What changed in this filing

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Item 1A. Risk Factors

2023-03-31 compared with 2022-04-15 · 80 added, 90 removed, 618 unchanged (22% of the section changed)

14 unchanged sentences

• We have made and expect to continue to make acquisitions that could disrupt our operations and harm our operating results.

• The COVID-19 pandemic and related governmental response could negatively affect our business, operations and financial performance.

• The COVID-19 pandemic, as well as any future pandemics or global health crises, and related governmental responses could negatively affect our business, operations and financial performance.

• Our business could suffer if providers of broadband Internet access services block, impair or degrade our services.

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• We do not intend to pay dividends on our common stock.

• We have identified a material weakness in internal control over financial reporting related to the accounting for the separation and distribution which could adversely affect our business, reputation, results of operations and stock price.

• We have identified material weaknesses in internal control over financial reporting which could adversely affect our business, reputation, results of operations and stock price.

Risks Related to the Separation

6 unchanged sentences

Our fax services constitute substantially all of our revenue and operating income.

For both of the years ended December 31, 2021 and December 31, 2020, Cloud Fax revenue constituted substantially all of our revenues and our operating income.

Cloud Fax revenue constitutes substantially all of our revenues and our operating income.

The success of our business is therefore dependent upon the continued use of cloud fax as a messaging medium and our ability to expand usage of our other current and future products and services in the secure data exchange area.

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There are ongoing efforts by governmental and nongovernmental entities to create a universally accepted method for electronically signing documents.

Widespread adoption of so-called “digital signatures” could reduce demand for our fax services.

Widespread adoption of so-called “digital signatures” could, in the future, reduce demand for our fax services where the fax service is primarily being used to evidence a wet signature.

While we have introduced a digital signature product, other companies have offered such products for longer and have greater customer adoption.

If adoption of digital signature products results in a reduction for our fax services without a corresponding adoption of our digital signature or other products, it could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

If future adoption of digital signature products results in a reduction for our fax services without a

corresponding adoption of our digital signature or other products, it could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

Developments in the healthcare industry could adversely affect our business.

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If customers do not accept the value proposition of our offerings, then a viable market for products and services may not develop further, or it may develop more slowly than we expect, either of which would adversely affect our business and operating results.

We have estimated the size of our total addressable market based on internally generated data and assumptions, as well as data published by third parties, which we have not independently verified.

While we believe our market size estimates are reasonable, such information is inherently imprecise and subject to a high degree of uncertainty.

If our third-party or internally generated data prove to be inaccurate or we make errors in our assumptions based on that data, our actual market opportunity may be more limited than our estimates.

If we have not accurately estimated the size of our total addressable market, it may cause us to misallocate capital or other critical business resources, which could harm our business.

Even if our total addressable market meets our size estimates and experiences growth, we may not be successful in growing our share of that market.

There are particular challenges in addressing the market for healthcare interoperability solutions.

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Customers or vendors could use any of these four components to define their particular “interoperability solution.” Separately, the Center for Medicare and Medicaid Services further defined a fifth component of interoperability that includes patients, which is not included in the HIMSS definition.

Furthermore, the Office of the National Coordinator for Health Information Technology (the “ONC”) has developed another definition that is included in the 21st Century Cures Act, which includes the concept of “information blocking” as a component of healthcare interoperability.

Furthermore, the Office of the National Coordinator for Health Information Technology (the “ONC”) has

developed another definition that is included in the 21st Century Cures Act, which includes the concept of “information blocking” as a component of healthcare interoperability.

This wide variety of definitions has the potential to create a risk of confusion in the market, or allow competitors to reframe the problem to their advantage in a competitive situation, potentially allowing less robust solutions to hold themselves out as healthcare interoperability solutions.

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Acquisitions involve numerous risks, including the following:

• difficulties in integrating the operations, systems, technologies, products and personnel of the acquired businesses;

• difficulties in integrating the operations, systems, controls, technologies, products and personnel of the acquired businesses;

• difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets may have stronger market positions;

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In addition, our effective tax rate for future periods is uncertain and could be impacted by mergers and acquisitions.

The COVID-19 pandemic and related governmental response could negatively affect our business, operations and financial performance.

The COVID-19 pandemic, as well as any future pandemics or global health crises, and related governmental responses could negatively affect our business, operations and financial performance.

The impact of the COVID-19 pandemic and subsequent variants has had a negative effect on the global economy, disrupting the financial markets and creating increasing volatility and overall uncertainty.

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We cannot predict at this time the extent to which the COVID-19 pandemic could negatively affect our business, operations and financial performance.

The extent of any continued or future adverse effects of the COVID-19 pandemic will depend on future developments, which are highly uncertain and outside our control, including the scope and duration of the pandemic, the emergence and virulence of new variants, the effect of the rollout of vaccines on the pandemic and public acceptance of vaccines, the direct and indirect impact of the pandemic on our employees, customers, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.

Even after the pandemic subsides, it is possible that the U.S, and other major economies continue to experience a prolonged recession or other economic disruption, which we expect would materially and adversely affect our business, operations and financial performance.

The extent of any continued or future adverse effects of the COVID-19 pandemic, as well as any future pandemics or global health crises, will depend on future developments, which are highly uncertain and outside our control, including the scope and duration of the pandemic, the emergence and virulence of new variants, the effect of the rollout of vaccines on the pandemic and public acceptance of vaccines, the direct and indirect impact of the pandemic on our employees, customers, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.

Our business could suffer if providers of broadband Internet access services block, impair or degrade our services.

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These hardware, software, data, and cloud computing systems may not continue to be available at reasonable prices, on commercially reasonable terms, or at all.

equivalent technology is either developed by us, or, if available, is identified, obtained through purchase or license, and integrated into our services.

Any loss of the right to use any of these hardware, software, or cloud computing systems could significantly increase our expenses and otherwise result in delays in the provisioning of our services until equivalent technology is either developed by us, or, if available, is identified, obtained through purchase or license, and integrated into our services.

We may be subject to increased rates for the telecommunications services we purchase from regulated carriers which could require us to either raise the retail prices of our offerings and lose customers or reduce our profit margins.

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While we are not a provider of regulated telecommunications services, we rely on such providers to offer our services to our customers.

As a result of the FCC’s reforms, regulated providers of telecommunications services are determining how the rates they charge customers like us will change in order to comply with the new rules.

As a result of the FCC’s reforms, regulated providers of telecommunications services are determining how the rates they charge customers like us will

change in order to comply with the new rules.

It is possible that some or all of our underlying carriers will increase the rates we pay for certain telecommunications services.

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The length of our sales cycle for enterprise customers from initial evaluation to payment for our offerings can be as long as 12 to 18 months, but can vary substantially from customer to customer and from offering to offering.

Further, these enterprise and commercial customers may require services based on volume of usage which can vary seasonally and/or slowly ramp up over an initiation period of 12-36 months.

Customers frequently require considerable time to evaluate, test and qualify our offerings prior to entering into or expanding a subscription.

This is particularly true in the case of customers in highly regulated industries, including healthcare, where longer evaluation, testing and qualification processes often result in longer sales cycles.

The timing of our sales with our enterprise customers and related revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for these customers.

During the sales cycle, we expend significant time and money on sales and marketing and contract negotiation activities, which may not result in a sale.

The timing and contractual commitments of our sales with our enterprise customers and related revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle and the variable usage of the services by these customers.

During the sales cycle, we expend significant time and money on sales and marketing and contract negotiation activities, which may not result in any sale or any significant sale.

A system failure, cybersecurity breach or other technological risk could delay or interrupt service to our customers, harm our reputation or subject us to significant liability.

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A significant portion of our operations relies heavily on the secure processing, storage and transmission of confidential and other sensitive data.

For example, a significant number of our customers authorize us to bill their credit or debit card

accounts directly for all transaction fees charged by us.

For example, a significant number of our customers authorize us to bill their credit or debit card accounts directly for all transaction fees charged by us.

We rely on encryption and authentication technology to effect secure transmission of confidential information, including customer credit and debit card numbers.

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Additionally, due to geopolitical tensions related to Russia’s invasion of Ukraine, the risk of cyber-attacks may be elevated.

Any system failure or security breach that causes interruptions or data loss in our operations, our partners, vendors, or other third parties, or in the computer systems of our customers or leads to the misappropriation of our or our customers’ confidential information could result in a significant liability to us (including in the form of judicial decisions and/or settlements, regulatory findings and/or forfeitures, and other means), cause considerable harm to us and our reputation (including requiring notification to customers, regulators, and/or the media), cause a loss of confidence in our products and services, and deter current and potential customers from using our services.

to customers, regulators, and/or the media), cause a loss of confidence in our products and services, and deter current and potential customers from using our services.

Our Board is briefed on cybersecurity risks and we implement cybersecurity risk management under our Board’s oversight.

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To date, these events have not resulted in the material impairment of any business operations.

Although we have experienced, and expect to continue to confront, efforts by third parties to gain unauthorized access or deny access to, or otherwise disrupt, our information systems, to date, these events have not resulted in the material impairment of any business operations.

If our products and services fail to perform properly and if we fail to develop enhancements to resolve any defect or other problems, we could lose customers or become subject to service performance or warranty claims and our market share could decline.

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These companies may be able to develop and expand their network infrastructures and capabilities more quickly, adapt more swiftly to new or emerging technologies and changes in customer requirements, take advantage of acquisition and other opportunities more readily and devote greater resources to the marketing and sale of their products and services than we can.

There can be no assurance that

additional competitors will not enter markets that we are currently serving and plan to serve or that we will be able to compete effectively.

There can be no assurance that additional competitors will not enter markets that we are currently serving and plan to serve or that we will be able to compete effectively.

Competitive pressures may reduce our revenue, operating profits or both.

Some of our existing competitors and possible entrants may have greater brand recognition for certain products and services, more expertise in a particular segment of the market, and greater operational, strategic, technological, financial, personnel, or other resources than we do.

Many of our competitors have access to considerable financial and technical resources with which to compete aggressively, including by funding future growth and expansion and investing in acquisitions, technologies, and research and development.

technologies, and research and development.

Further, emerging start-ups may be able to innovate and provide new products and services faster than we can.

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difficulties in staffing and managing international operations;

and adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries and affiliates.

and adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries and affiliates and transfer pricing implications.

Any or all of these factors could have a material adverse impact on our future business, prospects, financial condition, operating results and cash flows.

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We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could divert significant operational resources and our management’s time and attention.

From time to time, we are subject to litigation or claims or are involved in other legal disputes or regulatory inquiries, including in the areas of patent infringement and anti-trust that could negatively affect our business operations and financial condition.

From time to time, we may be subject to litigation or claims or become involved in other legal disputes or regulatory inquiries, including in the areas of patent infringement and anti-trust that could negatively affect our business operations and

financial condition.

Such disputes could cause us to incur unforeseen expenses, divert operational resources, occupy a significant amount of our management’s time and attention and negatively affect our business operations and financial condition.

The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings that could include monetary damages and injunctive relief.

We do not always have insurance coverage for defense costs, judgments, and settlements.

We may not always have insurance coverage for defense costs, judgments, and settlements.

We may also be subject to indemnification requirements with business partners, vendors, current and former officers and directors, and other third parties.

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The loss of the services of one or more of our key employees could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

In particular, the recruitment and retention of top technical, marketing, sales and subject matter experts - particularly those with specialized knowledge, will

be critical to our success.

In particular, the recruitment and retention of top technical, marketing, sales and subject matter experts - particularly those with specialized knowledge, will be critical to our success.

Competition for such people is intense, substantial and continuous, and we may not be able to attract, integrate or retain highly qualified technical, sales or managerial personnel in the future.

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We have observed an increasingly competitive labor market.

Increased employee turnover, changes in the availability of our employees, including as a result of COVID-19-related absences, and labor shortages more generally have resulted in, and could continue to result in, increased costs, and could adversely impact the efficiency of our operations.

Increased employee turnover, changes in the availability of our employees and labor shortages more generally have resulted in, and could continue to result in, increased costs, and could adversely impact the efficiency of our operations.

Political instability and volatility in the economy may adversely affect segments of our customers, which may result in decreased usage and advertising levels, customer acquisition and customer retention rates and, in turn, could lead to a decrease in our revenues or rate of revenue growth.

Certain segments of our customers may be adversely affected by political instability and volatility in the general economy or any downturns.

To the extent these customers’ businesses are adversely affected by political instability or volatility, their usage of our services and/or our customer retention rates could decline.

To the extent these customers’ businesses are adversely affected by political instability or economic volatility, their usage of our services and/or our customer retention rates could decline.

This may result in decreased cloud services subscription and/or usage revenues and decreased advertising, e-commerce or other revenues, which may adversely impact our revenues and profitability.

For example, in connection with the conflict between Russia and Ukraine, the U.S.

governments have imposed severe economic sanctions and export controls and have threatened additional sanctions and controls.

government has imposed severe economic sanctions and export controls and has threatened additional sanctions and controls.

The full impact of these measures, or of any potential responses to them by Russia or other countries, on the businesses and results of operations or our customers or us is unknown.

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In addition, we may sign business associate agreements in connection with the provision of the products and services developed for other third parties or in connection with certain of our other services that may transmit or store protected health information.

Failure to comply with the requirements of HIPAA or HITECH or any of the applicable federal and state laws regarding patient privacy, identity theft prevention and detection, breach notification and data security may subject us to penalties, including civil monetary penalties and, in some circumstances, criminal penalties or contractual liability under

agreements with our customers and clients.

Any failure or perception of failure of our products or services to meet HIPAA, HITECH and related regulatory requirements could expose us to risks of investigation, notification, litigation, penalty or enforcement, adversely affect demand for our products and services and force us to expend significant capital and other resources to modify our products or services to address the privacy and security requirements of our clients and HIPAA and HITECH.

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Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change.

As a result, our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation.

As a result, our

future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation.

These changes may adversely impact our effective tax rate and harm our financial position and results of operations.

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Any of these events could have a material adverse effect on our business, financial condition, and operating results.

We are currently under or subject to examination for indirect taxes in various states, municipalities and foreign jurisdictions.

We are subject to examination for indirect taxes in various states, municipalities and foreign jurisdictions.

Management currently believes we have adequate reserves established for these matters.

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Taxing authorities may successfully assert that we should have collected, or in the future should collect sales and use, telecommunications or similar taxes, and we could be subject to liability with respect to past or future tax, which could adversely affect our operating results.

We believe we remit state and local sales and use tax, excise, utility user, and ad valorem taxes, fees and surcharges or other similar obligations in all relevant jurisdictions in which we generate sales, based on our understanding of the applicable laws in those jurisdictions.

We believe we have provided for state and local sales and use tax, excise, utility user, and ad valorem taxes, fees and surcharges or other similar obligations in all relevant jurisdictions in which we generate sales, based on our understanding of the applicable laws in those jurisdictions.

Such tax, fees and surcharge laws and rates vary greatly by jurisdiction, and the application of such taxes to e-commerce businesses, such as ours, is a complex and evolving area.

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In addition, in the future we may also decide to engage in activities that would require us to pay sales and use, telecommunications, or similar taxes in new jurisdictions.

Such tax assessments, penalties and interest or future requirements may materially adversely affect our business, financial condition and operating results.

these laws and regulations, as well as potential substantial penalties for any failure to comply.

Such tax assessments, penalties and interest for failure to comply with current or future laws and regulations may materially adversely affect our business, financial condition and operating results.

Compliance with these laws and regulations may also cause us to change or limit our business practices in a manner adverse to our business.

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The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”), which allows for penalties that run into the millions of dollars, requires commercial emails to include identifying information from the sender and a mechanism for the receiver to opt out of receiving future emails.

Several states have enacted additional, more restrictive and punitive laws regulating commercial email.

Several states have enacted additional, more

restrictive and punitive laws regulating commercial email.

Foreign legislation exists as well, including Canada’s Anti-Spam Legislation and the European laws that have been enacted pursuant to the GDPR and European Union Directive 2002/58/EC and its amendments.

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We believe we have implemented such links to the extent necessary and our privacy policies have been updated and posted on our

Further, on November 3, 2020, the California Privacy Rights Act (the “CPRA”) was voted into law by California residents.

The CPRA significantly amends the CCPA, and imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data.

It also creates a new California data protection agency specifically tasked to enforce the law, which could result in increased regulatory scrutiny of California businesses in the areas of data protection and security.

The substantive requirements for businesses subject to the CPRA went into effect on January 1, 2023 and become enforceable on July 1, 2023.

Similar laws have been passed in several other states, and have been proposed in additional states and at the federal level.

Failure or perceived failure by us to comply with our policies, applicable requirements, or industry self-regulatory principles related to the collection, use, sharing or security of personal information, or other privacy, data-retention or data-protection matters could result in a loss of user confidence in us, damage to our brands, and ultimately in a loss of users and advertising partners, which could adversely affect our business.

Changes in these or any other laws and regulations or the interpretation of them could increase our future compliance costs, limit the amount and type of data we can collect, transfer,

share, or sell, make our products and services less attractive to our users, or cause us to change or limit our business practices.

Changes in these or any other laws and regulations or the interpretation of them could increase our future compliance costs, limit the amount and type of data we can collect, transfer, share, or sell, make our products and services less attractive to our users, or cause us to change or limit our business practices.

Further, any failure on our part to comply with any relevant laws or regulations may subject us to significant civil or criminal liabilities.

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As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations that impose various requirements on public companies.

Our management and other personnel will devote a substantial amount of time to compliance with these requirements and as an independent public company, such compliance has resulted in increased legal, accounting and financial costs.

Our management and other personnel are required to devote a substantial amount of time to compliance with these requirements and as an independent public company, such compliance has resulted in increased legal, accounting and financial costs.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.

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For example, we have hired and expect to continue to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to assist in our compliance efforts.

We expect to incur significant expenses and devote substantial management effort toward compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, when such attestation is required.

We have also incurred significant expenses and devoted substantial management effort toward compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.

To assist us in complying with these requirements we may need to hire more employees in the future, or engage outside consultants, which will increase our operating expenses.

As reported elsewhere in this Annual Report on Form 10-K, we have identified a material weakness in our internal control over financial reporting related to our accounting for the separation and distribution.

As reported elsewhere in this Annual Report on Form 10-K, we have identified material weaknesses in our internal control over financial reporting.

We cannot assure you that additional material weaknesses in our internal control over financial reporting will not be identified in the future.

While we have designed and implemented, or expect to implement, measures to remediate this material weakness, our efforts to remediate this material weakness may not be effective.

While we have designed and implemented, or expect to implement, measures to remediate these material weaknesses, our efforts to remediate these material weaknesses may not be effective.

Moreover, we are also continuing to develop our internal controls and processes.

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Any determination to pay dividends to holders of our common stock will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, restrictions in our existing and any future debt and other factors that our board of directors deems relevant.

Reduced reporting and disclosure requirements applicable to us as an emerging growth company could make our common stock less attractive to investors.

We are an EGC and, for as long as we continue to be an EGC, we may choose to continue to take advantage of exemptions from various reporting requirements applicable to other public companies.

Consequently, we are not required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, and we are subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards.

We have elected to take advantage of the extended transition period.

As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of the dates such pronouncements are effective for public companies.

We will cease to be an EGC upon the earliest of:

(i) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act, (ii) the first fiscal year after our annual gross revenue is $1.07 billion or more, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in nonconvertible debt securities or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.

We cannot predict whether investors will find our common stock less attractive if we choose to rely on these exemptions.

If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock, and the price of our common stock may be more volatile.

We have identified a material weakness in our internal control over financial reporting related to the accounting for the separation and distribution , and if our remediation of such material weakness is not effective, or if we experience additional material weaknesses or otherwise fail to design and maintain effective internal control over financial reporting we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.

We have identified material weaknesses in our internal control over financial reporting, and if our remediation of such material weaknesses is not effective, or if we experience additional material weaknesses or otherwise fail to design and maintain effective internal control over financial reporting we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act and are required to prepare our financial statements according to the rules and regulations required by the SEC.

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Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules.

As reported elsewhere in this Annual Report on Form 10-K, we have identified material weaknesses in our internal control over financial reporting.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.

We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the internal control deficiencies that led to our material weakness, that the material weakness will be remediated on a timely basis, or that additional material weaknesses will not be identified in the future.

If the steps we take do not remediate the outstanding material weakness in a timely manner, there could continue to be a possibility that these control deficiencies or others could result in a material misstatement of our annual or interim consolidated financial statements.

We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the internal control deficiencies that led to our material weaknesses, that the material weaknesses will be remediated on a timely basis, or that additional material weaknesses will not be identified in the future.

If the steps we take do not remediate the outstanding material weaknesses in a timely manner, there could continue to be a possibility that these control deficiencies or others could result in a material misstatement of our annual or interim consolidated financial statements.

Further, our current internal control over financial reporting and any additional internal control over financial reporting that we develop may become inadequate because of changes in conditions in our business.

We also cannot assure you that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective.

If we are not able to remediate this existing material weakness and document effective internal control over financial reporting, our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting, if and when required.

Matters affecting our internal controls, including the material weakness describe above, may cause us to be unable to report our financial information on a timely basis, or may cause us to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, violations of applicable stock exchange listing rules, and litigation brought by our shareholders and others.

If we are not able to remediate these existing material weaknesses and document effective internal control over financial reporting, our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting, if and when required.

Matters affecting our internal controls, including the material weaknesses described above, may cause us to be unable to report our financial information on a timely basis, or may cause us to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, violations of applicable stock exchange listing rules, and litigation brought by our shareholders and others.

There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

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Future sales by Ziff Davis or others of our common stock, or the perception that such sales may occur, could depress our common stock price.

As of December 31, 2021, Ziff Davis owned 19.9% of the economic interest and voting power of our outstanding common stock.

Ziff Davis has informed us that as of December 31, 2022, Ziff Davis owned 5% of the economic interest and voting power of our outstanding common stock.

Future sales of these shares in the public market will be subject to the volume and other restrictions of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), for so long as Ziff Davis is deemed to be our affiliate, unless the shares to be sold are registered with the Securities and Exchange Commission, or SEC.

We are a party to a Stockholder and Registration Rights Agreement with Ziff Davis, pursuant to which we agreed, upon request of Ziff Davis, we will use our reasonable best efforts to effect the registration under applicable federal and state securities laws of any shares of our common stock that it retains.

We have received a request from Ziff Davis to register all shares of our common stock held by Ziff Davis.

We are unable to predict with certainty whether or when Ziff Davis will distribute to holders of Ziff Davis debt and/or Ziff Davis stockholders, or sell, a substantial number of shares of our common stock following the distribution.

In June 2022, the registration statement on Form S-1 we filed with respect to the shares of our common stock held by Ziff Davis became effective, and Ziff Davis has informed us that it reduced its position in our common stock from 19.9% to approximately 5% over the course of 2022.

We are unable to predict with certainty whether or when Ziff Davis will distribute to holders of Ziff Davis debt and/or Ziff Davis stockholders, or sell, a substantial number of their remaining shares of our common stock following the distribution.

Sales by Ziff Davis or others of a substantial number of shares after the distribution, or a perception that such sales could occur, could significantly reduce the market price of our common stock.

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Because we have not chosen to be exempt from Section 203 of the Delaware General Corporation Law (“DGCL”), this provision could also delay or prevent a change of control that stockholders may favor.

Section 203 provides that, subject to

limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or their affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock.

Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or their affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock.

In addition, an acquisition or further issuance of our common stock could trigger the application of Section 355(e) of the Code, causing the distribution to be taxable to Ziff Davis.

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Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and the United States federal district courts as the exclusive forum for claims under the Securities Act, which could limit our stockholders’ ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated bylaws provide that, unless Consensus consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of Consensus, (b) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee, agent or stockholder of Consensus to Consensus or its stockholders, (c) any action asserting a claim against Consensus or any current or former director, officer or other employee of Consensus arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (d) any action asserting a claim against Consensus or any current or former director, officer or other employee of Consensus governed by the internal affairs doctrine shall, in each case to the fullest extent permitted by law, be the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, a the federal district court for the District of Delaware.

employee of Consensus governed by the internal affairs doctrine shall, in each case to the fullest extent permitted by law, be the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, a the federal district court for the District of Delaware.

Furthermore, unless Consensus consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the rules or regulations thereunder.

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The trading market for Consensus’ common stock depends in part on the research and reports that securities or industry analysts publish about us or our business.

We currently have five research analysts covering Consensus’ common stock.

We currently have six research analysts covering Consensus’ common stock.

If one or more of the analysts downgrades our stock or publishes misleading or unfavorable research about our business, our stock price would likely decline.

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federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code.

Such opinions and IRS private letter ruling are based, among other things, on various facts and assumptions, as well as certain representations, statements and

undertakings of Ziff Davis and Consensus.

Such opinions and IRS private letter ruling are based, among other things, on various facts and assumptions, as well as certain representations, statements and undertakings of Ziff Davis and Consensus.

If any of these facts, assumptions, representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if Ziff Davis or Consensus breach any of their respective covenants contained in any of the separation-related agreements or in the documents relating to the IRS private letter ruling and/or any tax opinion, the IRS private letter ruling and/or any tax opinion may be invalid.

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Our historical financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.

Our historical financial information for periods prior to the separation included in this Annual Report on Form 10-K is derived from the consolidated financial statements and accounting records of J2 Cloud Services, LLC (“Historical Cloud Services”), a wholly owned subsidiary of J2 Global, Inc.

Our historical financial information for periods prior to the separation included in this Annual Report on Form 10-K is derived from the consolidated financial statements and accounting records of J2 Cloud Services, LLC (now Consensus Cloud Solutions, LLC) (“Historical Cloud Services”), previously a wholly owned subsidiary of J2 Global, Inc.

(now Ziff Davis).

As a result, the historical financial information for periods prior to the separation included in this Annual Report on Form 10-K does not necessarily reflect the financial position, results of operations or cash flows of Consensus following the separation or what Consensus’ financial position, results of

operations and cash flows would have been had Consensus been a separate, standalone business during such periods.

Furthermore, the Historical Cloud Services financial information does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the following factors, among others:

• Prior to the separation, while our business operated on a relatively standalone basis, Ziff Davis or one of its affiliates performed various corporate functions for us such as legal, treasury, accounting, internal auditing, human resources and corporate affairs, and also provided our IT and other corporate infrastructure.

Our historical financial results for periods prior to the separation reflect allocations of corporate expenses from Ziff Davis for such functions and are likely to be less than the expenses we would have incurred had we operated as a separate publicly traded company.

Our historical financial results for periods prior to the separation reflect allocations of corporate expenses from Ziff Davis for such functions were likely less than the expenses we would have incurred had we operated as a separate publicly traded company.

Following the separation, our costs related to such functions previously performed by Ziff Davis have increased.

• To some extent historically, we have shared certain economies of scope and scale with Ziff Davis.

• To some extent historically, we shared certain economies of scope and scale with Ziff Davis.

Although we have entered into certain agreements (including a transition services agreement) with Ziff Davis in connection with the separation, these arrangements may not fully capture the benefits that we enjoyed as a result of being with a subsidiary of Ziff Davis and could result in us paying higher charges than in the past for these services.

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In connection with the separation, we have entered into certain financing arrangements.

We may also need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements.

may also need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements.

• Following the separation, the cost of capital for our business may be higher than Ziff Davis’s cost of capital prior to the separation.

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Our debt obligations could adversely affect our business and our ability to meet our obligations and pay dividends.

As of April 1, 2022, Consensus has total outstanding indebtedness of approximately $805 million.

As of December 31, 2022, Consensus has total outstanding indebtedness of approximately $805 million.

We may also incur additional indebtedness in the future.

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If our cash flow and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness.

We may not be able to implement any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.

We may not be able to

implement any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.

The indentures governing our indebtedness will restrict, and the agreements governing any future indebtedness may restrict, our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due.

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In addition, any event of default or declaration of acceleration under one debt instrument could result in an event of default under one or more of our other debt instruments.

We or Ziff Davis may fail to perform under the transition services agreement and other transaction agreements that were executed as part of the separation, and we may not have necessary systems and services in place when these transaction agreements expire.

We or Ziff Davis may fail to perform under the transition services agreement and other transaction agreements that were executed as part of the separation.

In connection with the separation, we entered into several agreements with Ziff Davis, including among others a transition services agreement, a separation agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement and a stockholder and registration rights agreement with respect to Ziff Davis’ continuing ownership of Consensus common stock.

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We are in the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services that Ziff Davis currently provides to us and/or will provide to us under the transition services agreement.

However, we may not be successful in implementing these systems and services or

in transitioning from Ziff Davis’s systems to our own systems, and may pay more for such systems and services that we currently pay or that we will pay under the transition services agreement.

However, we may not be successful in implementing these systems and services or in transitioning from Ziff Davis’s systems to our own systems, and may pay more for such systems and services that we currently pay or that we will pay under the transition services agreement.

Potential indemnification liabilities to Ziff Davis pursuant to the separation agreement could materially and adversely affect our business, financial condition, results of operations and cash flows.

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• had remaining assets constituting unreasonably small capital;

• intended to incur, or believed it would incur, debts beyond its ability to pay these debts as they matured,

then the court could void the separation and distribution, in whole or in part, as a fraudulent conveyance or transfer.

• intended to incur, or believed it would incur, debts beyond its ability to pay these debts as they matured, then the court could void the separation and distribution, in whole or in part, as a fraudulent conveyance or transfer.

The court could then require our stockholders to return to Ziff Davis some or all of the shares of Consensus common stock issued in the distribution, or require Ziff Davis or Consensus, as the case may be, to fund liabilities of the other company for the benefit of creditors.

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It may be more costly for us to separately obtain or perform the various corporate functions that Ziff Davis performed for us prior to the separation, such as legal, treasury, accounting, auditing, human resources, investor relations, public affairs, finance and cash management services.

Historically, our business has been operated as one of Ziff Davis’s business units, and Ziff Davis performed certain of the corporate functions for our operations.

Following the distribution, Ziff Davis provides support to us with respect to certain of these functions on a transitional basis.

We have replicated, and must continue to replicate, certain systems, infrastructure and personnel to which we no longer have access and have incurred, and expect to continue to incur, capital and other costs associated with developing and implementing our own support functions in these areas.

Historically, our business was operated as one of Ziff Davis’s business units, and Ziff Davis performed certain of the corporate functions for our operations.

Following the distribution, Ziff Davis provided support to us with respect to certain of these functions on a transitional basis.

We have replicated, and must continue to replicate, certain systems, infrastructure and

personnel to which we no longer have access and have incurred, and expect to continue to incur, capital and other costs associated with developing and implementing our own support functions in these areas.

Such costs could be material.

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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-K

Item 1A. Risk Factors