships is terminated, a supplier either exits or curtails its business as a result of economic conditions, a supplier fails to provide critical services or equipment, or the supplier is forced to stop providing services due to legal constraints,
+Added: such as patent infringement, and we are unable to reach suitable alternative arrangements quickly, we may experience significant additional costs or we may not be able to provide certain services to customers.
If that happens, our business, results of operations and financial condition could be materially adversely affected.
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The financial markets in the United States have experienced substantial uncertainty during recent years, particularly following the COVID-19 outbreak.
−Removed: This uncertainty has included, among other things, extreme volatility in securities prices, drastically reduced liquidity and credit availability, rating downgrades of certain investments and declining values with respect to others.
−Removed: If capital and credit markets continue to experience uncertainty and available funds remain limited, we may not be able to obtain debt or equity financing or to refinance our existing indebtedness on
−Removed: favorable terms or at all, which could affect our strategic operations and our financial performance and force modifications to our operations.
+Added: This uncertainty has included, among other things, extreme volatility in securities prices, reduced liquidity and credit availability, rating downgrades of certain investments and declining values with respect to others.
+Added: If capital and credit markets continue to experience uncertainty and available funds remain limited, we may not be able to obtain debt or equity financing or to refinance our existing indebtedness on favorable terms or at all, which could affect our strategic operations and our financial performance and force modifications to our operations.
These conditions currently have not precluded us from accessing credit markets or financing our operations, but there can be no assurance that financial markets and confidence in major economies will not deteriorate.
−Removed: An extended period of economic deterioration could materially adversely affect our results of operations and financial condition and exacerbate some of the other risk factors contained in this Annual Report on Form 10- K .
+Added: An extended period of economic deterioration could materially adversely affect our results of operations and financial condition and exacerbate some of the other risk factors contained in Annual Report on Form 10-K.
For example, our customers might defer or entirely decline purchases of our services due to tighter credit or negative financial news or reduce demand for our services.
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Our customer churn rate may increase.
−Removed: Customer churn occurs when a customer discontinues service with us, whether voluntarily or involuntarily, such as a customer switching to a competitor or going out of business.
−Removed: Changes in the economy, increased competition from other providers, or issues with the quality of service we deliver can impact our customer churn rate.
+Added: Customer churn occurs when a customer reduces usage or discontinues service with us, whether voluntarily or involuntarily, such as a customer switching some or all of its usage to a competitor or going out of business.
+Added: Changes in the economy, increased competition from other providers, cyber incidents such as the [ongoing DDoS attacks] or issues with the quality of service we deliver can impact our customer churn rate.
We cannot predict future pricing by our competitors, but we anticipate that price competition will continue.
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Failure to obtain usage of alternative IP circuits, if necessary, could have a material adverse effect on our ability to carry on business operations.
−Removed: In addition, some of our agreements with other providers require the payment of amounts for services whether or not those
−Removed: services are used.
+Added: In addition, some of our agreements with other providers require the payment of amounts for services whether or not those services are used.
Our reliance on third-party providers may reduce our operating flexibility, ability to make timely service changes and ability to control quality of service.
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Our future performance depends on the continued services and contributions of our senior management and other key employees to execute on our business plan, to develop our platform, to deliver our services to customers, to attract and retain customers and to identify and pursue opportunities.
−Removed: The loss of services of senior management or other key employees could significantly delay or prevent the achievement of our development and strategic objectives.
−Removed: In particular, we depend to a considerable degree on the vision, skills, experience and effort of our Co-Founder, Chief Executive Officer and Chairman, David A.
−Removed: The replacement of any of our senior management personnel would likely involve significant time and costs, and such loss could significantly delay or prevent the achievement of our business objectives.
+Added: The loss of services of senior management or other key employees, such as those who develop and maintain our service offerings, could significantly delay or prevent the achievement of our development and strategic objectives.
+Added: In particular, we depend to a considerable degree on the vision, skills, experience and effort of our Chief Executive Officer, David A.
+Added: The replacement of any of our senior management personnel or other key employees can involve significant time and costs, and such loss could significantly delay or prevent the achievement of our business objectives.
The loss of the services of our senior management or other key employees for any reason could adversely affect our business, results of operations and financial condition.
If we are unable to hire, retain and motivate qualified personnel, our business will suffer.
−Removed: Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel.
−Removed: We believe that there is, and will continue to be, intense competition for highly skilled management, technical, sales and other personnel with experience in our industry in the Raleigh, North Carolina area, where our headquarters are located, and in other locations where we maintain offices.
−Removed: We must provide competitive compensation packages and a high-quality work environment to hire, retain and motivate employees.
+Added: Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel, and our inability to do so could adversely affect our business, results of operations and financial condition.
+Added: Competition for talent in the technology industry has become increasingly intense.
+Added: In 2020 and 2021, the “great resignation” saw a dramatic increase in workers leaving their positions throughout the technology industry, and the market to recruit, retain and motivate talent has become even more competitive.
+Added: Many key individual contributors, particularly in software development, sales and cloud computing and telecommunications infrastructure, are critical to our success and can attract very significant compensation packages.
+Added: In addition, we believe that there is, and will continue to be, intense competition for highly skilled management, technical, sales and other personnel with experience in our industry in the Raleigh, North Carolina area, where our headquarters are located, and in other geographic locations where we maintain offices.
+Added: We have experienced and may continue to experience difficulties attracting, hiring and retaining highly-skilled personnel with appropriate qualifications, and may not be able to fill positions in desired geographic areas or at all.
+Added: These difficulties may be exacerbated by the reactions of employees and prospective employees to our policies related to remote working flexibility.
+Added: As a result, we have also experienced and may continue to experience increased compensation and training costs that may not be offset by either improved productivity or higher sales, which could reduce our profitability.
+Added: We seek to provide competitive compensation packages and a high-quality work environment to hire, retain and motivate employees.
If we are unable to retain and motivate our existing employees and attract qualified personnel to fill key positions, we may be unable to manage our business effectively, including the development, marketing and sale of our services, which could adversely affect our business, results of operations and financial condition.
To the extent we hire personnel from competitors, we also may be subject to allegations that they have been improperly solicited or hired, or that they divulged proprietary or other confidential information.
−Removed: Volatility in, or lack of performance of, our stock price may also affect our ability to attract and retain key personnel.
−Removed: Employees may be more likely to terminate their employment with us if the shares they own or the shares underlying any vested options or restricted stock units have significantly appreciated in value, or, conversely, if the exercise prices of any options that they hold are significantly above the trading price of our Class A common stock or the value of any restricted stock units they hold has depreciated significantly.
+Added: Volatility or declines in our stock price may also affect our ability to attract and retain key personnel.
+Added: Employees may be more likely to terminate their employment with us if the shares they own or the shares underlying any restricted stock units have not significantly appreciated in value, or if the value of the shares underlying restricted stock units they hold has depreciated significantly.
If we are unable to retain our employees, our business, results of operations and financial condition could be adversely affected.
−Removed: Our management team has limited experience managing a public company.
−Removed: Other than experience gained at our company, most members of our management team have limited, if any, experience managing a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies.
−Removed: Our management team may not successfully or efficiently manage us as a public company.
−Removed: As a result of being a public company, we are subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.
−Removed: These new obligations and constituents require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, results of operations and financial condition.
+Added: In addition, we believe our corporate culture has been a key contributor to our success to date.
+Added: However, in this period of the “great resignation,” we have experienced and may continue to face higher than usual employee turnover rates.
+Added: As we continue to grow and expand globally and navigate shifting workforce priorities, including the desire of many of our employees and prospective employees for a hybrid work model with the ability to work remotely for part of the week, and the increasing demand of employees and prospective employees for fully remote work, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our ability to retain and recruit personnel who are essential to our future success and could ultimately have a negative impact on our ability to innovate our technology and our business.
+Added: Further, as of December 31, 2021, approximately 33% of our employees have been employed by us for a year or less and we must be able to effectively integrate, develop and motivate a large number of new employees, while maintaining the effectiveness of our business execution and the beneficial aspects of our corporate culture.
We could be subject to liability for historic and future sales, use and similar taxes, which could adversely affect our results of operations.
16 unchanged sentences
Also, our tax expense could be affected depending on the applicability of withholding and other taxes under the tax laws of certain jurisdictions in which we have business operations.
−Removed: The relevant revenue and taxing authorities may disagree with positions we have taken generally, or our determinations as to income and expenses attributable to specific jurisdictions.
−Removed: If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes,
−Removed: interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.
+Added: The relevant revenue and taxing authorities may
+Added: disagree with positions we have taken generally, or our determinations as to income and expenses attributable to specific jurisdictions.
+Added: If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.
We may be subject to significant U.S.
2 unchanged sentences
We may be subject to significant U.S.
−Removed: federal income tax-related liabilities with respect to our prior distribution of all of the issued and outstanding shares of the common stock of Republic Wireless, Inc.
−Removed: (“Republic Wireless”), our former subsidiary, to our stockholders as of and on November 30, 2016 (the “Spin-Off”), if there is a determination that the Spin-Off is taxable for U.S.
+Added: federal income tax-related liabilities with respect to our prior distribution of all of the issued and outstanding shares of the common stock of Relay, Inc.
+Added: (f/k/a Republic Wireless, Inc.) (“Relay”), our former subsidiary, to our stockholders as of and on November 30, 2016 (the “Spin-Off”), if there is a determination that the Spin-Off is taxable for U.S.
federal income tax purposes.
In that regard, even if the Spin-Off otherwise qualified as a tax-free transaction to us and our stockholders under Section 355, Section 368(a)(1)(D) and related provisions of the U.S.
−Removed: Internal Revenue Code of 1986, as amended (the “Code”) at the time of the Spin-Off, we would be subject to corporate-level taxable gain under Section 355(e) of the Code (“Section 355(e)”) if there was a 50% or greater change in ownership, by vote or value, of shares of our stock or Republic Wireless’s stock that occurred after the Spin-Off as part of a plan or series of related transactions that included the Spin-Off.
−Removed: For purposes of Section 355(e), any acquisitions or issuances of our stock, including pursuant to our initial public offering and pursuant to the reorganizations undertaken and arrangements entered into in connection with our initial public offering, or Republic Wireless’s stock, in each case, that occurred within two years after the Spin-Off are generally presumed to be part of a plan or series of related transactions with respect to the Spin-Off.
+Added: Internal Revenue Code of 1986, as amended (the “Code”) at the time of the Spin-Off, we would be subject to corporate-level taxable gain under Section 355(e) of the Code (“Section 355(e)”) if there was a 50% or greater change in ownership, by vote or value, of shares of our stock or Relay’s stock that occurred after the Spin-Off as part of a plan or series of related transactions that included the Spin-Off.
+Added: For purposes of Section 355(e), any acquisitions or issuances of our stock, including pursuant to our initial public offering and pursuant to the reorganizations undertaken and arrangements entered into in connection with our initial public offering, or Relay’s stock, in each case, that occurred within two years after the Spin-Off are generally presumed to be part of a plan or series of related transactions with respect to the Spin-Off.
In connection with the Spin-Off, we received an opinion from Skadden, Arps, Slate, Meagher & Flom LLP substantially to the effect that, among other things, the Spin-Off should qualify as a tax-free transaction for U.S.
6 unchanged sentences
federal income tax related liabilities.
−Removed: In addition, pursuant to the Tax Sharing Agreement, dated November 30, 2016, between us and Republic Wireless (the “Tax Sharing Agreement”), we must generally indemnify Republic Wireless for any taxes or losses incurred by it (or its respective subsidiaries) resulting from the Spin-Off failing to qualify as a tax-free transaction for U.S.
+Added: In addition, pursuant to the Tax Sharing Agreement, dated November 30, 2016, between us and Relay (the “Tax Sharing Agreement”), we must generally indemnify Relay for any taxes or losses incurred by it (or its respective subsidiaries) resulting from the Spin-Off failing to qualify as a tax-free transaction for U.S.
federal income tax purposes (including due to the application of Section 355(e)) as a result of subsequent actions we take or fail to take.
2 unchanged sentences
Accordingly, in light of the requirements of Section 355(e), we might forego share repurchases, stock issuances and other strategic transactions.
−Removed: Notwithstanding the foregoing, it is possible that we, Republic Wireless or the holders of our respective stock might inadvertently cause, permit or otherwise not prevent a change in the ownership of our stock or Republic Wireless’s stock to occur, which would cause Section 355(e) to apply to the Spin-Off, thereby triggering significant U.S.
+Added: Notwithstanding the foregoing, it is possible that we, Relay or the holders of our respective stock might inadvertently cause, permit or otherwise not prevent a change in the ownership of our stock or Relay’s stock to occur, which would cause Section 355(e) to apply to the Spin-Off, thereby triggering significant U.S.
federal income tax-related liabilities and indemnity obligations under the Tax Sharing Agreement of approximately $50 million.
17 unchanged sentences
Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting.
−Removed: Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A common stock.
+Added: Ineffective disclosure controls
+Added: and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A common stock.
In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NASDAQ Global Select Market.
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Any such charges may adversely affect our results of operations.
−Removed: Earthquakes, hurricanes, fires, floods, pandemics, power outages, terrorist attacks and other significant events could disrupt our business and ability to serve our clients.
−Removed: A significant event, such as an earthquake, hurricane, a fire, a flood, a pandemic or a power outage, could have a material adverse effect on our business, results of operations or financial condition.
−Removed: For example, the rapid and global spread of COVID-19 has disrupted businesses and increased travel restrictions.
+Added: We face exposure to foreign currency exchange rate fluctuations, and such fluctuations could adversely affect our business, results of operations and financial condition.
+Added: We face exposure to the effects of fluctuations in currency exchange rates.
+Added: While historically we have primarily transacted in U.S.
+Added: dollars, we generally have transacted with customers and partners in Europe in British Pounds and Euros.
+Added: We expect to expand the number of transactions with customers and partners that are denominated in foreign currencies in the future as we continue to expand our business internationally.
+Added: We also incur expenses for some of our network service provider costs outside of the United States in local currencies and for employee compensation and other operating expenses in local currency.
+Added: Fluctuations in the exchange rates between the U.S.
+Added: dollar and other currencies could result in an increase to the U.S.
+Added: dollar equivalent of such expenses.
+Added: In addition, our international subsidiaries maintain net assets denominated in currencies other than the functional operating currencies of these entities.
+Added: As we expand our international operations, we will become more exposed to the effects of fluctuations in currency exchange rates.
+Added: Accordingly, changes in the value of foreign currencies relative to the U.S.
+Added: dollar may affect our results of operations due to transactional and translational re-measurements.
+Added: Such foreign currency exchange rate fluctuations could make it more difficult to detect underlying trends in our business and results of operations.
+Added: The trading price of our Class A common stock also could be adversely affected if fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors and securities analysts who follow our stock.
+Added: We do not currently maintain a program to hedge transactional exposures in foreign currencies.
+Added: However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates.
+Added: The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place.
+Added: Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.
+Added: Earthquakes, hurricanes, fires, floods, pandemics, power outages, terrorist attacks, acts of war, civilian unrest and other significant events could disrupt our business and ability to serve our clients.
+Added: A significant event, such as an earthquake, hurricane, a fire, a flood, a pandemic, a power outage, terrorist attack, act of war or civilian unrest could have a material adverse effect on our business, results of operations or financial condition.
+Added: For example, the rapid and global spread of COVID-19 has disrupted businesses and increased
+Added: travel restrictions.
Health concerns or governmental, legal, political or regulatory developments in the United States or other countries in which we or our customers, partners and service providers operate could cause economic, labor or social instability and could materially adversely affect our business and our results of operations and financial condition.
−Removed: Future developments, which are very uncertain, include changing information about the extent and severity of COVID-19 and evolving responses by governments and businesses.
+Added: Future developments, which are very uncertain, include evolving responses by governments and businesses.
These future developments could materially adversely affect our business and our results of operations and financial condition.
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Additionally, certain of our capabilities cannot be made redundant feasibly or cost-effectively.
−Removed: Acts of physical or cyber terrorism or other geopolitical unrest also could cause disruptions in our business.
+Added: Acts of physical or cyber terrorism or other geopolitical unrest, including acts of war, also could cause disruptions in our business.
The adverse impacts of these risks may increase if our disaster recovery plans prove to be inadequate.
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The failure to timely identify any material liabilities associated with any acquisitions could adversely affect our business, results of operations, and financial condition.
−Removed: Our credit facility contains restrictive and financial covenants that may limit our operating flexibility.
−Removed: Our credit facility with KeyBank National Association and Pacific Western Bank contains certain restrictive covenants that either limit our ability to, or require a mandatory prepayment in the event we, among other things, incur additional indebtedness, issue guarantees, create liens on assets, make certain investments, merge with or acquire other companies, change business locations, pay dividends or make certain other restricted payments, transfer or dispose of assets, enter into transactions with affiliates and enter into various specified transactions.
−Removed: We, therefore, may not be able
−Removed: to engage in any of the foregoing transactions unless we obtain the consent of our lenders or prepay the outstanding amount under our credit facility.
−Removed: Our credit facility also contains certain financial covenants and financial reporting requirements.
−Removed: Our obligations under our credit facility are secured by all of our property, with certain exceptions.
−Removed: We may not be able to generate sufficient liquidity or CPaaS Revenue to meet the financial covenants or pay the principal and interest under our credit facility.
−Removed: Furthermore, future working capital, borrowings or equity financing could be unavailable to repay or refinance the amounts outstanding under our credit facility.
−Removed: In the event of a liquidation, all outstanding principal and interest would have to be repaid prior to distribution of assets to unsecured creditors, and the holders of our Class A and Class B common stock would receive a portion of any liquidation proceeds only if all of our creditors, including our lenders, were first repaid in full.
−Removed: If we are unable to comply with the restrictive and financial covenants in our credit facility, there would be a default under the terms of that agreement, and this could result in an acceleration of payment of funds that have been borrowed.
−Removed: If we were unable to comply with the restrictive and financial covenants in our credit facility, there would be a default under the terms of that agreement.
−Removed: As a result, any borrowings under other instruments that contain cross-acceleration or cross default provisions may also be accelerated and become due and payable.
−Removed: If any of these events occur, there can be no assurance that we would be able to make necessary payments to the lenders or that we would be able to find alternative financing.
−Removed: Even if we were able to obtain alternative financing, there can be no assurance that it would be on terms that are acceptable.
Risks Related to the Acquisition of Voxbone
Although we expect that the acquisition of Voxbone will result in synergies and other benefits to us, we may not realize those benefits because of difficulties related to integration, the achievement of synergies and other challenges.
−Removed: On November 1, 2020, we acquired Voice Topco Limited, a private limited liability company incorporated under the laws of England and Wales (“Voice Topco” and, together with its subsidiaries, “Voxbone”), which directly or indirectly holds all of the issued and outstanding shares of Voxbone, S.A.
−Removed: a private limited liability company registered under the laws of Belgium, (the “Acquisition”).
−Removed: Prior to the completion of the Acquisition, we and Voxbone operated independently, and there can be no assurances that our businesses can be combined in a manner that allows for the achievement of substantial benefits.
−Removed: The integration process will require significant time and resources, and we may not be able to manage the process successfully as our ability to acquire and integrate larger or more complex companies, products, or technology in a successful manner is unproven.
−Removed: If we are not able to successfully integrate Voxbone’s business with ours or pursue our customer and product strategy successfully, the anticipated benefits of the Acquisition may not be realized fully or may take longer than expected to be realized.
−Removed: Further, it is possible that there could be a loss of our and/or Voxbone’s key employees and customers, disruption of either company’s or both companies’ ongoing businesses or unexpected issues, higher than expected costs and an overall post‑completion process that takes longer than originally anticipated.
−Removed: Specifically, the following issues, among others, must be addressed in combining Voxbone’s operations with ours in order to realize the anticipated benefits of the Acquisition so the combined company performs as the parties hope:
−Removed: • combining the companies’ corporate functions;
−Removed: • combining Voxbone’s business with our business in a manner that permits us to achieve the synergies anticipated to result from the Acquisition, the failure of which would result in the anticipated benefits of the Acquisition not being realized in the time frame currently anticipated or at all;
−Removed: • maintaining existing agreements with customers, distributors, providers, talent and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, providers, talent and vendors;
−Removed: • determining whether and how to address possible differences in corporate cultures and management philosophies;
−Removed: • integrating the companies’ administrative and information technology infrastructure;
−Removed: • developing products and technology that allow value to be unlocked in the future;
−Removed: • evaluating and forecasting the financial impact of the Acquisition transaction, including accounting charges;
−Removed: • effecting potential actions that may be required in connection with obtaining regulatory approvals.
−Removed: At times the attention of certain members of our management and resources may be focused on integration of the businesses of the two companies and diverted from day‑to‑day business operations, which may disrupt our ongoing business and the business of the combined company.
−Removed: We have incurred, and may continue to incur, significant, non‑recurring costs in connection with the Acquisition and integrating our operations with those of Voxbone, including costs to maintain employee morale and to retain key employees.
+Added: On November 2, 2020, we acquired Voxbone.
+Added: Prior to the completion of this acquisition, we and Voxbone operated independently, and there can be no assurances that our businesses can be combined in a manner that allows for the achievement of substantial benefits.
+Added: The integration process is ongoing and continues to require significant time and resources, and we may not be able to manage the process successfully, as our ability to acquire and integrate larger or more complex companies, products, or technology in a successful manner is unproven.
+Added: If we are not able to successfully integrate Voxbone’s business with ours, fail to achieve the synergies we anticipated would result from the acquisition, such as cross-selling to our legacy customers in international markets in which we now operate, or fail to pursue a unified customer and product strategy successfully, the anticipated benefits of the acquisition may not be realized fully or may take longer than expected to be realized.
+Added: We have incurred, and may continue to incur, significant, non-recurring costs in connection with the acquisition and integrating our operations with those of Voxbone, including costs to consolidate business support systems and service offerings.
Management cannot ensure that the elimination of duplicative costs or the realization of other efficiencies will offset the transaction and integration costs in the near term or at all.
−Removed: Purchase price accounting in connection with the Acquisition requires estimates that may be subject to change and could impact our consolidated financial statements and future results of operations and financial position.
−Removed: Pursuant to the acquisition method of accounting, the purchase price we paid for Voxbone will be allocated to the underlying Voxbone tangible and intangible assets acquired and liabilities assumed based on their respective fair market values with any excess purchase price allocated to goodwill.
−Removed: The acquisition method of accounting is dependent upon certain valuations and other studies that are preliminary.
−Removed: Accordingly, the purchase price allocation as of the Acquisition date is preliminary.
−Removed: We currently anticipate that all the information needed to identify and measure values assigned to the assets acquired and liabilities assumed will be obtained and finalized during the one‑year measurement period following the date of completion of the Acquisition.
−Removed: Differences between these preliminary estimates and the final acquisition accounting may occur, and these differences could have a material impact on the consolidated financial statements and the combined company’s future results of operations and financial position.
+Added: Risks Related to the Convertible Notes
+Added: Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.
+Added: Our ability to make scheduled payments of the principal of, to pay interest on or to refinance the Convertible Notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
+Added: Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures.
+Added: If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive.
+Added: Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.
+Added: We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
+Added: In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives.
+Added: Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our indebtedness.
+Added: We may incur substantially more debt or take other actions which would intensify the risks discussed above.
+Added: We and our subsidiaries may be able to incur substantial additional debt in the future, some of which may be secured debt.
+Added: We will not be restricted under the terms of the indentures governing the Convertible Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the Convertible Notes that could have the effect of diminishing our ability to make payments on the Convertible Notes when due.
+Added: We may not have the ability to raise the funds necessary for cash settlement upon conversion of the Convertible Notes or to repurchase the Convertible Notes for cash following a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion of the Convertible Notes or to repurchase the Convertible Notes.
+Added: Subject to limited exceptions, holders of the Convertible Notes have the right to require us to repurchase their Convertible Notes upon the occurrence of a fundamental change at a cash repurchase price generally equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.
+Added: In addition, upon conversion of the Convertible Notes, unless we elect to deliver solely shares of our Class A common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Convertible Notes being converted.
+Added: However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Convertible Notes surrendered therefor or pay the cash amounts due upon conversion.
+Added: In addition, our ability to repurchase the Convertible Notes or to pay cash upon conversions of the Convertible Notes may be limited by applicable law, by regulatory authorities or by agreements governing our future indebtedness.
+Added: Our failure to repurchase the Convertible Notes at a time when such repurchase is required by the indentures governing the Convertible Notes or to pay the cash amounts due upon future conversions of the Convertible Notes as required by such indentures would constitute a default under such indentures.
+Added: A default under the indentures governing the Convertible Notes or the fundamental change itself may also lead to a default under agreements governing our existing or future indebtedness, which may result in such existing or future indebtedness becoming immediately payable in full.
+Added: We may not have sufficient funds to satisfy all amounts due under such existing or future indebtedness and repurchase the Convertible Notes or make cash payments upon conversions thereof.
+Added: The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Notes, could have a material effect on our reported financial results.
+Added: In May 2008, the Financial Accounting Standards Board (“FASB”), issued FASB Staff Position No.
+Added: APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options.
+Added: Under ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the Convertible Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.
+Added: The effect of ASC 470-20 on the accounting for the Convertible Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet, and the value attributed to the equity component would be treated as original issue discount for purposes of accounting for the debt component of the Convertible Notes.
+Added: As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the Convertible Notes to their face amount over the term of the Convertible Notes.
+Added: We will report lower net income in our financial results because ASC 470-20 will require interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results, the trading price of our Class A common stock and the trading price of the Convertible Notes.
+Added: In addition, under certain circumstances, convertible debt instruments (such as the Convertible Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares of Class A common stock issuable upon conversion of the Convertible Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Convertible Notes exceeds their principal amount.
+Added: Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of Class A common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued.
+Added: However, in August 2020, the FASB published an accounting standards update 2020-06 (“ASU 2020-06”), which amends these accounting standards by reducing the number of accounting models for convertible instruments and limiting instances of separate accounting for the debt and equity or a derivative component of the convertible debt instruments.
+Added: ASU 2020-06 also will no longer allow the use of the treasury stock method for convertible instruments for purposes of calculating diluted earnings per share and instead require application of the “if-converted” method.
+Added: Under that method, diluted earnings per share will generally be calculated assuming that all the Convertible Notes were converted solely into shares of Class A common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which could adversely affect our diluted earnings per share.
+Added: However, if the principal amount of the convertible debt instrument being converted is required to be paid in cash and only the excess is permitted to be settled in shares, the if-converted method will produce a similar result as the treasury stock method prior to the adoption of ASU 2020-06 for such convertible debt instrument.
+Added: These amendments will be effective for public companies for fiscal years beginning after December 15, 2021, with early adoption permitted, but no earlier than fiscal years beginning after December 15, 2020.
+Added: The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
+Added: In the event the conditional conversion feature of the Convertible Notes is triggered, holders of Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their option.
+Added: See “Description of Notes—Conversion Rights.” If one or more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
+Added: In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
+Added: The Capped Calls may affect the value of the Convertible Notes and our Class A common stock.
+Added: In connection with the pricing of the 2026 Convertible Notes and the 2028 Convertible Notes, we entered into privately negotiated Capped Calls with certain financial institutions (the “option counterparties”).
+Added: The Capped Calls are expected generally to reduce the potential dilution upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.
+Added: We have been advised that, in connection with establishing their initial hedges of the Capped Calls, the option counterparties or their respective affiliates entered into various derivative transactions with respect to our Class A common stock concurrently with or shortly after the pricing of the Convertible Notes.
+Added: In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions from time to time prior to the maturity of the Convertible Notes (and are likely to do so during any observation period related to a conversion of Convertible Notes).
+Added: This activity could also cause or avoid an increase or a decrease in the market price of our Class A common stock or the Convertible Notes, which could affect your ability to convert the Convertible Notes and, to the extent the activity occurs during any observation period related to a conversion of Convertible Notes, it could affect the number of shares and value of the consideration that you will receive upon conversion of such Convertible Notes.
+Added: We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of the Convertible Notes or our Class A common stock.
+Added: In addition, we do not make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
+Added: We are subject to counterparty risk with respect to the Capped Calls.
+Added: The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the Capped Calls.
+Added: Our exposure to the credit risk of the option counterparties will not be secured by any collateral.
+Added: Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions.
+Added: If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transactions with such option counterparty.
+Added: Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our Class A common stock.
+Added: In addition, upon a default by an option counterparty, we may suffer more dilution than we currently anticipate with respect to our Class A common stock.
+Added: We can provide no assurances as to the financial stability or viability of the option counterparties.
Risks Related to Ownership of Our Class A Common Stock
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On November 10, 2017, we sold shares of our Class A common stock to the public at $20.00 per share.
−Removed: From November 10, 2017, the date that our Class A common stock began trading on the NASDAQ Global Select Market, through February 19, 2021, the trading price of our Class A common stock has ranged from $18.05 per share to $198.61 per share.
+Added: From November 10, 2017, the date that our Class A common stock began trading on the NASDAQ Global Select Market, through December 31, 2021, the trading price of our Class A common stock has ranged from $18.05 per share to $198.61 per share.
The trading price of our Class A common stock may continue to be volatile and could fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
−Removed: • general market volatility caused by COVID-19;
+Added: • general market volatility caused by COVID-19, acts of war, or other significant domestic or international events;
• price and volume fluctuations in the overall stock market from time to time;
25 unchanged sentences
Certain holders of our Class A common stock have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for our stockholders or ourselves.
−Removed: The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial public offering, including our directors, executive officers and significant stockholders and their respective affiliates who held in the aggregate 51.5% of the voting power of our capital as of December 31, 2020.
−Removed: This limits or precludes your ability to influence corporate matters, including
−Removed: the election of directors, amendments to our organizational documents and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
+Added: The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial public offering.
+Added: This may limit or preclude stockholders’ ability to influence corporate matters, including the election of directors, amendments to our organizational documents and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
Our Class A common stock has one vote per share, and our Class B common stock has ten votes per share.
−Removed: As of December 31, 2020 , our directors, executive officers and holders of more than 5% of our common stock, and their respective affiliates, hold in the aggregate 51.5% of the voting power of our capital stock.
Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval.
−Removed: This concentrated control limits or precludes your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments to our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
−Removed: In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in your best interest as one of our stockholders.
+Added: This concentrated control limits or precludes stockholders’ ability to influence corporate matters for the foreseeable future, including the election of directors, amendments to our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
+Added: In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that stockholders may feel are in their best interest as one of our stockholders.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes.
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Morken, our Co-Founder and Chief Executive Officer, whose interests may differ from other stockholders.
−Removed: If all or substantially all of the holders of our Class B common stock convert their shares into Class A common stock voluntarily or otherwise, Mr.
−Removed: Morken may control approximately 36.0% of the combined voting power of our outstanding capital stock.
+Added: If all or substantially all of the holders of our Class B common stock except for Mr.
+Added: Morken and his affiliates convert their shares into Class A common stock voluntarily or otherwise, Mr.
+Added: Morken may control more than 25% of the combined voting power of our outstanding capital stock.
As a result, Mr.
Morken may have the ability to effectively control the appointment of our management, the entering into of mergers, sales of substantially all or all of our assets and other extraordinary transactions and influence amendments to our certificate of incorporation and bylaws.
−Removed: Morken obtains control of a majority of the voting power of our outstanding capital stock, he would have the ability to control the vote in any election of directors and would have the ability to prevent any transaction that requires stockholder approval regardless of whether other stockholders believe the transaction is in our best interests.
In any of these matters, the interests of Mr.
Morken may differ from or conflict with your interests.
−Removed: Moreover, this concentration of ownership may also adversely affect the trading price for our Class A common stock to the extent investors perceive disadvantages in owning stock of a company with a controlling stockholder.
+Added: Moreover, this concentration of ownership may also adversely affect the trading price for our Class A
+Added: common stock to the extent investors perceive disadvantages in owning stock of a company with a controlling stockholder.
If securities or industry analysts cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our Class A common stock adversely, the trading price of our Class A common stock and trading volume could decline.
The trading market for our Class A common stock is influenced 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 may cover
−Removed: us change their recommendation regarding our Class A common stock in an adverse manner, or provide more favorable recommendations about our competitors relative to us, the trading price of our Class A common stock would likely decline.
+Added: If any of the analysts who may cover us change their recommendation regarding our Class A common stock in an adverse manner, or provide more favorable recommendations about our competitors relative to us, the trading price of our Class A common stock would likely decline.
If any analyst who covers us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price of our Class A common stock or trading volume to decline.
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These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
−Removed: As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding common stock not held by such 15% or greater stockholder.
+Added: As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents certain stockholders holding more than 15% of our outstanding
+Added: common stock from engaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding common stock not held by such 15% or greater stockholder.
Any provision of our second amended and restated certificate of incorporation, second amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock and could also affect the price that some investors are willing to pay for our Class A common stock.
3 unchanged sentences
If all or substantially all of the holders of our Class B common stock convert their shares into Class A common stock voluntarily or otherwise, Mr.
−Removed: Morken may control the majority of the voting power of our outstanding capital stock, and therefore he may have the ability to prevent any such changes, which will limit your ability to influence corporate matters.
+Added: Morken may control the majority of the voting power of our outstanding capital stock, and therefore he may have the ability to prevent any such changes, which will limit a stockholder’s ability to influence corporate matters.
Our second amended and restated bylaws provide, subject to certain exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
11 unchanged sentences
The additional capital we may seek may not be available on favorable terms or at all.
−Removed: In addition, our credit facility limits our ability to incur additional indebtedness under certain circumstances.
If we are unable to obtain capital on favorable terms or at all, we may have to reduce our operations or forego opportunities, and this may have a material adverse effect on our business, financial condition and results of operations.
3 unchanged sentences
Any determination to pay dividends in the future will be at the discretion of our board of directors.
−Removed: In addition, the terms of our credit facility contain restrictions on our ability to declare and pay cash dividends on our capital stock.
Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
2 unchanged sentences
In addition, shares of our Class A common stock that we issue in connection with an acquisition may not be subject to resale restrictions.
−Removed: The market price of our Class A common stock could drop
−Removed: significantly if certain large holders of our Class A common stock, or recipients of our Class A common stock in connection with an acquisition, sell all or a significant portion of their shares of Class A common stock or are perceived by the market as intending to sell these shares other than in an orderly manner.
+Added: The market price of our Class A common stock could drop significantly if certain large holders of our Class A common stock, or recipients of our Class A common stock in connection with an acquisition, sell all or a significant portion of their shares of Class A common stock or are perceived by the market as intending to sell these shares other than in an orderly manner.
In addition, these sales could impair our ability to raise capital through the sale of additional Class A common stock in the capital markets.
−Removed: Risks Related to the Convertible Notes and Our Indebtedness
−Removed: Servicing our future indebtedness may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.
−Removed: Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the Convertible Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
−Removed: Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures.
−Removed: If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive.
−Removed: Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.
−Removed: We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
−Removed: In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives.
−Removed: Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our indebtedness.
−Removed: Our credit facility may limit our ability to pay any cash amount upon the conversion or repurchase of the Convertible Notes.
−Removed: Our credit facility with KeyBank National Association and Pacific Western Bank prohibits us from making any cash payments on the conversion or repurchase of the Convertible Notes if, after giving effect to such conversion or repurchase (and any additional indebtedness incurred in connection with such conversion or a repurchase), we would not be in pro forma compliance with our financial covenants under the Credit Facility.
−Removed: Any new credit facility that we may enter into may have similar restrictions.
−Removed: Our failure to make cash payments upon the conversion or repurchase of the Convertible Notes as required under the terms of the Convertible Notes would permit holders of the Convertible Notes to accelerate our obligations under the Convertible Notes.
−Removed: In addition, our credit facility contains, and any future indebtedness that we may incur may contain, financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness.
−Removed: If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that indebtedness becoming immediately payable in full.
−Removed: We may incur substantially more debt or take other actions which would intensify the risks discussed above.
−Removed: We and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt.
−Removed: We will not be restricted under the terms of the indenture governing the Convertible Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the Convertible Notes that could have the effect of diminishing our ability to make payments on the Convertible Notes when due.
−Removed: Our Credit Facility restricts our ability to incur additional indebtedness, including secured indebtedness, but if the facility matures or is repaid, we may not be subject to such restrictions under the terms of any subsequent indebtedness.
−Removed: We may not have the ability to raise the funds necessary for cash settlement upon conversion of the Convertible Notes or to repurchase the Convertible Notes for cash following a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion of the Convertible Notes or to repurchase the Convertible Notes.
−Removed: Subject to limited exceptions, holders of the Convertible Notes have the right to require us to repurchase their Convertible Notes upon the occurrence of a fundamental change at a cash repurchase price generally equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.
−Removed: In addition, upon conversion of the Convertible Notes, unless we elect to deliver solely shares of our Class A common stock to settle such conversion (other than paying cash in lieu of delivering any
−Removed: fractional share), we will be required to make cash payments in respect of the Convertible Notes being converted.
−Removed: However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Convertible Notes surrendered therefor or pay the cash amounts due upon conversion.
−Removed: In addition, our ability to repurchase the Convertible Notes or to pay cash upon conversions of the Convertible Notes may be limited by applicable law, by regulatory authorities or by agreements governing our future indebtedness.
−Removed: Our failure to repurchase the Convertible Notes at a time when such repurchase is required by the indenture governing the Convertible Notes or to pay the cash amounts due upon future conversions of the Convertible Notes as required by such indenture would constitute a default under such indenture.
−Removed: A default under the indenture or the fundamental change itself may also lead to a default under agreements governing our existing or future indebtedness, which may result in such existing or future indebtedness becoming immediately payable in full.
−Removed: We may not have sufficient funds to satisfy all amounts due under such existing or future indebtedness and repurchase the Convertible Notes or make cash payments upon conversions thereof.
−Removed: The triggering of the conditional conversion feature of the Convertible Notes may adversely affect our financial condition and operating results.
−Removed: In the event the conditional conversion feature of the Convertible Notes is triggered, holders of the Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their option.
−Removed: If one or more holders elect to convert their Convertible Notes during a period in which the Convertible Notes are convertible, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
−Removed: In addition, even if holders do not elect to convert their Convertible Notes, under certain circumstances, such as a fundamental change or event of default, as described in the indenture, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
−Removed: The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Notes, could have a material effect on our reported financial results.
−Removed: Under Financial Accounting Standards Board Accounting Standards Codification 470‑20, Debt with Conversion and Other Options, which we refer to as ASC 470‑20, an entity must separately account for the liability and equity components of convertible debt instruments (such as the Convertible Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.
−Removed: ASC 470-20 requires the value of the conversion option of the Convertible Notes, representing the equity component, to be recorded as additional paid-in capital within stockholders’ equity in our consolidated balance sheet and as a discount to the debt component of the Convertible Notes, which reduces their initial debt carrying value reflected as a liability on our balance sheets.
−Removed: The carrying value of the debt component of the Convertible Notes, net of the discount recorded, will be accreted up to the principal amount of the Convertible Notes from the issuance date until maturity, which will result in non-cash charges to interest expense in our consolidated statement of operations.
−Removed: Accordingly, we will report lower net income or higher net loss in our financial results because ASC 470‑20 requires interest to include both the current period’s accretion of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results, the trading price of our Class A common stock and the trading price of the Convertible Notes.
−Removed: In addition, under certain circumstances, convertible debt instruments (such as the Convertible Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Convertible Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Convertible Notes exceeds their principal amount.
−Removed: Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of Class A common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued.
−Removed: We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method.
−Removed: If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Convertible Notes, then our diluted earnings per share would be adversely affected in periods when we report net income.
−Removed: The capped call transactions may affect the value of the Convertible Notes and our Class A common stock.
−Removed: In connection with the pricing of the Convertible Notes, we entered into privately negotiated capped call transactions (the “Capped Calls”) with certain financial institutions (the “Option Counterparties”).
−Removed: The Capped Calls are expected generally to reduce the potential dilution to our Class A common stock upon any conversion of the Convertible Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.
−Removed: We have been advised that in connection with establishing their initial hedges of the Capped Calls, the Option Counterparties or their respective affiliates entered into various derivative transactions with respect to our Class A common stock and/or purchased shares of our Class A common stock concurrently with or shortly after the pricing of the Convertible Notes.
−Removed: In addition, we have been advised that the Option Counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions at any time prior to the maturity of the Convertible Notes (and are likely to do so during any observation period related to a conversion of Convertible Notes).
−Removed: This activity could cause or avoid an increase or a decrease in the market price of our Class A common stock.
−Removed: We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of the Convertible Notes or our Class A common stock.
−Removed: In addition, we do not make any representation that the Option Counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
−Removed: We are subject to counterparty risk with respect to the Capped Calls.
−Removed: The Option Counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the Capped Calls.
−Removed: Our exposure to the credit risk of the Option Counterparties will not be secured by any collateral.
−Removed: Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions.
−Removed: If an Option Counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the Capped Calls with such Option Counterparty.
−Removed: Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our Class A common stock.
−Removed: In addition, upon a default by an Option Counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our Class A common stock.
−Removed: We can provide no assurances as to the financial stability or viability of the Option Counterparties.
Unresolved Staff Comments
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.