What changed in this filing

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Item 1A. Risk Factors

2024-03-07 compared with 2023-03-09 · 146 added, 145 removed, 734 unchanged (28% of the section changed)

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Below is a summary of some of these risks.

This summary is not complete, and should be read together with the entire section titled “Risk Factors” in this Annual Report on

Form 10-K, as well as the other information in this Annual Report on Form 10-K and the other filings that we make with the SEC.

This summary is not complete, and should be read together with the entire section titled “Risk Factors” in this Annual Report on Form 10-K, as well as the other information in this Annual Report on Form 10-K and the other filings that we make with the SEC.

• We have experienced rapid growth in recent periods, and if we do not manage our future growth, our business and results of operations will be adversely affected.

• We have a history of losses and may not be able to achieve or sustain profitability in the future.

• We have a history of losses, and while we have achieved profitability in quarterly periods, we may not be able to achieve or sustain profitability in the future.

• If organizations do not adopt cloud-based SaaS-delivered endpoint security solutions, our ability to grow our business and results of operations may be adversely affected.

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Any of the foregoing could adversely affect our business, results of operations, and financial condition.

We have a history of losses and may not be able to achieve or sustain profitability in the future.

We have incurred net losses in all periods since our inception, and we may not achieve or maintain profitability in the future.

We experienced net losses of $183.2 million, $234.8 million, and $92.6 million for fiscal 2023, fiscal 2022, and fiscal 2021, respectively.

We have a history of losses, and while we have achieved profitability in quarterly periods, we may not be able to achieve or sustain profitability in the future.

We have incurred net losses each year prior to fiscal 2024, and we may not achieve or maintain profitability in the future.

We experienced net gains of $89.3 million for fiscal 2024, and net losses of $183.2 million, and $234.8 million for fiscal 2023, and fiscal 2022, respectively.

As of January 31, 2024, we had an accumulated deficit of $1.1 billion.

While we have experienced significant growth in revenue in recent periods, we cannot assure you when or whether we will reach or maintain profitability.

While we have experienced significant growth in revenue in recent periods, and have achieved profitability during quarterly periods, we cannot assure you when or whether we will reach sustained profitability.

We also expect our operating expenses to increase in the future as we continue to invest for our future growth, which will negatively affect our results of operations if our total revenue does not increase.

We cannot assure you that these investments will result in substantial increases in our total revenue or improvements in our results of operations.

We also have incurred and expect to continue to incur significant additional legal, accounting, and other expenses as a public company.

We also have incurred and expect to continue to incur significant additional legal,

accounting, and other expenses as a public company.

Any failure to increase our revenue as we invest in our business or to manage our costs could prevent us from achieving or maintaining profitability or positive cash flow.

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We do not know whether the trend in adoption of cloud-based SaaS-delivered endpoint security solutions we have experienced in the past will continue in the future.

Furthermore, if we or other SaaS security providers experience security incidents, loss or disclosure of customer data, disruptions in delivery, or other problems, the market for SaaS solutions as a

whole, including our security solutions, could be negatively affected.

Furthermore, if we or other SaaS security providers experience security incidents, loss or disclosure of customer data, disruptions in delivery, or other problems, the market for SaaS solutions as a whole, including our security solutions, could be negatively affected.

You should consider our business and prospects in light of the risks and difficulties we encounter in this new and evolving market.

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Success in delivering enhancements and new solutions depends on several factors, including the timely completion, introduction and market acceptance of the enhancement or new solution, the risk that such enhancement or new solution may have quality or other defects or deficiencies, especially in the early stages of introduction, as well as our ability to seamlessly integrate all of our product and service offerings and develop adequate sales capabilities in new markets.

Failure in this regard may erode our competitive position, significantly impair our revenue growth, and negatively impact our operating results.

Failure to effectively deliver, integrate, and manage perceptions with respect to enhancements and new solutions may erode our competitive position, significantly impair our revenue growth, and negatively impact our operating results.

If we are unable to attract new customers, our future results of operations could be harmed.

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Even if we are successful in convincing prospective customers that a cloud native platform like ours is critical to protect against cyberattacks, they may not decide to purchase our Falcon platform for a variety of reasons, some of which are out of our control.

For example, any deterioration in general economic conditions, including as a result of the geopolitical environment, the outbreak of diseases such as COVID-19 or inflation (as well as government policies such as raising interest rates in response to inflation), have in the past and may in the future cause our current and prospective customers to delay or cut their overall security and IT operations spending, and such delays or cuts may fall disproportionately on cloud-based security solutions like ours.

Economic weakness, customer financial difficulties, and constrained spending on security and IT operations may result in decreased revenue, reduced sales, an increase in multi-phase subscription start dates, shorter terms for customer subscriptions, lengthened sales cycles, increased churn, lower demand for our products, and adversely affect our results of operations and financial conditions.

For example, any deterioration in general economic conditions, including as a result of the geopolitical environment, the outbreak of diseases or other public health crises, volatility in the banking and financial services sector, or inflation (as well as government policies such as raising interest rates in response to inflation), have in the past and may in the future cause our current and prospective customers to delay or cut their overall security and IT operations spending, and such delays or cuts may fall disproportionately on cloud-based security solutions like ours.

lengthened sales cycles, increased churn, lower demand for our products, and adversely affect our results of operations and financial conditions.

Furthermore, we may need to exercise more flexibility in customer payment terms as customers navigate a more challenging economic environment.

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We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition, and results of operations.

The market for security and IT operations solutions is intensely competitive, fragmented, and characterized by rapid changes in technology, customer requirements, industry standards, increasingly sophisticated attackers, and by frequent introductions of new or improved products to combat security threats.

We expect to continue to face intense competition from current competitors, as well as from new entrants into the market.

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• alternative endpoint security providers who generally offer a mix of on-premise and cloud-hosted products that rely heavily on malware-only or application whitelisting techniques;

• network security vendors who are supplementing their core perimeter-based offerings with endpoint security solutions;

• network security vendors who are supplementing their core perimeter-based offerings with endpoint or cloud security solutions;

• cloud security vendors, including those who focus on public cloud infrastructure and services;

• identify security vendors that seek to identify and secure user accounts and related activities;

• professional service providers who offer cybersecurity response services.

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Our larger competitors have substantially broader and more diverse product and services offerings as well as routes to market, which allows them to leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that discourages users from purchasing our platform, including our cloud modules.

Conditions in our market could change rapidly and significantly as a result of technological advancements, partnering or acquisitions by our competitors or continuing market consolidation.

Conditions in our market could change rapidly and significantly as a result of technological advancements, including with respect to AI.

Our competitors may more successfully incorporate AI into their products, gain or leverage superior access to certain AI technologies, and achieve higher market acceptance of their AI solutions.

Conditions in our market could also change rapidly and significantly due to partnering or acquisitions by our competitors or continuing market consolidation.

Some of our competitors have recently made acquisitions of businesses or have established cooperative relationships that may allow them to offer more directly competitive and comprehensive solutions than were previously offered and adapt more quickly to new technologies and customer needs.

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We cannot assure you that our products will detect all cyberattacks, especially in light of the rapidly changing security threat landscape that our solution seeks to address.

Due to a variety of both internal and external factors, including, without limitation, defects or misconfigurations of our solutions, our solutions could be or become vulnerable to security incidents (both from intentional attacks and accidental causes) that cause them to fail to secure endpoints and detect and block attacks.

Due to a variety of both internal and external factors, including, without limitation, defects or misconfigurations of our or third-party solutions, our solutions could be or become vulnerable to security incidents (both from intentional attacks and accidental causes) that cause them to fail to secure endpoints and detect and block attacks.

In addition, because the techniques used by computer hackers to access or sabotage networks and endpoints change frequently and generally are not recognized until launched against a target, there is a risk that an advanced attack could emerge that our cloud native security platform is unable to detect or prevent until after some of our customers are affected.

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If this happens, our systems and subscription customers could be specifically targeted by attackers and could result in vulnerabilities in our platform or undermine the market acceptance of our Falcon platform and could adversely affect our reputation as a provider of security solutions.

Because we host customer data on our cloud platform, which in some cases may contain personally-identifiable information or potentially confidential information, a security compromise, or an accidental or intentional misconfiguration or malfunction of our platform could result in personally-identifiable information and other customer data being accessible such as to attackers or to other customers.

Because we host customer data on our cloud platform, which in some cases may contain personally-identifiable information or potentially confidential information, a security compromise, or an accidental or intentional misconfiguration or malfunction of our platform or third-party platforms could result in personally-identifiable information and other customer data being accessible such as to attackers or to other customers.

Further, if a high profile security breach occurs with respect to another next-generation or cloud-based security system, our customers and potential customers may lose trust in cloud solutions generally, and cloud-based security solutions such as ours in particular.

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No security solution, including our Falcon platform, can address all possible security threats or block all methods of penetrating a network or otherwise perpetrating a security incident.

If any of our customers experiences a successful cyberattack while using our solutions or services, such customer could be disappointed with our Falcon platform, regardless of whether our solutions or services blocked the theft of any of such customer’s data, or if the attack would have otherwise been mitigated or prevented if the customer had fully deployed aspects of our Falcon platform.

If any of our customers experiences a successful cyberattack while using our solutions or services, such customer could be disappointed with our Falcon platform, regardless of whether our solutions or services blocked the theft of any of such customer’s data, if the customer failed to protect its own credentials, or if the attack would have otherwise been mitigated or prevented if the customer had fully deployed aspects of our Falcon platform.

Similarly, if our solutions detect attacks against a customer but the customer does not address the vulnerability, customers and the public may erroneously believe that our solutions were not effective.

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In particular, because we have been involved in the identification of organized cybercriminals and nation-state actors, we have been the subject of intense efforts by sophisticated cyber adversaries who seek to compromise our systems.

Such efforts may also intensify if geopolitical tensions increase.

Such efforts may also intensify as geopolitical tensions increase.

We are also susceptible to inadvertent compromises of our systems and data, including those arising from process, coding, or human errors.

We also utilize third-party service providers to, among other things, host, transmit, or otherwise process electronic data in connection with our business activities, including our supply chain, operations, and communications.

Moreover, we utilize third-party service providers to, among other things, host, transmit, or otherwise process electronic data in connection with our business activities, including our supply chain, operations, and communications.

Our third-party service providers and other vendors have faced and may continue to face cyberattacks, compromises, interruptions in service, or other security incidents from a variety of sources.

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Furthermore, employee error or malicious activity could compromise our systems.

As a result, we may be unable to anticipate these techniques or implement adequate measures to prevent an intrusion into our networks, which could result in unauthorized access to customer data, intellectual property including access to our source code, and information about vulnerabilities in our product, which in turn, could reduce the effectiveness of our solutions, or lead to cyberattacks or other intrusions of our customers’ networks, litigation, governmental audits and investigations and significant legal fees, any or all of which could

damage our relationships with our existing customers and could have a negative effect on our ability to attract and retain new customers.

We have expended, and anticipate continuing to expend, significant resources in an effort to prevent security breaches and other security incidents impacting our systems and data.

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• economic difficulties confronting our customers, which may impact the number of modules or endpoint deployments they are willing or able to purchase;

• insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our solutions;

• the timing and length of our sales cycles;

• changes in customer or channel partner requirements or market needs;

• any disruption in our relationship with channel partners;

• changes in the growth rate of the cloud-based SaaS-delivered endpoint security solutions market;

• the timing and success of new product and service introductions by us or our competitors or any other competitive developments, including consolidation among our customers or competitors;

• the level of awareness of cybersecurity threats, particularly advanced cyberattacks, and the market adoption of our Falcon platform;

• our ability to successfully expand our business domestically and internationally;

• decisions by organizations to purchase security solutions from larger, more established security vendors or from their primary IT equipment vendors;

• changes in our pricing policies or those of our competitors;

• any disruption in our relationship with channel partners;

• insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our solutions;

• the level of awareness of cybersecurity threats, particularly advanced cyberattacks, and the market adoption of our Falcon platform;

• significant security breaches of, technical difficulties with or interruptions to, the use of our Falcon platform;

• extraordinary expenses such as litigation or other dispute-related settlement payments or outcomes;

• future accounting pronouncements or changes in our accounting policies or practices;

• negative media coverage or publicity;

• political events;

• the amount and timing of operating costs and capital expenditures related to the expansion of our business;

• our ability to successfully expand our business domestically and internationally;

• the amount and timing of operating costs (including new hires), tightening of labor markets and capital expenditures related to the expansion of our business;

• extraordinary expenses such as litigation or other dispute-related settlement payments or outcomes;

• increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates;

• significant natural disasters and other catastrophic events, including the occurrence of a contagious disease or illness, such as COVID-19.

Furthermore, our business and revenues are impacted by global economic and geopolitical conditions.

Volatile financial markets, inflation, rising interest rates, supply chain challenges, political turmoil and other disruptions to global and regional economies and markets continue to add uncertainty to macroeconomic conditions.

Any continued or further uncertainty, weakness or deterioration in economic conditions or the geopolitical environment could harm our business and results of operations.

• future accounting pronouncements or changes in our accounting policies or practices;

• deteriorating or volatile conditions in the global economy and financial markets, including as a result of weak or negative gross domestic product growth, uncertainty or disruptions in the capital and credit markets, changing interest rates, inflation, bank failures or adverse conditions impacting financial institutions, and supply-chain disruptions;

• political events, geopolitical unrest or tension, acts of war and terrorism.

In addition, we experience seasonal fluctuations in our financial results as we typically receive a higher percentage of our annual orders from new customers, as well as renewal orders from existing customers, in the second half of the fiscal year as compared to the first half of the year due to the annual budget approval process of many of our customers.

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If these reviews are negative, or less positive as compared to those of our competitors’ products, our brand may be adversely affected.

Our solutions may fail to detect or prevent threats in any particular

test for a number of reasons that may or may not be related to the efficacy of our solutions in real world environments.

Our solutions may fail to detect or prevent threats in any particular test for a number of reasons that may or may not be related to the efficacy of our solutions in real world environments.

To the extent potential customers, industry analysts or testing firms believe that the occurrence of a failure to detect or prevent any particular threat is a flaw or indicates that our solutions or services do not provide significant value, we may lose customers, and our reputation, financial condition and business would be harmed.

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Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our channel partners and in training our channel partners to independently sell and deploy our Falcon platform.

If we fail to effectively manage our existing sales channels, or if our channel partners are unsuccessful in fulfilling the orders for our solutions, or if we are unable to enter into arrangements with, and retain a sufficient number of, high quality channel partners in each of the regions in which we sell solutions and keep them motivated to sell our products, our ability to sell our products and results of operations will be harmed.

If we fail to effectively manage our existing sales channels, or if our channel partners are unsuccessful in fulfilling the orders for our solutions, or if we are unable to enter into

arrangements with, and retain a sufficient number of, high quality channel partners in each of the regions in which we sell solutions and keep them motivated to sell our products, our ability to sell our products and results of operations will be harmed.

Our international operations and plans for future international expansion expose us to significant risks, and failure to manage those risks could adversely impact our business.

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We may need to raise additional capital to expand our operations and invest in new solutions, which capital may not be available on terms acceptable to us, or at all, and which could reduce our ability to compete and could harm our business.

We expect that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months.

Retaining or expanding our current levels of personnel and products offerings may require additional funds to respond to business challenges, including the need to develop new products and enhancements to our Falcon platform, improve our operating infrastructure, or acquire complementary businesses and technologies.

Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products could reduce our ability to compete and could harm our business.

We expect that our existing cash and cash equivalents and short-term investments will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months.

Retaining or expanding our current levels of personnel and product and service offerings may require additional funds to respond to business challenges, including the need to develop new products or services and enhancements to our Falcon platform, improve our operating infrastructure, or acquire complementary businesses and technologies.

Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products or services could reduce our ability to compete and could harm our business.

Accordingly, we may need to engage in additional equity or debt financings to secure additional funds.

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If we experience any of these effects in connection with future growth, it could impair our ability to attract new customers, retain existing customers and expand their use of our Falcon platform, all of which would adversely affect our business, financial condition and results of operations.

Public health crises, such as the COVID-19 pandemic could adversely affect our business, operating results and future revenue.

We are subject to public health crises, such as the COVID-19 pandemic, which has impacted and continues to impact worldwide economic activity and financial markets.

We have previously taken and may in the future take precautionary measures intended to mitigate the spread of the COVID-19 virus and minimize the risk to our employees, customers, partners, and the communities in which we operate to respond to developments relating to the pandemic, including developments relating to infection rates, disease variants, vaccination progress and efficacy, and evolving public health guidance.

These measures could, for example, negatively affect our customer success efforts, delay and lengthen our sales cycles, impact our sales and marketing efforts, slow our international expansion efforts, increase cybersecurity risks, and create operational or other challenges, any of which could harm our business and results of operations.

In addition, public health crises may disrupt the operations of our customers and partners for an indefinite period of time.

Some of our customers have been negatively impacted by the COVID-19 pandemic, which could result in delays in accounts receivable collection, or result in decreased technology spending which could negatively affect our revenues.

More generally, the COVID-19 pandemic adversely affected economies and financial markets globally.

Uncertainty caused by public health crises could lead to prolonged economic downturns, which could result in a larger customer churn than we can anticipate and reduce demand for our products and services, in which case our revenues could be significantly impacted.

The lasting impact of the public health crises, including the COVID-19 pandemic, may also exacerbate other risks discussed in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K.

We rely on a limited number of suppliers for certain components of the equipment we use to operate our cloud platform.

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If we experience disruption or delay from our suppliers, we may not be able to obtain supplies or components from alternative suppliers on a timely basis or on terms that are favorable to us, if at all.

The technology industry has recently experienced widespread component shortages and delivery delays, including as a result of geopolitical tensions, the COVID-19 pandemic and natural disasters.

The technology industry has experienced widespread component shortages and delivery delays, including as a result of geopolitical tensions, public health crises and natural disasters.

While we have taken steps to mitigate our supply chain risk, supply chain disruptions and delays could nevertheless adversely impact our operations by, among other things, causing us to delay opening new data centers, delay increasing capacity or replacing defective equipment at existing data centers, and experience increased operating costs.

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We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality procedures and contractual provisions, to establish and protect our intellectual property rights in the United States and abroad, all of which provide only limited protection.

The efforts we have taken to protect our

intellectual property may not be sufficient or effective, and our trademarks, copyrights and patents may be held invalid or unenforceable.

The efforts we have taken to protect our intellectual property may not be sufficient or effective, and our trademarks, copyrights and patents may be held invalid or unenforceable.

Moreover, we cannot assure you that any patents will be issued with respect to our currently pending patent applications in a manner that gives us adequate defensive protection or competitive advantages, or that any patents issued to us will not be challenged, invalidated or circumvented.

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A number of companies in our industry hold a large number of patents and also protect their copyright, trade secret and other intellectual property rights, and companies in the networking and security industry frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights.

For example, in March 2022, Webroot, Inc.

and Open Text, Inc.

filed a lawsuit against us alleging that certain of our products infringe on patents held by them.

As we face increasing competition and grow, the possibility of intellectual property rights claims against us also grows.

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or we may be required to obtain a license, which may not be available on reasonable terms, or at all, to use the relevant technology.

If we are prevented from using certain technology or

intellectual property, we may be required to develop alternative, non-infringing technology, which could require significant time, effort and expense and may ultimately not be successful.

If we are prevented from using certain technology or intellectual property, we may be required to develop alternative, non-infringing technology, which could require significant time, effort and expense and may ultimately not be successful.

Additionally, we may be unable to continue to offer our affected services or features while developing such technology.

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If we are unable to continue to license technology because of intellectual property infringement claims brought by third parties against our licensors or against us, or if we are unable to continue our license agreements or enter into new licenses on commercially reasonable terms, our ability to develop and sell solutions and services containing or dependent on that technology would be limited, and our business could be harmed.

Additionally, if we are unable to license technology from third parties, we may be forced to acquire or develop alternative technology, which we may be unable to do in a commercially feasible manner or at all, and may require us to use alternative technology of lower quality or performance standards.

quality or performance standards.

This could limit or delay our ability to offer new or competitive solutions and increase our costs.

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We are required to comply with stringent, complex and evolving laws, rules, regulations and standards in many jurisdictions, as well as contractual obligations, relating to data privacy and security.

Ensuring that our collection, use, transfer, storage and other processing of personal information complies with such requirements can increase operating costs, impact the development of new products or services, and reduce operational efficiency.

Ensuring compliance with such requirements may increase operating costs, impact our data processing practices and policies and the development of new products or services, and reduce operational efficiency, any of which could adversely affect our business and operations.

In the United States, there are numerous federal, state and local data privacy and security laws, rules, and regulations governing the collection, sharing, use, retention, disclosure, security, transfer, storage and other processing of personal information, including federal and state data privacy and security laws, data breach notification laws, and data disposal laws.

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The United States Congress also has considered, is currently considering, and may in the future consider, various proposals for comprehensive federal data privacy and security legislation, to which we may become subject if passed.

If we are found to have violated applicable laws or regulations, we also may be subject to penalties, fines, damages, injunctions or other outcomes that may adversely affect our operations and financial results.

At the state level, we are subject to laws and regulations such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”).

The CCPA broadly defines personal information and gives California residents expanded privacy rights and protections, such as affording them the right to access and request deletion of their information and to opt out of certain sharing and sales of personal information.

The CCPA also prohibits covered businesses

from discriminating against California residents for exercising any of their CCPA rights.

The CCPA provides for severe civil penalties and statutory damages for violations and a private right of action for certain data breaches that result in the loss of unencrypted personal information.

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Numerous other states have also enacted, or are in the process of enacting or considering, comprehensive state-level data privacy and security laws, rules, and regulations that share similarities with the CCPA.

At least four such laws, in Virginia, Colorado, Connecticut, and Utah, have taken effect, or are scheduled to take effect, in 2023.

Moreover, laws in all 50 U.S.

states require businesses to provide notice under certain circumstances to consumers whose personal information has been disclosed as a result of a data breach.

These state statutes, and other similar state or federal laws that may be enacted in the future, may require us to modify our data processing practices and policies, incur substantial compliance-related costs and expenses, and otherwise suffer adverse impacts on our business.

Internationally, virtually every jurisdiction in which we operate has established its own data privacy and security legal framework with which we must comply.

For example, we are required to comply with the European Union (“EU”) General Data Protection Regulation (“GDPR”), which imposes stringent obligations regarding the collection, control, use, sharing, disclosure and other processing of personal data.

Additionally, following the United Kingdom’s withdrawal from the EU, we also are subject to the U.K.

General Data Protection Regulation (“U.K.

GDPR”), a version of the GDPR as implemented into the laws of the United Kingdom (“U.K.”).

For example, we are required to comply with the European Union (“EU”) General Data Protection Regulation (“GDPR”) and its equivalent in the U.K.

GDPR”), which impose stringent obligations regarding the collection, control, use, sharing, disclosure and other processing of personal data.

While the GDPR and U.K.

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GDPR) or four percent (4%) of annual global revenue, whichever is greater.

The cost of compliance, and the potential for fines and penalties for non-compliance, with GDPR and U.K.

GDPR may have a significant adverse effect on our business and operations.

Legal developments in the European Economic Area (“EEA”), including recent rulings from the Court of Justice of the European Union (“CJEU”) and from various EU member state data protection authorities, have created complexity and uncertainty regarding processing and transfers of personal data from the EEA to the United States and other so-called third countries outside the EEA, including in the context of website cookies.

European data protection authorities have already imposed fines for GDPR violations of up to, in some cases, hundreds of millions of Euros.

Legal developments in the European Economic Area (“EEA”) have created complexity and uncertainty regarding processing and transfers of personal data from the EEA to the United States and other so-called third countries outside the EEA, including in the context of website cookies.

Similar complexities and uncertainties also apply to transfers from the U.K.

to third countries.

While we have taken steps to mitigate the impact on us, such as implementing the European Commission’s standard contractual clauses (“SCCs”), the efficacy and longevity of these mechanisms remains uncertain.

Moreover, in 2021, the European Commission adopted new SCCs, which impose on companies additional obligations relating to personal data transfers out of the EEA, including the obligation to update internal privacy practices, conduct transfer impact assessments and, as required, implement additional security measures.

The new SCCs may increase the legal risks and liabilities under EU laws associated with cross-border data transfers, and result in material increased compliance and operational costs.

While the European Commission announced in March 2022 that an agreement in principle had been reached between EU and U.S.

authorities regarding a new transatlantic data privacy framework, no formal agreement has been finalized, and any such agreement, if formalized, is likely to face challenge at the CJEU.

While we have taken steps to mitigate the impact on us, such as implementing the European Commission’s standard contractual clauses (“SCCs”) and the U.K.’s international Data Transfer Agreement (or the U.K.’s international data transfer addendum that can be used with the SCCs), the efficacy and longevity of these mechanisms remains uncertain.

On July 10, 2023, the European Commission adopted an adequacy decision concluding that the U.S.

ensures an adequate level of protection for personal data transferred from the EU to the U.S.

under the recently adopted EU-U.S.

Data Privacy Framework (followed on October 12, 2023 with the adoption of an adequacy decision in the U.K.

for the U.K.-U.S.

Data Bridge);

however, such new

adequacy decision has been challenged in EU courts, and is likely to face additional challenges.

Moreover, although the U.K.

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data protection regime is reformed in ways that deviate substantially from the GDPR.

Adding further complexity for international data flows, in March 2022, the U.K.

adopted its own International Data Transfer Agreement (“IDTA”) for transfers of personal data out of the U.K.

to so-called third countries, as well as an international data transfer addendum (U.K.

Addendum) that can be used with the SCCs for the same purpose.

The EU has also proposed legislation that would regulate non-personal data and establish new cybersecurity standards, and other countries, including the U.K., may similarly do so in the future.

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GDPR and the data privacy and security laws of other jurisdictions in which we operate, such procedures and controls may not be effective in ensuring compliance or preventing unauthorized transfers of personal data.

Moreover, while we strive to publish and prominently display privacy policies that are accurate, comprehensive, and compliant with applicable laws, rules regulations and industry standards, we cannot ensure that our privacy policies and other statements regarding our practices will be sufficient to protect us from claims, proceedings, liability or adverse publicity

relating to data privacy and security.

Although we endeavor to comply with our privacy policies, we may at times fail to do so or be alleged to have failed to do so.

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Any failure or perceived failure by us to comply with our privacy policies, or applicable data privacy and security laws, rules, regulations, standards, certifications or contractual obligations, or any compromise of security that results in unauthorized access to, or unauthorized loss, destruction, use, modification, acquisition, disclosure, release or transfer of personal information, may result in requirements to modify or cease certain operations or practices, the expenditure of substantial costs, time and other resources, proceedings or actions against us, legal liability, governmental investigations, enforcement actions, claims, fines, judgments, awards, penalties, sanctions and costly litigation (including class actions).

There also has been increased regulatory scrutiny from the SEC with respect to adequately disclosing risks concerning cybersecurity and data privacy.

Such scrutiny from the SEC increases the risk of investigations into the cybersecurity practices, and related disclosures, of companies within its jurisdiction.

Any of the foregoing could harm our reputation, distract our management and technical personnel, increase our costs of doing business, adversely affect the demand for our products and services, and ultimately result in the imposition of liability, any of which could have a material adverse effect on our business, financial condition and results of operations.

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In certain jurisdictions, these regulatory requirements may be more stringent than in the United States.

Increased scrutiny of technologies like AI may also become subject to regulation under new laws or new applications of existing laws, such as the AI Act being considered in the EU.

Noncompliance by us, our employees, representatives, contractors, channel partners, agents, intermediaries, or other third parties with applicable regulations or requirements could subject us to:

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These laws and regulations impose added costs on our business, and failure by us, our employees, representatives, contractors, channel partners, agents, intermediaries, or other third parties to comply with these or other applicable regulations and requirements could lead to claims for damages, penalties, termination of contracts, loss of exclusive rights in our intellectual property and temporary suspension or permanent debarment from government contracting.

Any such damages, penalties, disruptions or limitations in our ability to do business with customers, including those in the public sector, could result in reduced sales of our products, substantial product inventory write-offs, reputational damage, penalties, and other sanctions, any of which could harm our business, reputation, and results of operations.

We are subject to laws and regulations, including governmental export and import controls, sanctions, and anti-corruption laws, that could impair our ability to compete in our markets and subject us to liability if we are not in full compliance with applicable laws.

We are subject to laws and regulations, including governmental export controls, that could subject us to liability or impair our ability to compete in our markets.

Our products are subject to U.S.

export controls, including the U.S.

Department of Commerce’s Export Administration Regulations, and we and our employees, representatives, contractors, agents, intermediaries, and other third parties are also subject to various economic and trade sanctions regulations administered by the U.S.

Any such damages, penalties, disruptions or limitations in our ability to do business with customers, including those in the public sector, could result in reduced sales of our products or services, substantial product inventory write-offs, reputational damage, penalties, and other sanctions, any of which could harm our business, reputation, and results of operations.

We are subject to governmental export controls and economic sanctions laws that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.

Our products, services and business activities, including our collection of information about cyber threats, are subject to various restrictions under U.S.

export controls and trade and economic sanctions laws, including the U.S.

Commerce Department’s Export Administration Regulations and economic and trade sanctions regulations maintained by the U.S.

Treasury Department’s Office of Foreign Assets Control.

We incorporate standard encryption algorithms into our products, which, along with the underlying technology, may be exported outside of the U.S.

only with the required export authorizations, including by license, license exception or other appropriate government authorizations, which may require the filing of an encryption registration and classification request.

Furthermore, U.S.

export control laws and economic sanctions prohibit the shipment of certain cloud-based solutions to countries, governments, and persons targeted by U.S.

We also collect information about cyber threats from open sources, intermediaries, and third parties, which we use and make available to our customers in our threat industry publications.

Although we take precautions and have implemented certain procedures to prevent our information collection practices and services from being provided in violation of applicable laws and regulations, our information collection practices and services may have been in the past, and could in the future be, provided in violation of such laws and regulations.

In addition, we cannot assure you that third parties, many of whom we do not control, have complied with all such laws or regulations.

Failure by our employees, representatives, contractors, agents, intermediaries, or other third parties to comply with such laws and regulations in the collection of this information could adversely affect us, through reputational harm, loss of access to certain markets, government investigations, and civil and criminal penalties.

Various countries regulate the import of certain encryption technology, including through import permit and license requirements, and have enacted laws that could limit our ability to distribute our products or could limit our customers’ ability to implement our products in those countries.

export control laws and U.S.

economic sanctions laws include prohibitions on the sale or supply of certain products and services to U.S.

embargoed or sanctioned countries, governments, persons and entities and also require authorization for the export of encryption items.

In addition, various countries regulate the import of certain encryption technology, including through import and licensing requirements, and have enacted laws that could limit our ability to distribute our products or service or could limit our customers’ ability to implement our service in those countries.

Changes in our products or services or changes in these laws and regulations may create delays in the introduction of our products or services into international markets, prevent our customers with international operations from deploying our products or services globally or, in some cases, prevent the export or import of our products or services to certain countries, governments or persons altogether.

Any decreased use of our products or services or limitation on our ability to export to or sell our products or services in international markets would likely adversely affect our business, financial condition, and operating results.

Obtaining the necessary authorizations, including any required license, for a particular transaction may be time-consuming, is not guaranteed, and may result in the delay or loss of sales opportunities.

Changes in our products or changes in export and import regulations may create delays in the introduction of our products into international markets, prevent our customers with international operations from deploying our products globally or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether.

Any change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential customers with international operations.

Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, results of operations, and financial condition.

We are also subject to the FCPA, the Bribery Act, and other anti-corruption, sanctions, anti-bribery, anti-money laundering and similar laws in the United States and other countries in which we conduct activities.

Anti-corruption and anti-bribery laws, which have been enforced aggressively and are interpreted broadly, prohibit companies and their employees, agents, intermediaries, and other third parties from promising, authorizing, making or offering improper payments or other benefits to government officials and others in the private sector.

We leverage third parties, including intermediaries, agents, and channel partners, to conduct our business in the U.S.

and abroad, to sell subscriptions to our Falcon platform and to collect information about cyber threats.

We and these third-parties may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners, agents, intermediaries, and other third parties, even if we do not authorize such activities.

While we have policies and procedures to address compliance with the FCPA, the Bribery Act and other anti-corruption, sanctions, anti-bribery, anti-money laundering and similar laws, we cannot assure you that they will be effective, or that all of our employees, representatives, contractors,

channel partners, agents, intermediaries, or other third parties have taken, or will not take actions, in violation of our policies and applicable law, for which we may be ultimately held responsible.

If we fail to comply with these laws and regulations, we and certain of our employees could be subject to civil or criminal penalties, including the possible loss of export privileges and monetary penalties.

Although we take precautions to prevent our products or services from being provided in violation of such laws, our products or services may have been in the past, and could in the future be, provided in violation of such laws, despite the precautions we take.

This could result in negative consequences to us, including government investigations, penalties and harm to our reputation.

We are subject to anti-corruption, anti-bribery and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.

We are subject to the U.S.

Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), the U.K.

Bribery Act 2010 and other anti-corruption, anti-bribery, anti-money laundering and similar laws in the United States and other countries in which we conduct activities.

Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and their employees and agents from promising, authorizing, making or offering improper payments or other benefits to government officials and others in the private sector.

As we increase our international sales and business, our risks under these laws may increase.

Noncompliance with these laws could subject us to investigations, severe criminal or civil sanctions, settlements, prosecution, loss of export privileges, suspension or debarment from U.S.

government contracts, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, whistleblower complaints, adverse media coverage and other consequences.

Any investigations, actions or sanctions could harm our reputation, business, results of operations and financial condition.

In addition, we use channel partners, agents and other third-parties to sell our products or conduct business on our behalf.

We or such third parties may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and under certain circumstances we could be held liable for the corrupt or other illegal activities of such partners, and our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities.

We have implemented an anti-corruption compliance program but cannot ensure that all our employees and agents, as well as those companies to which we outsource certain of our business operations, will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible.

Noncompliance with the FCPA, other applicable anti-corruption, anti-bribery, or anti-money laundering laws could subject us to investigations, whistleblower complaints, sanctions, settlements, prosecution, and other enforcement actions within the U.S.

and internationally.

Any violation of these laws could result in disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage, loss of export privileges, severe criminal or civil sanctions, suspension or debarment from U.S.

government contracts and other consequences, any of which could have a material adverse effect on our reputation, business, results of operations, and financial condition.

Some of our technology incorporates “open source” software, which could negatively affect our ability to sell our Falcon platform and subject us to possible litigation.

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• requiring us to satisfy indemnification obligations to our customers.

We utilize Artificial Intelligence, which could expose us to liability or adversely affect our business.

We incorporate novel uses of AI technologies, including generative AI, into our products and operations.

AI is complex and rapidly evolving, and we face significant competition from other companies as well as an evolving regulatory landscape.

The introduction of AI into new or existing products may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results.

For example, if we do not have sufficient rights to use the data or other material or content on which our AI technologies rely, we may incur liability through the violation of applicable laws, third-party intellectual property, privacy or other rights, or contracts to which we are a party.

AI algorithms may be flawed, insufficient, of poor quality, reflect unwanted forms of bias, or contain other errors or inadequacies, any of which may not be easily detectable.

Our customers or others may rely on or use this flawed content to their detriment, which may expose us to brand or reputational harm, competitive harm, and/or legal liability.

The use of AI presents emerging ethical and social issues, and if we enable or offer solutions that draw scrutiny or controversy due to their perceived or actual impact on customers or on society as a whole, we may experience brand or reputational harm, competitive harm, and/or legal liability.

The technologies underlying AI and its uses are subject to a variety of laws, including intellectual property, privacy, data protection and cybersecurity, consumer protection, competition, and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws.

AI is the subject of ongoing review by various U.S.

governmental and regulatory agencies, and various U.S.

states and other foreign jurisdictions are applying, or are considering applying, their cybersecurity and data protection laws to AI or are considering general legal frameworks for AI, such as the AI Act currently being considered in the EU.

As a fast-evolving and complicated technology subject to significant government attention, AI-related legislation and regulation may be developed and apply to AI in unexpected ways.

We may not be able to anticipate how to respond to or comply with these rapidly evolving frameworks, and we may need to expend resources to adjust our offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions.

Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal, operational or technological risks that may arise relating to the use of AI.

We provide service level commitments under some of our customer contracts.

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A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our products may harm our business and results of operations.

Although we generally have limitation of liability provisions in our terms and conditions of sale, these provisions do not cover our indemnification obligations as described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Indemnification” and they may not fully or effectively protect us from claims as a result of federal, state, or local laws or ordinances, or unfavorable judicial decisions in the United States or other countries.

Although we generally have limitation of liability provisions in our terms and conditions of sale, these provisions do not cover our indemnification obligations and they may not fully or effectively protect us from claims as a result of federal, state, or local laws or ordinances, or unfavorable judicial decisions in the United States or other countries.

The sale and support of our products also entails the risk of product liability claims.

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We may also have to seek a license for the technology.

Such license may not

be available on reasonable terms, if at all, and may significantly increase our operating expenses or may require us to restrict our business activities and limit our ability to deliver certain solutions or features.

Such license may not be available on reasonable terms, if at all, and may significantly increase our operating expenses or may require us to restrict our business activities and limit our ability to deliver certain solutions or features.

We may also be required to develop alternative non-infringing technology, which could require significant effort and expense and/or cause us to alter our products and services, which could harm our business.

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• the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

• announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments;

• announcements by us or our competitors of new products or services or new or terminated significant contracts, commercial relationships or capital commitments;

• industry or financial analyst or investor reaction to our press releases, other public announcements and filings with the SEC;

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• any major changes in our management or our board of directors, particularly with respect to Mr.

• effects of public health crises, pandemics and epidemics, such as COVID-19;

• effects of public health crises, pandemics and epidemics;

• general economic conditions and slow or negative growth of our markets;

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In addition, the stock prices of many companies in the technology industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts.

If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations of analysts or public investors, analysts could downgrade our Class A common stock or publish unfavorable

research about us.

If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, our visibility in the financial markets could decrease, which in turn could cause our stock price or trading volume to decline.

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The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock (or options or other securities convertible into or exercisable for our capital stock) prior to our initial public offering, including our executive officers, employees, directors, principal stockholders, and their affiliates, which will limit your ability to influence the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change in control transaction.

Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, which will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.

Future transfers by holders of Class B common stock will generally result in

those shares converting to Class A common stock, which will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.

As of January 31, 2024, our executive officers, directors, one of our current stockholders and its respective affiliates held, in aggregate, 36% of the voting power of our outstanding capital stock.

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As part of our business strategy, we have in the past and expect to continue to make investments in and/or acquire complementary companies, services or technologies.

Our ability as an organization to acquire and integrate other companies,

services or technologies in a successful manner in the future is not guaranteed.

Our ability as an organization to acquire and integrate other companies, services or technologies in a successful manner in the future is not guaranteed.

We may not be able to find suitable acquisition candidates, and we may not be able to complete such acquisitions on favorable terms, if at all.

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The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our stockholders.

The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

The incurrence of indebtedness would result in

increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

Additional risks we may face in connection with acquisitions include:

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Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions.

interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.

The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.

The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions.

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During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination may be uncertain.

In addition, our tax obligations and effective tax rates could be adversely affected, among other things, by (i) changes in the relevant tax, accounting and other laws, regulations, principles and interpretations, including increases in corporate tax rates and greater taxation of international income and changes relating to income tax nexus, (ii) recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, (iii) changes in foreign currency exchange rates, or (iv) changes in the valuation of our deferred tax assets and liabilities.

rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, (iii) changes in foreign currency exchange rates, or (iv) changes in the valuation of our deferred tax assets and liabilities.

We may be audited in various jurisdictions, and such jurisdictions may assess additional taxes, sales taxes and value added taxes against us.

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In addition, the Organization for Economic Cooperation and Development (“OECD”) has published proposals covering a number of issues, including country-by-country reporting, permanent establishment rules, transfer pricing rules, tax treaties, and taxation of the digital economy.

A significant majority of countries in the OECD’s Inclusive Framework have agreed in principle to a proposed solution to address the tax challenges arising from the digitalization of the economy, including joining a two-pillar plan to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate.

The first pillar is focused on the allocation of taxing rights between countries for in-scope multinational enterprises that sell goods and services into countries with little or no local physical presence and is intended to apply to multinational enterprises with global revenue above 20 billion euro and certain other criteria.

The second pillar is focused on developing a global minimum tax rate of at least 15 percent applicable to in-scope multinational enterprises and is intended to apply to multinational enterprises with annual consolidated group revenue in excess of 750 million euro.

On October 8, 2021, the OECD/G20 inclusive framework on Base Erosion and Profit Shifting (the “Inclusive Framework”) published a statement updating and finalizing the key components of a two-pillar plan on global tax reform originally agreed on July 1, 2021, and a timetable for implementation by 2023.

The timetable for implementation has since been extended to 2024 and, with respect to certain components of the plan, to 2025.

Under pillar one, a portion of the residual profits of multinational businesses with global turnover above €20 billion and a profit margin above 10% will be allocated to market jurisdictions where such allocated profits would be taxed.

Under pillar two, the Inclusive Framework has agreed on a global minimum corporate tax rate of 15% for companies with revenue above €750 million, calculated on a jurisdictional basis.

While substantial work remains to be completed by the OECD and national governments on the implementation of these proposals, future tax reform resulting from these developments may result in changes to long-standing tax principles, which could adversely affect our effective tax rate or result in higher cash tax liabilities.

The OECD’s proposed solution envisages new international tax rules and the removal of all Digital Services Taxes (“DST”).

Notwithstanding this, some countries, in the European Union and beyond, continue to operate a DST regime to capture tax revenue on digital services more immediately.

On February 1, 2023, the U.S.

Financial Accounting Standards Board ("FASB") indicated that they believe the minimum tax imposed under pillar two is an alternative minimum tax, and, accordingly, deferred tax assets and liabilities associated with the minimum tax would not be recognized or adjusted for the estimated future effects of the minimum tax but would be recognized in the period incurred.

In addition, the OECD’s proposed solution envisages new international tax rules and the removal of all Digital Services Taxes (“DST”).

Notwithstanding this, some countries, in the European Union and beyond, continue to operate existing DST regimes to capture tax revenue on digital services more immediately.

Such laws may increase our tax obligations in those countries or change the manner in which we operate our business.

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federal and California net operating loss carryforwards of $1.5 billion and $243.9 million, respectively, which may be available to offset future taxable income for income tax purposes.

If not utilized, the federal and California net operating loss carryforwards will begin to expire in fiscal 2031.

The federal net operating losses are carried forward indefinitely, and California net operating loss carryforwards will begin to expire in 2032.

As of January 31, 2024, we had net operating loss carryforwards for other states of $0.8 billion that will begin to expire in fiscal 2025.

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The federal research and development credit carryforwards will begin to expire in 2036, and the California carryforwards are carried forward indefinitely.

As of January 31, 2023, we had aggregate United Kingdom net operating loss carryforwards of $80.9 million, which are carried forward indefinitely.

As of January 31, 2024, we had aggregate United Kingdom net operating loss carryforwards of $78.0 million and Israel net operating loss carryforwards of $51.5 million, which are carried forward indefinitely.

Realization of these net operating loss and research and development credit carryforwards depends on future income, and there is a risk that our existing carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our results of operations.

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We may experience ownership changes in the future as a result of shifts in our stock ownership.

As a result, if we earn net taxable income, our ability to use

our pre-change net operating loss carryforwards to offset U.S.

As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S.

federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

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Sales and use, value added, and similar tax laws and rates vary greatly by jurisdiction.

Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, to us or our customers for the past amounts, and we may be required to collect such taxes in the future.

and we may be required to collect such taxes in the future.

If we are unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, which may adversely affect our results of operations.

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and the provision for income taxes and related deferred taxes.

Additionally, as a result of the global COVID-19 pandemic, many of management’s estimates and assumptions require increased judgment and carry a higher degree of variability and volatility.

Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of industry or financial analysts and investors, resulting in a decline in the market price of our Class A common stock.

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This volatility could be material to our results in any given quarter and may cause our stock price to decline.

Our business is subject to the risks of earthquakes, fire, floods, outbreak of diseases and other natural catastrophic events, and to interruption by man-made problems such as power disruptions, computer viruses, data security breaches or terrorism.

Expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

There is an increasing focus from regulators, certain investors, and other stakeholders concerning environmental, social and governance (“ESG”) matters, both in the United States and internationally.

We have undertaken and expect to continue to undertake certain ESG-related initiatives, goals and commitments, which we have communicated on our website, in our SEC filings and elsewhere.

These initiatives, goals, or commitments could be difficult to achieve and costly to implement.

We could fail to achieve, or be perceived to fail to achieve, our ESG-related initiatives, goals, or commitments.

In addition, we could be criticized for the timing, scope or nature of these initiatives, goals, or commitments, or for any revisions to them.

Stakeholders could also challenge the accuracy, adequacy, or completeness of our ESG-related disclosures.

Our actual or perceived failure to achieve some or all of our ESG-related initiatives, goals, or commitments or maintain ESG practices that meet evolving stakeholder expectations or regulatory requirements could harm our reputation, adversely impact our ability to attract and retain employees or customers and expose us to increased scrutiny from ESG-focused investors, regulatory authorities and others, or subject us to liability.

Damage to our reputation or reduced demand for our products may adversely impact our business, financial condition, or results of operations.

Our business is subject to the risks of catastrophic events, including, but not limited to, natural events such as earthquakes, fire, floods, and the outbreak of diseases, as well as man-made problems such as power disruptions, computer viruses or data security breaches.

Our principal executive offices are located in Austin, Texas, and we also maintain other office locations around the world, including in California and India, that are prone to natural disasters including severe weather and seismic activity.

A significant natural disaster, such as an earthquake, a fire, a flood, or significant power outage and other catastrophic events, including the occurrence of a contagious disease or illness, such as COVID-19, could have a material adverse impact on our business, results of operations, and financial condition.

Natural disasters and other catastrophic events such as COVID-19, could affect our personnel, recovery of our assets, data centers, supply chain, manufacturing vendors, or logistics providers’ ability to provide materials and perform services such as manufacturing products or assisting with shipments on a timely basis.

Natural disasters and other catastrophic events such as public health crises, could affect our personnel, recovery of our assets, data centers, supply chain, manufacturing vendors, or logistics providers’ ability to provide materials and perform services such as manufacturing products or assisting with shipments on a timely basis.

In addition, climate change could result in an increase in the frequency or severity of natural disasters.

In the event that our or our service providers’ information technology systems or manufacturing or logistics abilities are hindered by any of the events discussed above, shipments could be delayed, resulting in missed financial targets, such as revenue and shipment targets, for a particular quarter.

In addition, computer malware, viruses and computer hacking, fraudulent use attempts, and phishing attacks have become more prevalent in our industry, and our internal systems may be victimized by such attacks.

Although we maintain incident management and disaster response plans, in the event of a major disruption caused by a natural disaster or man-made problem, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our development activities, lengthy interruptions in service, breaches of data security and loss of critical data, and our insurance may not cover such events or may be insufficient to compensate us for the potentially significant losses we may incur.

Acts of terrorism and other geopolitical unrest could also cause disruptions in our business or the business of our supply chain, manufacturers, logistics providers, partners, or customers or the economy as a whole.

Any disruption in the business of our supply chain, manufacturers, logistics providers, partners or end-customers could have a significant adverse impact on our financial results.

If our or our service providers’ information technology systems or manufacturing or logistics abilities are hindered by any of the events discussed above, shipments could be delayed, resulting in missed financial targets, such as revenue and shipment targets, for a particular quarter.

In addition, computer malware, viruses and computer hacking, fraudulent use attempts, and phishing attacks have become more prevalent in our industry and may be further enhanced in frequency or effectiveness through threat actors’ use of AI, and our internal systems may be victimized by such attacks.

Although we maintain incident management and disaster response plans, in the event of a major disruption caused by a catastrophic event, such as a natural disaster, or man-made problem, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our development activities, lengthy interruptions in service, breaches of data security and loss of critical data, and our insurance may not cover such events or may be insufficient to compensate us for the potentially significant losses we may incur.

All of the aforementioned risks may be further increased if the disaster recovery plans for us and our suppliers prove to be inadequate.

To the extent that any of the above should result in delays or cancellations of customer orders, or the delay in the manufacture, deployment or shipment of our products, our business, financial condition and results of operations would be adversely affected.

UNRESOLVED STAFF COMMENTS

To the extent that any of the above should result in delays or cancellations of customer orders, delays in the manufacture, deployment or shipment of our products, or delays in the rendering of our services, our business, financial condition and results of operations would be adversely affected.

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