What changed in this filing

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Item 1A. Risk Factors

2023-11-07 compared with 2023-05-11 · 67 added, 59 removed, 377 unchanged (25% of the section changed)

34 unchanged sentences

Any of these developments may adversely affect our revenue, operating results and financial condition.

Furthermore, we maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.

Furthermore, we maintain an allowance for doubtful accounts for estimated credit losses resulting from the inability of our customers to make required payments.

In such cases, we may be required to defer revenue recognition on sales to affected customers.

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The loss of any significant customer or a decline in business with any significant customer would materially and adversely affect our financial condition and results of operations.

The market for customer engagement software is intensely competitive, and our business will be adversely affected if we are unable to successfully compete.

The market for customer engagement software, including generative AI product offerings, is competitive, and our business will be adversely affected if we are unable to successfully compete.

The market for customer engagement software is intensely competitive.

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In addition, we face actual or potential competition from larger software companies such as Microsoft Corporation, Oracle Corporation, salesforce.com Inc., and ServiceNow, Inc., and similar companies that may attempt to sell customer engagement software to their installed base.

We believe competition will continue to be fierce as current competitors increase the sophistication of their offerings and as new participants enter the market.

We believe that competition will continue to be fierce as current competitors increase the sophistication of their offerings and as new participants enter the market.

Many of our current and potential competitors have longer operating histories, larger customer bases, broader brand recognition, and significantly greater financial, marketing and other resources.

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If we are unable to compete successfully, our business will be adversely affected.

We are also investing in AI across the entire company and infusing generative AI capabilities into our product and service offerings.

We expect AI technology and services to be a highly competitive and rapidly evolving market.

We will bear significant development and operational costs to build and support the generative AI capabilities, products, and services necessary to meet the needs of our customers.

To compete effectively, we must also be responsive to technological change, potential regulatory developments, and public scrutiny.

Such competitive pressure may cause decreased sales volumes, price reductions, and/or increased operating costs, such as for research and development, marketing, and sales activities.

This may lead to lower revenue, gross margins, and operating income.

In addition, customers are currently assessing their AI utilization strategy, so it is difficult to estimate with any reasonable degree of precision the impact of generative AI product offerings on our future revenue or expected demand for our products.

If we fail to expand and improve our sales performance and marketing activities, or retain our sales and marketing personnel, we may be unable to grow our business, which could negatively impact our operating results and financial condition.

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These risks in turn could cause our operating results and financial condition to suffer.

We derived 22% and 27% of our revenue from combined Europe, Middle East, and Africa sales during three months ended March 31, 2023 and 2022, respectively.

We derived 23% and 28% of our revenue from combined Europe, Middle East,

and Africa sales during the nine months ended March 31, 2023 and 2022, respectively.

In addition to those discussed elsewhere in this section, our combined Europe, Middle East, and Africa sales operations are subject to a number of specific risks, such as:

We derived 21% and 23% of our revenue from our EMEA sales during three months ended September 30, 2023 and 2022, respectively.

In addition to those discussed elsewhere in this section, our EMEA sales operations are subject to a number of specific risks, such as:

● general economic conditions in each country or region in which we do or plan to do business;

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Any of the above risks could adversely affect our international operations, reduce our revenue from customers outside of the United States or increase our operating costs, each of which could adversely affect our business, results of operations, financial condition, and growth prospects.

As of March 31, 2023 approximately 44% of our workforce was employed in India.

As of September 30, 2023 approximately 46% of our workforce was employed in India.

Of our employees in India, 51% are allocated to research and development.

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We currently serve our customers from third-party data center facilities operated by third parties in the United States and other international locations.

Any damage to, or failure of, our systems generally could interrupt

service or impair the use or functionality of our cloud operations .

Any damage to, or failure of, our systems generally could interrupt service or impair the use or functionality of our cloud operations .

In addition, as we continue to increase the number of customers and users on our cloud operations , we will need to increase the capacity of our data center infrastructure.

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Changes in customer and Internet user requirements and preferences, frequent new product and service introductions embodying new technologies and the emergence of new industry standards and practices such as but not limited to security standards could render our services and our proprietary technology and systems obsolete.

The rapid evolution of these products and services will require that we continually improve the performance, features and reliability of our services.

The rapid evolution of these products and services will require that

we continually improve the performance, features and reliability of our services.

Our success will depend, in part, on our ability to:

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Certain questions regarding the safe harbor under the DMCA and the CDA have yet to be litigated, and we cannot guarantee that we will meet the safe harbor requirements of the DMCA or of the CDA.

If we are not covered by a safe harbor, for any reason, we could be exposed to claims, which could be costly and time-consuming to defend.

not covered by a safe harbor, for any reason, we could be exposed to claims, which could be costly and time-consuming to defend.

If our cybersecurity systems or the systems of our vendors, partners and suppliers are breached and unauthorized access is obtained to a customer’s data or our data or IT systems, our service may be perceived as not being secure, customers may curtail or stop using our service and we may incur significant legal and financial exposure and liabilities.

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The techniques used to effect unauthorized penetration of computer systems are constantly evolving and have been increasing in sophistication.

While we have security measures in

place that are designed to protect customer information and prevent data loss and other security breaches, these security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers (which may involve nation states and individuals sponsored by them), employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our customers’ data or our data, including our intellectual property and other confidential business information, or our IT systems.

While we have security measures in place that are designed to protect customer information and prevent data loss and other security breaches, these security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers (which may involve nation states and individuals sponsored by them), employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our customers’ data or our data, including our intellectual property and other confidential business information, or our IT systems.

Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our customers’ data or our data or IT systems.

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We have in the past relied on adherence to the U.S.

Department of Commerce’s Safe Harbor Privacy Principles, the U.S.- EU and–U.S.

– Swiss Safe Harbor Frameworks, and their successors, the EU-U.S.

Department of Commerce’s Safe Harbor Privacy Principles, the U.S.- EU and U.S.-Swiss Safe Harbor Frameworks, and their successors, the EU-U.S.

and Swiss-U.S.

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However, as a result of the October 6, 2015 EU Court of Justice (ECJ), opinion in Case C-362/14 (Schrems v.

Privacy Shield Framework, both frameworks are no longer deemed to constitute a valid method of compliance with restrictions set forth in European law regarding the transfer of data outside of the EEA.

Data Protection Commissioner) regarding the adequacy of the U.S.-EU Safe Harbor Framework, and the July 16, 2020 ECJ judgment in Case C-311/18 (Data Protection Commissioner v Facebook Ireland Limited and Maximillian Schrems) regarding the adequacy of the Privacy Shield Framework, both frameworks are no longer deemed to constitute a valid method of compliance with restrictions set forth in European law regarding the transfer of data outside of the EEA.

We are therefore required to rely on alternative mechanisms permitted under European law, such as consent and approved standard contractual clauses.

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Our publication of our privacy policy and other public statements that provide promises and assurances about privacy and security can subject us to potential governmental action if they are found to be deceptive or misrepresentative of our practices.

Further, the costs of compliance with, and other burdens imposed by, such laws, regulations and policies that are applicable to us may limit the use and adoption of our products and solutions and could have a material adverse impact on our results of operations.

Further, t he costs of compliance with, and other burdens imposed by, such laws, regulations and policies that are applicable to us may limit the use and adoption of our products and solutions and could have a material adverse impact on our results of operations.

Privacy concerns and laws, evolving regulation of cloud computing and other domestic or foreign regulations may limit the use and adoption of our solutions and adversely affect our business.

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The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

New York enacted the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act), which became effective March 2020 and requires companies with data relating to New Yorkers to adopt comprehensive cybersecurity programs.

On November 3, 2020, California passed the California Privacy Rights Act (CPRA), which became effective on January 1, 2023 and amends and expands the CCPA, including the introduction of sensitive personal information as a new regulated dataset in California that is subject to new disclosure and purpose limitation requirements.

Additionally, the Virginia Consumer Data Protection Act (VCDPA) became effective on January 1, 2023,

the Colorado Privacy Act and the Connecticut Data Privacy Act both become effective on July 1, 2023, and the Utah Consumer Privacy Act will become effective on December 31, 2023.

Furthermore, New York enacted the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act), which became effective March 2020 and requires companies with data relating to New Yorkers to adopt comprehensive cybersecurity programs.

Aspects of the CCPA, CPRA and other laws remain unclear and we may be required to modify our practices further in an effort to comply with them.

These statutes may increase our compliance costs and potential liability.

Some observers have noted that the CCPA and the SHIELD Act could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

Furthermore, India has recently proposed enacting its own data protection legislation although the specifics of this are yet to be decided.

Furthermore, on August 11, 2023, India’s Digital Personal Data Protection Bill (DPDP) received presidential assent after passing both houses of India’s legislature but there has been no official slated implementation date.

DPDP applies to personal data processed within India and personal data outside the territory of India if such processing is in connection with any activity related to offering of goods or services to data subjects.

We will continue to monitor developments related to new privacy laws which will require us to incur additional costs and expenses in an effort to monitor and comply with such laws.

In addition to government activity, privacy advocacy and other industry groups have established or may establish new self-regulatory standards that may place additional burdens on us.

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We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S.

Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S.

Foreign Corrupt Practices Act of 1977, as amended, the U.S.

domestic bribery statute contained in 18 U.S.C.

§ 201, the U.S.

Travel Act, the USA PATRIOT Act, the U.K.

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

Travel Act, the USA PATRIOT Act, the UK Bribery Act 2010, and other anti-corruption, anti-bribery, and anti-money laundering laws in 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.

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If we are unable to comply with these guidelines or controls, or if our customers are unable to obtain regulatory approval to use our service where required, our business may be harmed.

In addition, an inability to satisfy the standards of certain voluntary third-party certification bodies that our customers may expect, such as an attestation of compliance with the PCI Data Security Standards, may have an adverse impact on our business.

In addition, an inability to satisfy the standards of certain voluntary third-

party certification bodies that our customers may expect, such as an attestation of compliance with the PCI Data Security Standards, may have an adverse impact on our business.

If we are unable to achieve or maintain these industry-specific certifications or other requirements or standards relevant to our customers, it could adversely affect our ability to provide our services to certain customers and harm our business.

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Any failure or perceived failure by us to comply with such requirements could have an adverse impact on our business.

We face risks related to health epidemics, including the COVID-19 pandemic, which could have a material adverse effect on our business, financial condition and results of operations .

The COVID-19 pandemic has created significant worldwide uncertainty, volatility and economic disruption.

The ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic, the severity of the disease and outbreak, the impact of new strains or resurgence of the virus, future and ongoing actions that may be taken by governmental authorities, the impact on the businesses of our customers and partners, and the length of its impact on the global economy, which are uncertain and are difficult to predict at this time.

The potential effects of the COVID-19 pandemic, each of which could adversely affect our business, results of operations, financial condition and cash flows, include:

● the rate of IT spending and the ability of our customers to purchase our offerings could be adversely impacted.

Further, the impact of the COVID-19 pandemic could delay prospective customers’ purchasing decisions and cause them to become less inclined to trade-up from existing solutions, impact customers’ pricing expectations for our offerings, lengthen payment terms, reduce the value or duration of their subscription contracts, or adversely impact renewal rates;

● we could experience disruptions in our operations as a result of office closures, risks associated with our employees returning to work remotely, a significant portion of our workforce suffering illness and travel restrictions.

Starting in early 2020, we temporarily closed our offices, instituted a global remote work mandate and instituted significant travel restrictions.

While we have begun to re-open our offices, the vast majority of our employees are on a hybrid work model.

We have implemented significant new safety protocols, which may limit the effectiveness and productivity of our employees;

● we may be unable to collect amounts due on billed and unbilled revenue if our customers or partners delay payment or fail to pay us under the terms of our agreements as a result of the impact of the COVID-19 pandemic on their businesses, including their seeking bankruptcy protection or other similar relief.

As a result, our cash flows could be adversely impacted, which could affect our ability to fund future product development and acquisitions or return capital to shareholders;

● we may experience disruptions or delays to our supply chain or fulfillment and delivery operations as a result of the COVID-19 pandemic;

● our marketing effectiveness and demand generation efforts may be impacted due to the cancelling of customer events or shifting events to virtual-only experiences.

We may need to postpone or cancel other customer, employee or industry events or other marketing initiatives in the future;

● our business is dependent on attracting and retaining highly skilled employees, and our ability to attract and retain such employees may be adversely impacted by intensified restrictions on travel, immigration, or the availability of work visas during the COVID-19 pandemic;

● increased cyber incidents during the COVID-19 pandemic and our increased reliance on a remote workforce could increase our exposure to potential cybersecurity breaches and attacks;

● our results of operations are subject to fluctuations in foreign currency exchange rates, which risks may be heightened due to increased volatility of foreign currency exchange rates as a result of COVID-19.

Further, our forecasted revenue, operating results and cash flows could vary materially from those we provide as guidance or from those anticipated by investors and analysts if the assumptions on which we base our financial projections are inaccurate as a result of the unpredictability of the impact that the COVID-19 pandemic will have on our businesses, our customers’ and partners’ businesses and the global markets and economy or we make changes to our licensing programs or payment terms in connection with COVID-19.

Even though the COVID-19 pandemic has presumably subsided, we may continue to experience an adverse impact to our business and the value of our securities as a result of its global economic impact, including any recession that has occurred or may occur in the future.

There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a pandemic, and, as a result, the ultimate impact of COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.

We do not yet know the full extent of COVID-19’s impact on our business, our operations, or the global economy as a whole.

However, the effects could have a material impact on our results of operations, and we will continue to monitor the situation closely.

To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in this “Risk Factors” section.

Changes to current accounting policies could have a significant effect on our reported financial results or the way in which we conduct our business.

Generally accepted accounting principles and the related accounting pronouncements, implementation guidelines and interpretations for some of our significant accounting policies are highly complex and require subjective judgments and assumptions.

Some of our more significant accounting policies that could be affected by changes in the accounting rules and the related implementation guidelines and interpretations include:

● recognition of revenue;

● contingencies and litigation;

● accounting for income taxes.

Changes in these or other rules, or scrutiny of our current accounting practices, or a determination that our judgments or assumptions in the application of these accounting principles were incorrect, could have a significant adverse effect on our reported operating results or the way in which we conduct our business.

Risks Related to Intellectual Property

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The laws of some foreign countries may not be as protective of intellectual property rights as those in the U.S., and mechanisms for enforcement of intellectual property rights may be inadequate.

Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

We might be required to spend significant resources to monitor and protect our intellectual property rights.

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These royalty or license agreements, if required, may not be available on acceptable terms, if at all, in the event of a successful claim of infringement.

The AI technology and features incorporated into our solution include new and evolving technologies that may present both legal and business risks

Concerns relating to the responsible use of generative AI in our products and services may result in reputational and financial harm and liability and may cause us to incur costs to resolve such issues.

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

The incorporation of AI-powered features into our products and services may subject us to new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other complications.

Intellectual property ownership and license rights, including copyright, surrounding AI technologies has not been fully addressed by federal or state laws or by U.S.

courts, and the manner in which we configure and use AI technologies may expose us to claims of copyright infringement or other intellectual property misappropriation.

It is possible that new laws and regulations will be adopted in the United States and in other countries, or that existing laws and regulations will be interpreted in ways that would affect the operation of our products and services and the way in which we use AI.

Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could harm our business, reputation, financial condition, and results of operations.

If we enable or offer solutions that draw controversy due to their perceived or actual impact on society, such as AI solutions that have unintended consequences or are controversial because of their impact on human rights, privacy, employment, or other social, economic, or political issues, or if we are unable to develop effective internal policies and frameworks relating to the responsible development and use of AI models and systems offered through our sales channels, we may experience brand or reputational harm, competitive harm or legal liability.

Compliance with government regulation in the area of AI ethics may also increase the cost of related research and development, and changes in AI-related regulation could disproportionately impact and disadvantage us and require us to change our business practices, which may negatively impact our financial results.

Our failure to address concerns relating to the responsible use of AI by us or others could undermine public confidence in AI and slow adoption of AI in our products and services or cause reputational harm.

Uncertainty around new and emerging AI applications such as generative AI content creation may require additional investment in the development of proprietary datasets, machine learning models and systems to test for accuracy, bias and other variables, which are often complex, may be costly and could impact our profit margin if we decide to expand generative AI into our product offerings.

We face risks related to pandemic and public health emergencies which could have a material adverse effect on our business, financial condition and results of operations .

Pandemics, such as the COVID-19 pandemic, and other public health emergencies, and preventative measures taken to contain or mitigate such crises have caused, and may in the future cause, business slowdown or shutdown in affected areas and significant disruption in the financial markets, both globally and in the United States.

These events have led to and could again lead to adverse impacts to our business, results of operations, financial conditions, and cash flows.

We cannot predict whether, and to what degree, our sales, operations and financial results could in the future be affected by the pandemic and preventative measures.

● Risks presented by pandemics and other public health emergencies include, but are not limited to:

the rate of information technology spending and the ability of our customers to purchase our offerings could be adversely impacted.

Further, the impact of a pandemic or public health emergency could delay prospective customers’ purchasing decisions and cause them to become less inclined to trade-up from existing solutions, impact customers’ pricing expectations for our offerings, lengthen payment terms, reduce the value or duration of their subscription contracts, or adversely impact renewal rates;

● increased cyber incidents during a pandemic or public health emergency and our increased reliance on a remote workforce could increase our exposure to potential cybersecurity breaches and attacks;

Further, our forecasted revenue, operating results and cash flows could vary materially from those we provide as guidance or from those anticipated by investors and analysts if the assumptions on which we base our financial projections are inaccurate as a result of the unpredictability of the impact that a pandemic or public health emergency will have on our businesses, our customers’ and partners’ businesses and the global markets and economy or we make changes to our licensing programs or payment terms in connection with a pandemic or public health emergency.

We cannot reasonably predict the ultimate impact of any pandemic or public health emergency, including the extent of any adverse impact on our business, results of operations and financial condition, which will depend on, among other things, the duration and spread of the pandemic or public health emergency, the impact of governmental regulations that have been, and may continue to be, imposed in response, the effectiveness of actions taken to contain or mitigate the outbreak, the availability, safety and efficacy of vaccines, including against emerging variants of the infectious disease, and global economic conditions.

Additionally, disruptions have in the past made it more challenging to compare our performance, including our revenue growth and overall profitability, across quarters and fiscal years, and could have this effect in the future.

To the extent a pandemic or public health emergency adversely affects our business, results of operations, financial conditions, and cash flows, it may also heighten many of the other risks described in this “Risk Factors” section.

General Risk Factors

Changes to current accounting policies could have a significant effect on our reported financial results or the way in which we conduct our business.

Some of our more significant accounting policies that could be affected by changes in the accounting rules and the related implementation guidelines and interpretations include:

● recognition of revenue;

● contingencies and litigation;

● accounting for income taxes.

Our stock price has demonstrated volatility and continued market conditions may cause declines or fluctuations.

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Our insiders who are significant stockholders have the ability to exercise significant control over matters requiring stockholder approval, including the election of our board of directors, and may have interests that conflict with those of other stockholders.

Our directors and executive officers, together with their affiliates and members of their immediate families, beneficially owned, in the aggregate, approximately 31% of our outstanding capital stock as of March 31, 2023, of which our Chief Executive Officer, Ashutosh Roy, beneficially owned approximately 27% as of such date.

Our directors and executive officers, together with their affiliates and members of their immediate families, beneficially owned, in the aggregate, approximately 32% of our outstanding capital stock as of September 30, 2023, of which our Chief Executive Officer, Ashutosh Roy, beneficially owned approximately 28% as of such date.

As a result of these concentrated holdings, Mr.

1 unchanged sentence

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

What changed 10-Q

Item 1A. Risk Factors