What changed in this filing

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Item 1A. Risk Factors

2023-04-24 compared with 2022-10-25 · 86 added, 93 removed, 409 unchanged (30% of the section changed)

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Business and Operational Risks

We have risks associated with being materially dependent upon third-party vendors;

We face risks associated with being materially dependent upon third-party vendors;

certain factors that affect our business as a result of those dependencies have in the past and could continue to disrupt our business and adversely impact our gross margin and results of operations.

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If any of these vendors stop providing their services, for any reason, we would have to obtain similar services from other sources, which may not be available on commercially reasonable terms, if at all.

We also have limited control over disruptions that may occur at the facilities of those providers, such as supply interruptions, labor shortages, strikes, shipping backlogs at ports and similar disruptions to transportation infrastructure, design and manufacturing failures, quality control issues, systems failures or even facility closures arising from the COVID-19 pandemic or natural disasters.

In addition, switching development firms or manufacturers could delay the manufacture and availability of products and/or require us to re-qualify our products with our customers, which would be costly and time-consuming.

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Our dependence solely on third-party manufacturers makes us vulnerable to possible supply and capacity constraints and reduces our control over manufacturing disruptions due to component availability, extended lead times delivery schedules, quality, manufacturing yields and increased costs.

Some of these risks have occurred from time to time in our business, including recent unforeseen increases in component costs.

Some of these risks have occurred from time to time in our business, including recent increases in component costs.

If these disruptions and constraints are prolonged, or if these manufacturers do not have the ability or business continuity plans to fulfill their obligations to us, our business could be disrupted.

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Our international manufacturing also creates risks and uncertainties associated with regulatory changes or government actions such as local business requirements, trade restrictions and tariffs, economic sanctions or related legislation, which may complicate our export and import activities, be disruptive to the operations of our manufacturers and logistics partners or result in higher product and shipping costs and variability of supply.

For example, substantially all our silicon suppliers have extended their lead times to 52 weeks or more and increased prices.

Manufacturing in Asia

further heightens our risk of meeting customer delivery requirements as we rely upon third-party logistics companies to transport and import significant volumes of products to the U.S.

For example, in 2022, substantially all our silicon suppliers had extended their lead times to 52 weeks and increased prices.

Prices remain

however, many silicon suppliers have reduced their lead-times by 10 weeks or more.

Manufacturing in Asia further heightens our risk of meeting customer delivery requirements as we rely upon third-party logistics companies to transport and import significant volumes of products to the U.S.

where we generate a substantial majority of our revenue.

These supply chain risks are further increased by periodic shipping backlogs at ports and similar disruptions to transportation infrastructure due to a growing surge in global demand for goods.

These supply chain risks are further increased by periodic shipping backlogs at ports and similar disruptions to transportation infrastructure.

• Limited sources and sole-sourced supply.

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Any of these suppliers could stop producing our components, raise the prices they charge us, be subject to higher product tariffs, epidemics or other conditions that disrupt their operations, cease operations or enter into exclusive arrangements with our competitors, consequently affecting our operations and results.

For example, we have experienced disruptions in our supply of certain components that we source from suppliers in China and other Asian countries as a result of the effects of the COVID-19 pandemic, causing delays in supply of our products due to production disruptions, factory closures and longer lead times for components and from uncertainty around trade and tariff policies between the U.S.

For example, we have experienced disruptions in our supply of certain components that we source from suppliers in China and other Asian countries, causing delays in supply of our products due to production disruptions, factory closures and longer lead times for components and from uncertainty around trade and tariff policies between the U.S.

Being dependent upon a limited number of suppliers constrains our ability to mitigate these disruptions in our supply chain and such disruptions, particularly if prolonged.

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• Limitations on ability to manage third-party risks.

Our business with third-party manufacturers typically represents a relatively small percentage of their total revenue.

Our business with certain third-party manufacturers may represent a relatively small percentage of their revenue.

Consequently, our orders may not be given adequate priority if such manufacturers have to allocate limited capacity among competing customers.

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• Ability to forecast and manage inventory liability with vendors.

We have experienced unanticipated increases in demand from customers, in part as a result of higher consumer demand for internet services and improved Wi-Fi due to COVID-19;

We have experienced increases in demand from many customers, in part as a result of higher consumer demand for internet services and improved Wi-Fi;

in turn, this has resulted in our shipments being delayed.

If we underestimate product demand from our customers, our manufacturers may have inadequate component inventory to meet our demand.

If we are not able to adequately anticipate demand, this could interrupt our product manufacturing, increase our cost of product revenue associated with expedite fees and air freight and/or result in delays or cancellation of customer orders.

If we are not able to adequately anticipate demand, this could interrupt our product manufacturing, increase our cost of revenue associated with expedite fees and air freight and/or result in delays or cancellation of customer orders.

If we are unable to deliver products timely to our customers, we may lose customer goodwill or our customers may choose to purchase from other vendors, all of which may have a material negative impact on our revenue and operating results.

If we overestimate our product demand, our third-party manufacturers may purchase excess components and build excess inventory, and we could be required to pay for these excess parts or products and their storage costs.

Long lead times for component supply, which have been magnified by factory closures and shortages due to the COVID-19 pandemic as well as higher demand for certain components, and unanticipated demand for our products have in the past and are expected to continue to impact our ability to accurately forecast our production requirements.

Long lead times for component supply, which have been magnified by factory closures and shortages due to the COVID-19 pandemic as well as higher demand for certain components, and demand for our products have in the past and are expected to continue to impact our ability to accurately forecast our production requirements.

We may incur liabilities for certain component inventory purchases that have been rendered excess or obsolete, which may have an adverse effect on our gross margin, financial condition and results of operations.

Security breaches and data loss may expose us to liability, harm our reputation and adversely affect our business.

As part of our business operations, we collect, store, process, use and/or disclose sensitive data relating to our business, including in connection with the provision of our cloud services and in our information systems and data centers (including

third-party data centers).

We also engage third-party providers to support various internal functions, such as human resources, finance, information technology and electronic communications, as well as the development and delivery of our products and cloud services, which includes collecting, handling, processing and/or storage of data on our behalf.

These internal and external functions involve an array of software and systems (including cloud-based) that enable us to conduct, monitor and/or protect our business, operations, systems and IT assets.

Our cloud-based solutions enable us to host our customers’ subscriber data in third-party data centers.

While we and our third-party providers apply multiple layers of security to prevent unauthorized access to, use, alteration or disclosure of data, including encryption and authentication technologies, these security measures may be compromised by malicious hackers.

Hackers could steal proprietary or personal information related to our business, products, employees and customers;

Hackers could steal proprietary or personal information related to our business, products, employees and customers, including information related to customers of our customers;

hold data ransom;

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Even if we and our third-party providers allocate, implement and manage reasonable security and data protection measures, we could experience data loss, unauthorized data disclosure or a breach of our systems, products or those of our third-party data centers that materially impact our business.

The continued growth of our cloud-based platforms and services portfolio and increased reliance on third-party development partners and third-party software and cloud-based solutions, increases the likely risks arising from security breaches or data loss.

Any data loss or compromise of our systems that collect and process personal information, or third-party data centers where that personal information is stored, could result in loss of confidence in the security of our offerings and loss of customers or customer goodwill.

The continued growth of our cloud-based platform and managed services portfolio and increased reliance on third-party development partners and third-party software and cloud-based solutions, increases the likely risks arising from security breaches or data loss.

Any data loss or compromise of our systems that collect and process personal information (including personal information of customers of our customers), or third-party data centers where that personal information is stored, could result in loss of confidence in the security of our offerings and loss of customers or customer goodwill.

Such losses also could damage our reputation, lead to liability given the increasing development of strict privacy and data security laws and regulations around the world, and adversely affect our business, financial condition, operating results and cash flows.

Although we maintain insurance that may apply to cybersecurity risks and liabilities, there can be no guarantee that any or all costs or losses incurred will be partially or fully insured.

If we do not successfully increase our sales through adoption of our new platform and managed service offerings, our operating results, financial condition, cash flows and long-term growth may be negatively impacted.

We have platform and managed service offerings that are new and early in their life cycles and subject to uncertain market demand.

If our customers are unwilling to adopt these new offerings, install our new products or deploy our new services, or if we are unable to achieve market acceptance of our products and platform, our business and financial results may be harmed.

Moreover, adoption of our cloud product offerings, such as our Revenue EDGE, is dependent upon the success of our customers in investing, marketing, selling and deploying broader services—including managed services—to their subscribers, and our ability to differentiate our products from competing or substitutive product and service offerings.

For example, our managed services include managed Wi-Fi, network security, parental controls and an ecosystem of services from partners including Arlo, Bark and Servify.

However, if subscriber demand for such services does not grow as expected or declines, or our customers are unable or unwilling to invest in our platform to deploy and market these services, demand for our products may not grow at rates as we anticipate.

Changing market and customer requirements may adversely affect the valuation of our inventory as well as our supplier purchase commitments.

Customer demand for our products can change rapidly in response to market and technology developments.

We may, from time to time, adjust inventory valuations downward or end of life certain of our products in response to our assessment of our business strategy as well as consideration of demand from our customers for specific products or product lines.

We also periodically evaluate our supplier purchase commitments, which have increased significantly due to extended lead-times in the current supply-chain environment.

We record a liability for excess and obsolete components based on our estimated future demand for our products, potential obsolescence of technology and product life cycles.

If we fail to accurately plan our inventory levels, which becomes more challenging as component lead times increase, we may have to write off excess or obsolete inventory, or accrue a liability for component inventory held by our suppliers, both of which could have a material adverse effect on our financial condition and results of operations.

Business and operational risks associated with expanding our international operations could harm our business.

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and differences in local business practices and customs that may not align with our expectations and standards.

Along with the foregoing risks, our international sales operations involve risks associated with greater costs and complexity localizing and supporting our products and platforms in local markets;

Along with the foregoing risks, our international sales operations involve risks associated with greater costs and complexity localizing and supporting our products and platform in local markets;

evolving privacy regulations, trade regulations, compliance requirements and incremental costs applicable to the qualification, production, sale and delivery of our products;

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If we do not successfully execute our business strategy to increase our sales to new and existing BSPs, our operating results, financial condition, cash flows and long-term growth may be negatively impacted.

Our growth depends upon our ability to increase sales to existing and new BSP customers of all types and sizes, and the execution of our strategy to increase sales to BSPs involves significant risk.

Our growth depends upon our ability to increase sales to existing and new service providers of all types and sizes, and the execution of our strategy to increase sales to BSPs involves significant risk.

The majority of our revenue is not recurring, and our customers generally have no committed purchase requirements, may cancel orders or cease purchasing our products at any time.

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As a result, our failure to maintain high quality support and services could result in the loss of customers, which would harm our business.

If we do not successfully increase our sales through adoption of our new platform offerings, our operating results, financial condition, cash flows and long-term growth may be negatively impacted.

We have platform offerings that are new and early in their life cycles and subject to uncertain market demand.

If our customers are unwilling to adopt these new offerings, install our new products or deploy our new services, or if we are unable to achieve market acceptance of our products and platforms, our business and financial results may be harmed.

Moreover, adoption of our cloud product offerings, such as our Revenue EDGE, is dependent upon the success of our customers in investing, marketing, selling and deploying broader services—including ancillary services—to their subscribers, and our ability to differentiate our products from competing or substitutive product and service offerings.

For example, our Revenue EDGE Suites include network security, parental controls and a growing ecosystem of services from partners like Arlo, Bark and Servify.

However, if subscriber demand for such services does not grow as expected or declines, or our customers are unable or unwilling to invest in our platforms to deploy and market these services, demand for our products may not grow as we anticipate.

We may have difficulty evolving and scaling our business and operations to meet customer and market demand, which could result in lower profitability or cause us to fail to execute on our business strategies.

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If we cannot evolve and scale our business and operations effectively, we may not be able to execute our business strategies in a cost-effective manner and our business, financial condition, profitability and results of operations could be adversely affected.

Changing market and customer requirements may adversely affect the valuation of our inventory as well as our supplier purchase commitments.

Customer demand for our products can change rapidly in response to market and technology developments.

periodically evaluate our supplier purchase commitments, which have increased significantly due to extended lead-times in the current supply chain environment.

We record a liability for excess and obsolete components based on our estimated future demand for our products, potential obsolescence of technology and product life cycles.

Our business and results of operations have been, and may continue to be, negatively affected by the on-going effects of the COVID-19 pandemic and related severe impacts on the global economy.

For over two years the COVID-19 pandemic has severely impacted the global economy, disrupting financial markets, global manufacturing activities, customer purchasing patterns and general business operations, resulting in business closures, significant unemployment rates and substantial and prolonged government restrictions on business, travel and personal activities.

These measures have disrupted our global supply chain activities, including our third-party manufacturers, logistics providers and suppliers, and significantly limited our business travel, customer engagements and normal business activities, all of which heighten our business and operational risks.

Although global economic conditions have generally improved with the rollout of COVID-19 vaccines, business activity may not recover as quickly as anticipated, including as a result of inflationary pressures and the responses by central banking authorities to control such inflation, rising interest rates, debt and equity market fluctuations, diminished liquidity and credit availability, increased unemployment rates, decreased investor and consumer confidence, political turmoil, and supply chain challenges.

As the effects of the pandemic persist, we may continue to experience a sustained shortage of components and materials, which may have a material negative impact on our ability to supply products to meet customer requirements and could materially adversely affect our business and results of operations.

Although demand for our products has been strong in the short-term as subscribers seek more bandwidth and better Wi-Fi at home for work and entertainment, as the pandemic appears to be subsiding, the future of broadband expansion is unclear.

For example, BSPs may not invest in our new platforms or delay infrastructure improvements due to the uncertainty in the global economy.

A prolonged disruption to our business and operations and other adverse residual impacts of the COVID-19 pandemic or further future disruptions could have a material adverse effect on our business, results of operations and financial condition.

With the increased availability of vaccines in the U.S., we reopened our offices in July 2021 for fully-vaccinated employees who choose to work at the office and resumed business travel with safety precautions.

We continue to monitor evolving pandemic conditions and focus on the safety, well-being and productivity of our workforce.

The rapid emergence and subsidence of multiple COVID-19 variants and sub-variants suggest that effects of current and potential future COVID-19 variants on our business will continue to make planning responses to new outbreaks an on-going challenge.

There are no assurances that the global economy will recover from the on-going effects of the pandemic quickly or at all, or that impacted areas will be able to adequately contain COVID-19 infections.

Our business and results of operations have been, and may continue to be, negatively affected by the COVID-19 pandemic and related impacts on the global economy and supply chain, and the demand for broadband products may not be sustained.

The COVID-19 pandemic and the resulting containment measures caused economic, financial and supply chain disruptions globally, including in most regions in which we sell our products and services and conduct our business operations.

Although COVID-19 related containment measures have generally subsided, we continue to manage through sustained shortages of components and materials, including extended lead times and higher supply chain costs, which may have a material negative impact on our ability to supply products to meet customer requirements and could materially adversely affect our business and results of operations.

Although demand for our products has been strong as subscribers sought more bandwidth and better Wi-Fi at home for work and entertainment, there are no assurances that the demand for our products will remain strong.

For example, BSPs may not invest in our platform or delay infrastructure improvements due to the resulting uncertainty in the global economy.

To the extent we experience a renewed or worsening disruption to our business and operations and other adverse residual impacts of a pandemic or further future disruptions, it could have a material adverse effect on our business, results of operations and financial condition.

We could become subject to litigation that could harm our business or negatively impact our results of operations.

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Protracted litigation could cause us to incur significant defense costs, which would negatively impact our results of operations.

We have a history of losses and fluctuations in our gross margin and operating results, which make it difficult to predict our future performance and could cause the market price of our stock to decline.

We have a history of net operating losses and fluctuations in our quarterly and annual gross margin and operating results, including losses and fluctuations due to factors outside of our control.

Factors that impact variability of our operating results include our ability to predict our revenue and reduce and control our costs, our ability to predict product functions and features desired by our customers, the impact of global economic conditions, our ability to effectively manage our global supply chain operations, our ability to effectively manage third parties upon whom we depend to conduct our business, our customers’ spending patterns and purchasing decisions, the impact of competition, customer adoption of our products, our ability to manage our legal, contractual and regulatory obligations and liabilities, and other risk factors identified in the lead-in to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” above and in this “Risk Factors” section.

We have a history of fluctuations in our gross margin and operating results, which can make it difficult to predict our future performance and could cause the market price of our stock to decline.

We have a history of fluctuations in our quarterly and annual gross margin and operating results, including fluctuations due to factors outside of our control.

of Financial Condition and Results of Operations” above and in this “Risk Factors” section.

Our gross margin is further impacted by customer, geographic and product mix, the impact of competition on our prices, our ability to manage our costs associated with components and materials, excess and obsolescence, expedite fees and logistics-related activities, contractual commitments and other product costs.

Fluctuating results make it difficult to predict our future performance and could cause the market price of our stock to decline.

We expect to continue to incur significant expenses and cash outlays as we expand our business and operations and target new customer opportunities.

We expect to continue to incur significant expenses and cash outlays in connection with our anticipated growth as we expand our business and operations and target new customer opportunities.

Given our anticipated growth and the intense competitive pressures we face, we may be unable to adequately control our operating expenses or maintain positive operating income.

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If our revenue or operating results fall below the expectations of investors or securities analysts, or below any guidance we may provide to the market, the market price of our stock would likely decline.

We cannot guarantee that we will achieve sustained profitability.

We will have to generate and sustain significant and consistent increased revenue, while continuing to control our expenses, to maintain profitability.

If we are unable to sustain our operating income and positive cash flows from operations, our liquidity, results of operations and financial condition will be adversely affected, and we may be forced to limit our development activities, reduce our investment in growth initiatives and institute cost-cutting measures, any of which would adversely impact our business and growth.

We are exposed to customer credit risks that could adversely affect our operating results and financial condition.

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Furthermore, some of our international customers operate in countries with developing economies, volatile financial markets or currency regulations that impact their ability to make payments in U.S.

The COVID-19 pandemic has also presented financial challenges to numerous businesses, including delays in collections from some of our international customers in emerging markets and, if prolonged, may result in liquidity issues leading to heightened difficulties with collections.

While we take measures to pursue collections on our accounts receivable, we have from time to time written down accounts receivable and written off doubtful accounts and may need to do so in future periods.

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Our success depends, in large part, on the continued contributions of our key personnel who are highly skilled and would be difficult to replace.

Competition for skilled personnel, particularly in software development and engineering, is intense.

Competition for skilled personnel, particularly in software and cloud development and engineering, is intense.

We cannot be certain that we will be successful in attracting and retaining qualified personnel, or that newly hired personnel will function effectively, both individually and as a group.

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In January 2020, we migrated our Oracle enterprise resource planning, or ERP, system to Oracle’s cloud platform.

With that migration, we are highly dependent upon Oracle to host, manage and maintain our ERP system.

In 2022, we implemented a software billing application on Salesforce.com.

With these implementations, we are highly dependent upon Oracle and Saleforce.com to host, manage and maintain our ERP system and supporting applications.

Any disruptions to their business or processes, or delays in their ability to provide services to us, may in turn disrupt our business operations or increase costs.

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We cannot be certain that the actions we have taken to implement internal controls over financial reporting will be sufficient.

We have in the past discovered, and may in the future discover, areas of our internal financial and accounting controls and procedures that need improvement, particularly as we enhance, automate and improve functionality of our processes and internal applications, including Oracle’s cloud platform.

New laws and regulations as well as changes to existing laws and regulations affecting public companies, including the provisions of SOX and Dodd-Frank and rules adopted by the SEC and the NYSE, would likely result in increased costs to us as we respond to their requirements.

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Our products are highly technical and may contain undetected hardware or software defects or software bugs, which could harm our reputation and adversely affect our business.

Our products, including our cloud and software platforms and systems, are highly technical and, when deployed, are critical to the operation of many networks.

Our products, including our platform (cloud, software and systems) and managed services, are highly technical and, when deployed, are critical to the operation of many networks.

Our products have contained and may contain undetected defects, bugs or security vulnerabilities, which risks may be exacerbated as we continue to expand our cloud and software portfolio and include services from third-party partners.

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Adverse global economic, market and industry conditions, geopolitical issues and other conditions that impact our increasingly global operations could have a negative effect on our business, results of operations and financial condition and liquidity.

As a global company, our performance is affected by global economic, market and industry conditions (including the current inflationary economic environment and rising interest rates) as well as geopolitical issues and other conditions with global reach.

As a global company, our performance is affected by global economic, market and industry conditions (including the current inflationary economic environment, rising interest rates and disruptions related to the banking industry) as well as geopolitical issues and other conditions with global reach.

In recent years, concerns about the global economic outlook have adversely affected market and business conditions in general.

Macroeconomic weakness and uncertainty make it more difficult for us to manage our operations and accurately forecast revenue, gross margin and expenses.

Geopolitical issues, such as the Russian invasion of Ukraine, ongoing conflicts between the United States and China, tariff and trade policy changes, increasing potential of conflict involving countries in Asia that are critical to our supply chain operations, such as Taiwan and China, have resulted in increasing global tensions and create uncertainty for global commerce.

In particular, we incurred substantial costs and diversion of resources realigning our supply chain operations to move substantially all of our product manufacturing to locations outside of China as a result of U.S.

tariff and trade policy changes.

Macroeconomic weakness and uncertainty make it more difficult for us to manage our operations and accurately forecast revenue, gross margin and operating expenses.

Further, adverse developments that affect financial institutions, transactional counterparties, or other third parties, or concerns or rumors about these events, have led to market-wide liquidity problems.

We have no borrowing or deposit exposure to directly impacted institutions and have not experienced an adverse impact to our liquidity or to our business operations, financial condition, or results of operations as a result of these recent events.

However, uncertainty may remain over liquidity concerns in the broader financial services industry, and there may be unpredictable impacts to our business and our industry.

Geopolitical issues, such as the Russian invasion of Ukraine, relations between the United States and China, tariff and trade policy changes, and increasing potential of conflict involving countries in Asia that are critical to our supply-chain operations, such as Taiwan and China, have resulted in increasing global tensions and create uncertainty for global commerce.

The on-going global impact of the COVID-19 pandemic continues to create shortages in component and supplies and otherwise disrupt and delay our global supply-chain operations.

Moreover, shipping backlogs and similar disruptions to transportation infrastructure due to an increasing surge in the global demand for goods has exacerbated supply chain challenges.

In addition, historically high rising interest rates in the United States have begun to affect businesses across many industries, including ours, by increasing the costs of labor, employee healthcare, components, and freight and shipping, which may further constrain our customers’ or prospective customers’ budgets.

To the extent there is a sustained general economic downturn, and our platforms and services are perceived by customers or potential customers as costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in spending.

In addition, rising inflation in the United States has affected businesses across many industries, including ours, by increasing the costs of labor, employee healthcare, components and freight and shipping, which may further constrain our customers’ or prospective customers’ budgets.

To the extent there is a sustained general economic downturn, and our platform and services are perceived by customers or potential customers as costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in spending.

Sustained or worsening of global economic conditions and geopolitical issues may increase our cost of doing business, materially disrupt our supply chain operations, cause our customers to reduce or delay spending and intensify pricing pressures.

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BSP acceptance and adoption of our products and solutions;

our ability to differentiate our products from our competitors’ offerings based on performance, features, cost-effectiveness or other factors;

our ability to differentiate our products from our competitors’ offerings

based on performance, features, cost-effectiveness or other factors;

our product capabilities to meet customer network requirements and preferences;

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Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier, regardless of product performance or features, because the products that we and our competitors offer require a substantial investment of time and funds to qualify and install.

The demand on network capacity due to the shift towards a remote workforce may attract new market entrants with competitive or substitutive products, which may lead to increased sales cycles, cause pricing pressure and impact adoption of our platforms due to the broader availability of product offerings.

The demand on network capacity due to the shift towards a remote workforce may attract new market entrants with competitive or substitutive products, which may lead to increased sales cycles, cause pricing pressure and impact adoption of our platform due to the broader availability of product offerings.

Some of our competitors may offer substantial discounts or rebates to win or retain customers.

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Our industry is characterized by rapid technological advance, and if we fail to develop new products or enhancements that meet changing BSP requirements, we could experience lower sales.

Our industry is characterized by rapid technological change, changing needs of BSPs, evolving industry standards and frequent introductions of new products and platforms.

Our industry is characterized by rapid technological change, changing needs of BSPs, evolving industry standards and frequent introductions of new products and platform offerings.

We invest significant amounts to pursue innovative technologies that we believe will be adopted by BSPs.

For example, we have invested and continue to invest resources in our cloud and software platforms.

For example, we have invested and continue to invest resources in our platform offerings.

In addition, on an ongoing basis, we expect to reposition our product and service offerings and introduce new offerings as we encounter rapidly changing BSP requirements and increasing competitive pressures.

If we cannot increase sales of our new platforms and services, keep pace with rapid technological developments to meet customer needs and compete with evolving standards or if the technologies we choose to invest in fail to meet customer needs or are not adopted by customers in the timeframes that we expect, our financial condition and results of operations would be adversely affected.

If we cannot increase sales of our new platform and services, keep pace with rapid technological developments to meet customer needs and compete with evolving standards or if the technologies we choose to invest in fail to meet customer needs or are not adopted by customers in the timeframes that we expect, our financial condition and results of operations would be adversely affected.

Developing our products is complex and involves uncertainties, including pricing risks for key materials, component shortages and limited suppliers.

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If we fail to maintain compatibility requirements in our customers’ networks, demand for our products would decline, which would reduce our revenue opportunities and market share.

We use third-party development partners both for key skills and to augment our employee developers.

Using third-party development partners for our product and service platforms allows us to accelerate development and leverage the third parties’ expertise, but increases our risks due to reduced direct control over the third party’s work.

We use third-party development partners both for their key skills and to augment our employee developers.

Using third-party development partners for our broadband platform and managed services allow us to accelerate development and leverage the third parties’ expertise, but increases our risks due to reduced direct control over the third party’s work.

This product development approach may cause unforeseen issues in product design, as well as challenges arising from integration and support of third-party features in our products.

We have engineering services agreements that include future revenue-share payments on our sale of the developed products and that require us to make minimum payments regardless of whether we achieve the desired revenue levels.

Even if our actual demand falls short of expectations, our agreements obligate us to make these minimum payments, which could adversely affect our financial results.

In addition, our product revenues based on the third parties’ product development work may take several years to cover our out-of-pocket expenses, if ever.

In addition, our revenue based on the third parties’ product development work may take several years to cover our out-of-pocket expenses, if ever.

Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense.

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The timing of our revenue is difficult to predict.

Our sales efforts often involve educating BSPs about the use and benefits of our products, platforms and services.

BSPs typically undertake a significant evaluation process, which frequently involves not only our products, platforms and services, but also those of our competitors and results in a lengthy sales cycle.

Our sales efforts often involve educating BSPs about the use and benefits of our platform (cloud, software and systems) and managed services.

BSPs typically undertake a significant evaluation process, which frequently involves not only our platform and managed services, but also those of our competitors and results in a lengthy sales cycle.

Sales cycles for larger customers are relatively longer and require considerably more time and expense.

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Our business depends upon the capital spending patterns and decisions of BSPs, and any decrease or delay in capital spending by BSPs due to the timing and availability of capital and other causes would reduce our revenue and harm our business.

Demand for our products depends on the magnitude and timing of capital spending by BSPs as they construct, expand, upgrade and maintain their access networks as well as BSPs’ adoption of our platforms and cloud-based services.

Capital spending is cyclical in our industry, sporadic among individual BSPs and can change on short notice, which gives us little visibility into changes in spending behavior in any particular quarter.

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Changes in the BSP market, such as financial difficulties, spending cuts or corporate consolidations that impact purchasing decisions by these customers have and may again negatively impact our revenue, and as a result, revenue from such customers may remain flat or continue to decline.

For example, sales to Lumen, our only greater than 10% customer in 2020, declined in 2021 and sales to other BSP customers increased such that Lumen was not a 10% customer.

There is no assurance that purchasing levels by Lumen will increase from current levels.

For example, sales to Lumen, our only greater than 10% customer in 2020, declined in 2021 and sales to other BSP customers increased such that Lumen was not a 10% customer in 2021 or 2022.

Any decrease or delay in purchases of any of our key customers, particularly if prolonged or sustained, or our inability to grow our sales with them, may have a material negative impact on our revenue and results of operations.

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We currently rely on the standard contractual clauses and the UK International Data Transfer Agreement (or Addendum) to transfer personal data outside the European Economic Area and the UK respectively, including to the United States.

As the enforcement landscape further develops, and supervisory authorities issue further guidance on – and revised standard contractual clauses for - international data transfers, we could suffer additional costs, complaints and/or regulatory investigations or fines;

As the enforcement landscape further develops, and supervisory authorities issue further guidance on – and revised standard contractual clauses for – international data transfers.

Our current contracts may not be sufficient, and we could suffer additional costs, complaints and/or regulatory investigations or fines;

we may have to stop using certain tools and vendors and make other operational changes;

we have had to and will have to implement revised standard contractual clauses for existing intragroup, customer and vendor arrangements within required time frames;

our customers may not use our services in a manner that is compliant with applicable data privacy laws and regulations;

our services may not be competitive in certain markets;

and/or it could otherwise affect the manner in which we provide our services, and could adversely affect our business, operations and financial condition.

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If the trend of increasing enforcement by regulators of the strict approach to opt-in consent for all but essential use cases, as seen in recent guidance and decisions continues, this could lead to substantial costs, require significant systems changes, limit the effectiveness of marketing activities conducted on behalf of our customers, divert the attention of our technology personnel, adversely affect our margins, and subject us to additional liabilities.

In addition, new security regulations, such as the EU’s Network and Information Security 2 Directive (NIS2) and the UK’s Telecommunications (Security) Act 2021 together with its implementing regulations (currently in draft form) imposes further security obligations on electronic communications networks.

We may be required to implement (and contractually commit to) additional security measures to remain a competitive vendor, as customers will need to ensure its vendors are able to meet the obligations that they are themselves subject to, or customers may choose different vendors due to our security measures.

This could result in additional costs and require operational changes which could adversely affect our business, operations and financial condition.

In light of the complex and evolving nature of EU, EU Member State and UK privacy laws, there can be no assurances that we will be successful in our efforts to comply with such laws;

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Since 2020, a number of U.S.

states, including California, Colorado, Oklahoma, Utah and Virginia have enacted laws and regulations to protect consumers’ personal information and efforts to enact a comprehensive federal privacy law have intensified.

states, including California, Colorado, Connecticut, Iowa, Utah and Virginia, have enacted laws and regulations to protect consumers’ personal information, and efforts to enact a comprehensive federal privacy law have intensified.

Most of the new or proposed laws include restrictions on processing consumer information for targeted advertising, which could negatively affect our marketing cloud product.

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and internationally, deter customers from adopting our cloud-based solutions or require us to redesign our platform in order to meet customer requirements related to such laws.

Regulatory actions or claims involving our practices in the collection, storage, processing, use or disclosure of consumer information or other personal data, even if unfounded, could damage our reputation and adversely affect our operating results.

operating results.

The failure or perceived failure to comply may result in government or civil proceedings or actions against us, or could cause us to lose customers, which could have an adverse effect on our business.

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In some cases, we are required to obtain certifications or authorizations before our products can be introduced, marketed or sold in new markets or to new customers.

For example, our ability to maintain Operations System Modification for Intelligent Network Elements certification for our products will affect

our ongoing ability to continue to sell our products to large BSPs.

For example, our ability to maintain Operations System Modification for Intelligent Network Elements certification for our products will affect our ongoing ability to continue to sell our products to large BSPs.

In addition, our ability to expand our international operations may be limited by standards in countries or may require us to redesign our products or develop new products to meet local standards.

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Similarly, changes to regulatory tariff requirements or other regulations relating to pricing or terms of carriage on communication networks could slow the development or expansion of network infrastructures, which could adversely affect the sale of our products and services.

Many of our customers are subject to FCC rate regulation of interstate telecommunications services and are recipients of government stimulus payments.

of our customers are subject to FCC rate regulation of interstate telecommunications services and are recipients of government stimulus payments.

Limits or restrictions on access to these programs could affect the ability of IOCs to access capital, which would in turn reduce our revenue opportunities.

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and a slowdown in the communications industry or the general economy.

In the past several months, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.

Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance.

Since early 2020, the COVID-19 pandemic has severely impacted U.S.

markets, causing dramatic swings in the U.S.

stock exchanges that resulted in increased volatility in the trading price of our common stock.

Recently, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.

Broad market and industry factors may seriously affect the market price and volatility of our common stock, regardless of our actual operating performance.

Historically, following periods of volatility in the market price of a company’s securities, there is increased risk that stockholders may initiate securities class action litigation against the company.

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We may need additional capital in the future to finance our business.

Our working capital needs and cash use have continued to increase to support our business operations and growth, and we may need additional capital if our current plans and assumptions change.

While our working capital needs to support our business operations and growth have been funded from operating cash flows in the near term, we may need additional capital if our current plans and assumptions change.

In January 2022, we terminated our loan and security agreement with Bank of America, N.A.

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If we raise additional debt financing, we may be subject to restrictive covenants that limit our ability to conduct our business.

If we are unable to sustain positive operating income and cash flows from operations, our liquidity, results of operations and financial condition may be adversely affected.

If we are unable to sustain positive operating

income and cash flows from operations, our liquidity, results of operations and financial condition may be adversely affected.

Furthermore, if we are unable to generate sufficient cash flows to support our operational needs, we may need to cease our repurchase program or seek additional sources of liquidity, including borrowings, to support our working capital needs, even if we believe we have generated sufficient cash flows to support our operational needs.

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

What changed 10-Q

Item 1A. Risk Factors