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Item 1A. Risk Factors

2021-03-01 compared with 2020-02-27 · 493 added, 399 removed, 451 unchanged (66% of the section changed)

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If any of the following risks or other risks actually occur, our business, financial condition, results of operations, and future prospects could be materially harmed, and the price of our common stock could decline.

Risks Related to Our Business and Industry

Risk Factors Summary

The following is a summary of the principal risks that could adversely affect our business, financial condition, results of operations, and future prospects.

• Our quarterly and annual results may fluctuate significantly, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock.

• If we are unable to attract new clients or sell additional services and functionality to our existing clients, our revenue and revenue growth will be harmed.

• Our recent rapid growth may not be indicative of our future growth, and if we continue to grow rapidly, we may fail to manage our growth effectively.

• Failure to adequately retain and expand our direct sales force will impede our growth.

• If we fail to manage our technical operations infrastructure, our existing clients may experience service outages, our new clients may experience delays in the deployment of our solution and we could be subject to, among other things, claims for credits or damages.

• Our growth depends in part on the success of our strategic relationships with third parties and our failure to successfully maintain, grow and manage these relationships could harm our business.

• We have established, and are continuing to increase, our network of master agents and resellers to sell our solution;

our failure to effectively develop, manage, and maintain this network could materially harm our revenues.

• Adverse economic conditions may harm our business.

• The effects of the COVID-19 pandemic have materially affected how we, our clients and business partners are operating, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

• Security breaches and improper access to or disclosure of our data or our clients’ data, or other cyber attacks on our systems, could result in litigation and regulatory risk, harm our reputation and our business.

• We may acquire other companies, or technologies or be the target of strategic transactions, or be impacted by transactions by other companies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.

• The markets in which we participate involve numerous competitors and are highly competitive, and if we do not compete effectively, our operating results could be harmed.

• If our existing clients terminate their subscriptions or reduce their subscriptions and related usage, our revenues and gross margins will be harmed and we will be required to spend more money to grow our client base.

• We sell our solution to larger organizations that require longer sales and implementation cycles and often demand more configuration and integration services or customized features and functions that we may not offer, any of which could delay or prevent these sales and harm our growth rates, business and operating results.

• Because a significant percentage of our revenue is derived from existing clients, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern.

• We rely on third-party telecommunications and internet service providers to provide our clients and their customers with telecommunication services and connectivity to our cloud contact center software and any failure by these service providers to provide reliable services could cause us to lose clients and subject us to claims for credits or damages, among other things.

• We have a history of losses and we may be unable to achieve or sustain profitability.

• The contact center software solutions market is subject to rapid technological change, and we must develop and sell incremental and new products in order to maintain and grow our business.

• We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.

• Failure to comply with laws and regulations could harm our business and our reputation.

• We may not have sufficient cash to service our convertible senior notes and repay such notes, if required.

Risks Related to COVID-19

The effects of the COVID-19 pandemic have materially affected how we, our clients and business partners are operating, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

In December 2019, a novel coronavirus disease known as COVID-19 was reported and on March 11, 2020, the World Health Organization, or WHO, characterized COVID-19 as a pandemic.

This pandemic has resulted in a widespread health crisis that has continued to significantly harm the U.S.

and global economies and has caused significant fluctuation in financial markets, including those on which our common stock and other securities trade, and may impact demand for our solution.

In accordance with the various social distancing and other office closure orders and recommendations of applicable government agencies, all of our employees have transitioned to work-from-home operations and we have canceled all business travel by our employees except where necessary and properly authorized, which has changed how we operate our business.

Our clients and business partners are also subject to various and changing social distancing and office closure orders and recommendations and travel restrictions or prohibitions, which have changed the way we interact with our clients and business partners.

Moreover, the conditions caused by the COVID-19 pandemic, the extent of which depends upon its prolonged impact, has or may:

• harm our ability to renew and maintain our relationships with our existing clients;

• cause our existing clients to reduce the number of seats to which they subscribe, seek price concessions, or go out of business, which would harm our revenue;

• result in some of our clients failing to comply with the terms of their agreements, including payment terms, due to economic uncertainty, financial hardship, and even failure of these businesses, which could result in us being required to take action to collect payments, terminate their subscriptions for our solution, increase accounts receivable, and reduce collections, any which would increase our expenses and harm our revenues and results of operations;

• make it more difficult for us to sell increased services or functionality to our existing clients;

• reduce the rate of spending on enterprise software solutions or cloud-based enterprise contact center systems generally;

• delay prospective clients’ decisions to subscribe to our solution, increase the length of sales cycles, or slow the typical growth in the use of our solution once clients have initially deployed our solution;

• harm our ability to effectively market and sell our solution, particularly during social distancing and office closure orders;

• change the mix and sizes or types of organizations that purchase our solution;

• delay the introduction of enhancements to our solution and market acceptance of any new features and products;

• harm our ability to grow our international sales and operations;

• harm our ability to recruit, onboard and successfully integrate new employees, including members of our direct sales force, both domestically and internationally, as a result of not being able to interface in person;

• harm our ability to maintain our corporate culture with an employee base temporarily working remotely and facing unique personal and professional challenges;

• increase the burden on our technical operations infrastructure, which could harm the capacity, stability, security and performance of our operations infrastructure and potentially leave us more vulnerable to security breaches;

• increase the risk that we may experience cybersecurity-related events such as COVID-19 themed phishing attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number of cybersecurity threats or attacks, and other security challenges as a result of our employees and service providers continuing to work remotely from non-corporate managed networks during the COVID-19 pandemic, and potentially beyond as remote work and resource access expand;

• limit our ability to efficiently provide professional services to our larger clients, as those services have typically been performed onsite, which could delay implementation of our solution at new clients;

• harm our ability to manage, maintain or increase our network of master agents and resellers to sell our solution, and make it more difficult for them to effectively assist us with their sales efforts;

• impact the health and safety of our employees, including our senior management team, and their ability to perform services;

• cause our management team to continue to commit significant time, attention and resources to monitor the COVID-19 pandemic and seek to mitigate its effect on our business and workforce;

• lead to the adoption of additional new laws and regulations that we are required to comply with and that could harm our results of operations, and we may be subject to COVID-19 related litigation;

• cause the price per share of our common stock or the trading price of our convertible senior notes to continue to experience substantial volatility, and potentially decline, based on developments and announcements related to COVID-19 and its impact on the global and U.S.

economy in general or our industry in particular, our failure to meet our guidance or analyst expectations or withdrawal or modification by us of previously issued guidance.

Any of the foregoing factors could significantly harm our future sales, operating results, gross margins and overall financial performance, which could cause us to experience a decreased level of growth of our business and make our future financial results and prospects difficult to predict.

The COVID-19 pandemic and its impact on us and the U.S.

and global economies could limit our ability to forecast our future operating results, including our ability to predict revenue and expense levels, and plan for and model future results of operations.

Moreover, because a significant portion of our revenue is derived from existing clients, downturns in new sales will not immediately be reflected in our operating results and may be difficult to discern until future periods.

Our competitors could experience different impacts as a result of COVID-19, which could result in changes to our competitive landscape.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the ongoing severity and transmission rate of the virus, the extent and effectiveness of vaccine programs and other containment actions, the duration of social distancing, office closure and other restrictions on businesses and society at large, and the specific impact of these and other factors on our business, employees, clients and partners.

If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.

There are no comparable recent events that provide guidance as to the effect the COVID-19 pandemic may have and, as a result, the ultimate impact of the outbreak on our business and operations is highly uncertain and subject to change.

The effects of the COVID-19 pandemic could have a material impact on our results of operations and increase many of the other risks described herein.

Risks Related to Our Financial Results

Our quarterly and annual results may fluctuate significantly, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock.

Our quarterly and annual results of operations, including our revenues, profitability and cash flow have varied, and may vary significantly in the future, and period-to-period comparisons of our operating results may not be meaningful.

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Factors that may cause fluctuations in our quarterly and annual results include, without limitation:

• market acceptance of our solution;

• market acceptance of our solution, including new features that are added to our solution;

• our ability to attract new clients and grow our business with existing clients;

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• client attrition rates;

• network outages or security incidents, which may result in additional expenses or losses, legal or regulatory actions, the loss of clients, the provision of client credits, and harm to our reputation;

• our ability to make technological advancements and add more features to our solution;

• our ability to adequately expand our sales and service team;

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• the timing and success of new product and feature introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation, partnership or collaboration among competitors, clients or strategic partners;

• our ability to successfully integrate companies, businesses and technology that we acquire and achieve a positive return on our investment;

• general economic, industry and market conditions;

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• the amount and timing of costs and expenses related to our research and development efforts or in the acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies;

• our ability to successfully integrate companies and businesses that we acquire and achieve a positive return on our investment;

• our ability to expand, and effectively utilize, our network of master agents, resellers and systems integrators;

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• advances and trends in new technologies and industry standards.

If we are unable to attract new clients or sell additional services and functionality to our existing clients, our revenue and revenue growth will be harmed.

To increase our revenue, we must add new clients, add additional agent seats and sell additional functionality to existing clients, and encourage existing clients to renew their subscriptions on terms favorable to us.

As our industry matures, as our clients experience seasonal trends in their business, or as competitors introduce lower cost or differentiated products or services that are perceived to compete favorably with ours, our ability to add new clients and renew, maintain or sell additional services to existing clients based on pricing, cost of ownership, technology and functionality could be harmed.

As a result, our existing clients may not renew our agreements or may decrease their number of agent seats, and we may be unable to attract new clients or grow or maintain our business with existing clients, which could harm our revenue and growth.

Furthermore, a portion of our revenue is generated by acquiring domestic and international telecommunications minutes from wholesale telecommunication service providers and reselling those minutes to our clients.

As telecommunications rates continue to decrease, we may not be able to resell more minutes to maintain our level of usage revenue.

Because a significant percentage of our revenue is derived from existing clients, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern.

We generally recognize subscription revenue from clients monthly as services are delivered.

As a result, the vast majority of the subscription revenue we report in each quarter is derived from existing clients.

Consequently, a decline in new subscriptions in any single quarter will likely have only a small impact on our revenue results for that quarter.

However, the cumulative impact of such declines could negatively impact our business and results of operations in future quarters.

Accordingly, the effect of significant downturns in sales and market acceptance of our solution, and potential changes in our pricing policies or renewal rates, will typically not be reflected in our results of operations until future periods.

We also may be unable to adjust our cost structure to reflect the changes in revenue, resulting in lower margins and earnings.

In addition, our subscription model makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new clients will be recognized over time as services are delivered.

Moreover, many of our clients initially deploy our solution to support only a portion of their contact center agents and, therefore, we may not generate significant revenue from these new clients at the outset of our relationship, if at all.

Any increase to our revenue and the value of these existing client relationships will only be reflected in our results of operations as subscription revenue is recognized, and if and when these clients increase the number of agent seats and the number of components of our solution they deploy over time.

Shifts over time or from quarter-to-quarter in the mix of sizes or types of organizations that purchase our solution or changes in the components of our solution purchased by our clients could affect our gross margins and operating results.

Our strategy is to sell our solution to both smaller and larger organizations.

Our gross margins can vary depending on numerous factors related to the implementation and use of our solution, including the features and number of agent seats purchased by our clients and the level of usage and professional services and support required by our clients.

For example, our larger clients typically require more professional services and because our professional services offerings typically have lower margins, any increase in sales of professional services could harm our gross margins and operating results.

We also have lower margins on our usage revenues.

Sales to larger organizations may also entail longer sales cycles and more significant selling efforts and expense.

Selling to smaller clients may involve smaller contract sizes, fewer opportunities to sell additional services, a higher likelihood of contract terminations, lower returns on sales and marketing expense, fewer potential agent seats and greater credit risk and uncertainty.

If the mix of organizations that purchase our solution, or the mix of solution components purchased by our clients, changes unfavorably, our revenues and gross margins could decrease and our operating results could be harmed.

We have a history of losses and we may be unable to achieve or sustain profitability.

We have incurred losses in each annual period since our inception in 2001.

We incurred net losses of $42.1 million, $4.6 million and $0.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020, we had an accumulated deficit of $198.2 million.

These losses and our accumulated deficit reflect the substantial investments we have made, and continue to make, to develop our solution and acquire new clients, among other expenses.

We expect the dollar amount of our costs and expenses to increase in the future as revenue increases, although at a slower rate.

We expect our losses to continue for the foreseeable future as we continue to invest in sales and marketing and research and development and expand our business.

In addition, as a public company, we incur significant legal, accounting and other expenses.

Our historical or recent growth in

revenues is not necessarily indicative of our future performance.

Accordingly, there is no assurance that we will achieve profitability in the future or that, if we do become profitable, we will sustain profitability.

Risks Related to Our Growth

Our recent rapid growth may not be indicative of our future growth, and if we continue to grow rapidly, we may fail to manage our growth effectively.

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• compete with other vendors of cloud-based enterprise contact center systems, including recent market entrants, and with providers of legacy on-premise systems;

• increase our existing clients’ use of our solution and further develop our partner ecosystem;

• strengthen and improve our solution through significant investments in research and development and the introduction of new and enhanced solutions;

• increase our existing clients’ use of our solution, including additional and new features of our solution;

• further develop our partner ecosystem;

• strengthen and improve our solution through significant investments in research and development and the introduction of new and enhanced features and functionality;

• introduce our solution to new markets outside of the United States and increase global awareness of our brand;

• selectively pursue acquisitions that enhance our solution offerings;

• respond to general macro economic factors and industry and market conditions.

• respond to general macro economic factors and industry and market conditions, including the effects of the COVID-19 pandemic.

If we are not successful in achieving these objectives, our ability to grow our revenue may be harmed.

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• our technology infrastructure, including systems architecture, management tools, scalability, availability, performance and security, as well as disaster recovery measures;

• solution development, including investments in our solution development team and the development of new solutions, as well as new applications and features for existing solutions;

• solution development, including investments in our solution development team, the development of new solutions and in the acquisition of companies and technologies to enhance our solution, as well as new applications and features for our existing solution;

• international expansion;

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We anticipate that we will continue to expand our operations and headcount in the near term and beyond.

This growth has placed, and future growth will place, a significant strain on our management, administrative, operational

and financial resources, company culture and infrastructure.

This growth has placed, and future growth will place, a significant strain on our management, administrative, operational and financial resources, company culture and infrastructure.

For example, in the fourth quarter of 2020, we acquired Inference Solutions Inc., or Inference, which will increase the complexity of our operations, administration and infrastructure.

Our success will depend in part on our ability to manage this growth effectively while retaining personnel.

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If we fail to manage our anticipated growth, we will be unable to execute our business plan successfully.

Failure to adequately retain and expand our direct sales force will impede our growth.

Key to our success is the continuity of our direct sales force.

We need to continue to retain key members of our direct sales force while expanding and optimizing our sales infrastructure in order to grow our client base and business.

We plan to continue to expand our direct sales force, both domestically and internationally.

Identifying and recruiting qualified personnel and training them in the use and sale of our solution requires significant time, expense and attention.

It can take several months before our sales representatives are fully trained and productive.

Our business may be harmed if we fail to retain key members of our direct sales force or if our efforts, and the expense incurred, to expand and train our direct sales force do not generate a corresponding increase in revenues.

In particular, if we are unable to hire, develop and retain talented sales personnel or if new sales personnel are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the expected benefits of this investment or increase our revenues.

If we fail to manage our technical operations infrastructure, our existing clients may experience service outages, our new clients may experience delays in the deployment of our solution and we could be subject to, among other things, claims for credits or damages.

Our success depends in large part upon the capacity, stability, security and performance of our operations infrastructure.

From time to time, we have experienced interruptions in service, and may experience such interruptions in the future.

These service interruptions may be caused by a variety of factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in client usage and denial of service issues.

In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time.

Our failure to achieve or maintain expected performance levels, stability and security, particularly as we increase the number of users of our service and the product applications that run on our system, could harm our relationships with our clients, result in claims for credits or damages, damage our reputation, significantly reduce client demand for our solution, cause us to incur significant expense and personnel time replacing and upgrading our infrastructure and harm our business.

We have experienced significant growth in the number of agents seats and interactions that our infrastructure supports.

As the number of agent seats within our client base grows and our clients’ use of our service increases, we need to continue to make additional investments in our capacity to maintain adequate and reliable stability and performance, the availability of which may be limited or the cost of which may be prohibitive, and any failure may cause interruptions in service that may harm our business.

In addition, we need to properly manage our operations infrastructure in order to support version control, changes in hardware and software parameters and the evolution of our solution.

If we do not accurately predict our infrastructure requirements or efficiently improve our infrastructure, our business could be harmed.

Our growth depends in part on the success of our strategic relationships with third parties and our failure to successfully maintain, grow and manage these relationships could harm our business.

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Our competitors may be more successful than we are in establishing or expanding relationships with third parties or may provide incentives to third parties to favor their products over our solution.

Our competitors may also have deeper or broader

relationships with third parties, including products that we do not offer or that are outside our core markets, that could give these competitors an advantage in establishing and maintaining relationships with these third parties.

Our competitors may also have deeper or broader relationships with third parties, including products that we do not offer or that are outside our core markets, that could give these competitors an advantage in establishing and maintaining relationships with these third parties.

These strategic partners may cease to recommend our solution to prospective clients due to actual or perceived lack of features, technological or security issues or failures, reputational concerns, economic incentives, or other factors, which would harm our business, financial condition and operations.

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Our inability to successfully manage and maintain these complex relationships or negotiate sufficient and favorable contractual terms could harm our business.

We have established, and are continuing to increase, our network of master agents and resellers to sell our solution;

our failure to effectively develop, manage, and maintain this network could materially harm our revenues.

We have established, and are continuing to increase, our network of master sales agents, which provide sales leads, and resellers, which sell our solution to new clients.

This network has helped us attract additional clients.

Our resellers have assisted us in expanding in both domestic and international markets.

These master agents and resellers sell, or may in the future decide to sell, solutions for our competitors.

Our competitors may be able to cause our current or potential master agents or resellers to favor their services over ours, either through financial incentives, technological innovation, solution features or performance, by offering a broader array of services to these service providers or otherwise, which could reduce the effectiveness of our use of these third parties.

If we fail to maintain relationships with current master agents and resellers, fail to develop relationships with new master agents and resellers in new and existing markets, if we fail to manage, train, or provide appropriate incentives to our existing master agents and resellers, or if our master agents and resellers are not successful in their sales efforts, sales of our subscriptions may decrease or not grow at an appropriate rate and our operating results could be harmed.

Additionally, in order to effectively utilize our resellers, we must enhance our systems, develop specialized marketing materials and invest in educating resellers regarding our systems, product offerings and services.

Our failure to accomplish these objectives could limit our success in marketing and selling our products.

In addition, identifying new resellers, and negotiating and documenting relationships with them, requires significant time and resources.

As the complexity of our solution and our reseller relationships increases, the management of those relationships and the negotiation of contractual terms sufficient to protect our rights and limit our potential liabilities will become more complicated.

Our inability to successfully manage these complex relationships or negotiate sufficient contractual terms could harm our business.

Adverse economic conditions may harm our business.

Our business depends on the overall demand for cloud contact center software solutions and on the economic health of our current and prospective clients.

In addition to the United States, Canada, the U.K.

and Latin America, we plan to market and sell our solution in other European countries, Asia and other international markets.

If economic conditions, including currency exchange rates, in these areas and other key potential markets for our solution remain uncertain or deteriorate, clients may delay or reduce their contact center and overall information technology spending.

If our clients or potential clients experience economic hardship, this could reduce the demand for our solution, delay and lengthen sales cycles, lower prices for our solution, and lead to slower growth or even a decline in our revenues, operating results and cash flows.

Security breaches and improper access to or disclosure of our data or our clients’ data, or other cyber attacks on our systems, could result in litigation and regulatory risk, harm our reputation and our business.

Our solution involves the storage and transmission of our clients’ information, including information about our clients’ customers or other information treated by our clients as confidential.

Unauthorized access, unauthorized use of our systems, security breaches or other cyber attacks could result in the loss of confidentiality, integrity and availability of such information, leading to litigation, governmental investigations and enforcements actions, indemnity obligations, increased expense, and other liability.

Such incidents could also cause interruptions to the solution we provide, degrade the user experience, or cause clients to lose confidence in our solution.

While we have security measures in place to protect client information and minimize the probability of security breaches and other cyber attacks, if these measures fail as a result of a cyber-attack, other third-party action, employee error, malfeasance or otherwise, and someone obtains unauthorized access to our clients’ information, our reputation could be damaged, our business may suffer and we could incur significant liability.

Because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

In addition, third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access to our data or our users’ data.

Moreover, any failure on the part of third parties, including our clients, to maintain appropriate security measures for their own systems could harm our relationships with our clients, result in claims against us for credits or damages, damage our reputation and significantly reduce client demand for our solution.

Any or all of these issues could harm our ability to attract new clients, cause existing clients to cancel, reduce or not renew their subscriptions, result in reputational damage or subject us to third-party lawsuits, governmental investigations and enforcement actions, regulatory fines or other action or liability, including orders or consent decrees forcing us to modify our business practices, all of which could materially harm our business, reputation or financial results.

The markets in which we participate involve numerous competitors and are highly competitive, and if we do not compete effectively, our operating results could be harmed.

The market for contact center solutions is highly competitive.

Generally, we do not have long-term contracts with our clients and our clients can terminate our service and switch to competitors’ offerings on short notice.

We currently compete with large legacy technology vendors that offer on-premise contact center systems, such as Avaya and Cisco, and legacy on-premise software companies that come from a CTI heritage, such as Aspect and Genesys (including through its acquisition of Interactive Intelligence).

These legacy technology and software companies are increasingly supplementing their traditional on-premise contact center systems with competing cloud offerings, through a combination of acquisitions, partnerships and in-house development.

Additionally, we compete with vendors that historically provided other contact center services and technologies and expanded to offer cloud contact center software such as NICE inContact.

We also face competition from many smaller contact center service providers such as Talkdesk and Seranova, as well as vendors offering unified communications and contact center solutions.

In addition, Amazon and Twilio have introduced solutions aimed at companies who wish to build their own contact centers with in-house developers.

In addition, CRM vendors are increasingly offering features and functionality that were traditionally provided by contact center providers.

CRM vendors also continue to partner with contact center service providers to provide integrated solutions and may, in the future, acquire competitive contact center service providers.

These factors could cause CRM vendors to reduce or terminate their partnerships with us, and could result in increased competition.

Because CRM integration and partnerships are critical to the success of our solution, these factors could harm our revenue and results of operations.

Our actual and potential competitors may enjoy competitive advantages over us, including greater name recognition, longer operating histories and larger marketing budgets, as well as greater financial or technical resources.

With the introduction of new technologies and market entrants, we expect competition to continue to intensify in the future.

Our recent, and any future, acquisitions will subject us to new competitors and cause us to face additional and different competition in the markets served by these businesses.

Some of our competitors can devote significantly greater resources than we can to the development, promotion and sale of their products and services and many have the ability to initiate or withstand substantial price competition.

Current or potential competitors may also be acquired by third parties with significantly greater resources.

In addition, many of our competitors have stronger name recognition, longer operating histories, established relationships with clients, more comprehensive product offerings, larger installed bases and major

distribution agreements with consultants, system integrators and resellers.

Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their product offerings or resources and ability to compete.

If our competitors’ products, services or technologies become more accepted than our solution, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are less expensive or more technologically capable than ours, our revenues could be harmed.

Pricing pressures and increased competition could result in reduced sales and revenues, reduced margins and loss of, or a failure to maintain or improve, our competitive market position, any of which could harm our business.

Our recent growth makes it difficult to evaluate and predict our current business and future prospects.

While we have been in existence since 2001, much of our employee, revenue and operations growth has occurred in recent years.

Our recent growth may make it difficult for investors to evaluate our current business and our future prospects.

We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including increasing and unforeseen expenses as we continue to grow our business.

Our ability to forecast our future operating results is limited and subject to a number of uncertainties, including our ability to predict revenue and expense levels, and plan for and model future growth.

These uncertainties may be exacerbated by the effects of the COVID-19 pandemic.

We have encountered and will continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described in this annual report.

If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change due to adjustments in our markets or our competitors and their product offerings, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.

Risks Related to Our Clients

If we are unable to attract new clients or sell additional seats, functionality and services to our existing clients, our revenue and revenue growth will be harmed.

To increase our revenue, we must add new clients, add additional agent seats and sell additional seats, functionality and services to existing clients, and encourage existing clients to renew their subscriptions on terms favorable to us.

As our industry matures, as our clients experience seasonal trends in their business, or as

competitors introduce lower cost or differentiated products or services that are perceived to compete favorably with ours, our ability to add new clients and renew, maintain or sell additional services to existing clients based on pricing, cost of ownership, technology and functionality could be harmed.

As telecommunications rates continue to decrease, we may not be able to resell more minutes to maintain our level of usage revenue.

If our existing clients terminate their subscriptions or reduce their subscriptions and related usage, our revenues and gross margins will be harmed and we will be required to spend more money to grow our client base.

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or global economy declines;

• our clients’ business declines due to industry cycles, seasonality, business difficulties or other reasons;

• our clients’ business or demand for our services declines due to industry cycles, seasonality, business difficulties or other reasons, including the impact of the COVID-19 pandemic;

• clients favor products offered by other contact center providers, particularly as competition continues to increase;

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• alternative technologies, products or features emerge or gain popularity that we do not provide;

• our clients or potential clients experience financial difficulties.

• our clients or potential clients experience financial difficulties, including as a result of the COVID-19 pandemic.

If our existing clients’ subscriptions and related usage decrease or are terminated, we will need to spend more money to acquire new clients and still may not be able to maintain our existing level of revenues.

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If clients fail to pay us under the terms of our agreements or fail to comply with the terms of our agreements, including compliance with regulatory requirements and intellectual property terms, we may terminate clients, lose revenue, be unable to collect amounts due to us, be subject to legal or regulatory action and incur costs in enforcing the terms of our contracts, including litigation.

Some of our clients may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, seek reimbursement for amounts already paid, or pay those amounts more slowly, which could harm our operating results, financial position and cash flow.

Some of our clients may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, seek reimbursement for amounts already paid, or pay those amounts more slowly, all of which risks may be exacerbated by the effects of the COVID-19 pandemic, and any of which could harm our operating results, financial position and cash flow.

Our business could be harmed if our clients are not satisfied with the professional services and technical support provided by us or our partners.

Our business depends on our ability to satisfy our clients, not only with respect to our solution, but also with the professional services and technical support that are required for our clients to implement and use our solution to address their business needs.

Professional services and technical support may be performed by our own staff or, in a select subset of cases, by third parties.

Our professional services offerings typically have lower margins.

Accordingly, any increase in sales of professional services could harm our gross margins and operating results.

We will need to continue to expand and optimize our professional services and technical support in order to keep up with new client installations and ongoing service, which takes time and expense to implement.

Identifying and recruiting qualified service personnel and training them in our solution is difficult and competitive and requires significant time, expense and attention.

We may be unable to respond quickly enough to accommodate short-term increases in client demand for support services.

We also may be unable to modify the format of our support services or change our pricing to compete with changes in support services provided by our competitors.

Increased client demand for these services, without corresponding revenues, could increase our costs and harm our operating results.

If a client is not satisfied with the deployment and ongoing services performed by us or a third party, we could lose clients, miss opportunities to expand our business with these clients, incur additional costs, or suffer reduced (including negative) margins on our service revenue, any of which could damage our ability to grow our business.

In addition, negative publicity related to our professional services and technical support, regardless of its accuracy, may damage our business by affecting our ability to compete for new business with current and prospective clients.

Risks Related to the Sale of our Solution

Failure to adequately retain and expand our direct sales force will impede our growth.

Key to our success is the continuity and growth of our direct sales force.

We need to continue to retain key members of our direct sales force while expanding and optimizing our sales infrastructure and headcount in order to grow our client base and business.

We plan to continue to expand our direct sales force, both domestically and internationally.

Identifying and recruiting qualified personnel and training them in the use and sale of our solution requires significant time, expense and attention.

It can take several months before our sales representatives are fully trained and productive.

In particular, if we are unable to hire, develop and retain talented sales personnel or if new sales personnel, including those joining our company as a result of an acquisition, are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the expected benefits of this investment or increase our revenues.

We have established, and are continuing to increase, our network of master agents and resellers to sell our solution;

our failure to effectively develop, manage, and maintain this network could materially harm our revenues.

We have established, and are continuing to increase, our network of master sales agents, which provide sales leads, and resellers, which sell our solution to new clients.

This network has helped us attract additional clients.

Our resellers have assisted us in expanding in both domestic and international markets.

These master agents and resellers sell, or may in the future decide to sell, solutions for our competitors.

Our failure to accomplish these objectives could limit our success in marketing and selling our products.

In addition, identifying new resellers, and negotiating and documenting relationships with them, requires significant time and resources.

As the complexity of our solution and our reseller relationships increases, the

management of those relationships and the negotiation of contractual terms sufficient to protect our rights and limit our potential liabilities will become more complicated.

Our inability to successfully manage these complex relationships or negotiate sufficient contractual terms could harm our business.

We sell our solution to larger organizations that require longer sales and implementation cycles and often demand more configuration and integration services or customized features and functions that we may not offer, any of which could delay or prevent these sales and harm our growth rates, business and operating results.

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If prospective clients require customized features or functions that we do not offer, and that would be difficult for them to deploy themselves, they will need to use our services or third-party service providers or we may lose sales opportunities with larger organizations and our business could suffer.