What changed in this filing

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Item 1A. Risk Factors

2023-02-24 compared with 2022-02-28 · 217 added, 286 removed, 696 unchanged (42% of the section changed)

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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.

• Adverse economic conditions, including the impact of macroeconomic deterioration, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the impact of the Russia-Ukraine conflict, and other factors, may continue to harm our business.

• 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 our existing clients terminate their subscriptions or reduce their subscriptions and related usage, or fail to grow subscriptions at the rate they have in the past or that we might expect, our revenues and gross margins will be harmed, and we will be required to spend more money to grow our client base.

• 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 have established, and are continuing to increase, our network of technology solution brokers and resellers to sell our solution;

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

• Our quarterly and annual results may fluctuate significantly, including as a result of the timing and success of new product and feature introductions by us, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock.

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

• Our recent Chief Executive Officer transition could disrupt our operations, result in additional executive and personnel transitions and make it more difficult for us to hire and retain employees.

• Failure to adequately retain and expand our 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.

• The markets in which we participate involve a high number of competitors that is continuing to increase, and if we do not compete effectively, our operating results could be harmed.

• 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.

• We continue to expand our international operations, which exposes us to significant macroeconomic and other risks.

• 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 or use a significant amount of our cash resources and otherwise disrupt our operations and harm our operating results.

• 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.

• 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.

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

• Our stock price has been volatile, may continue to be volatile and may decline, including due to factors beyond our control.

• 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, including those related to import and export controls, could harm our business and our reputation.

• 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.

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

• if our existing clients terminate their subscriptions or reduce their subscriptions and related usage, or fail to grow subscriptions at the rate they have in the past or that we expect;

• adverse economic conditions, including the impact of macroeconomic deterioration, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the impact of the Russia-Ukraine conflict, or other factors;

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

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• client attrition rates;

• changes to our management team;

• 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 make technological advancements, add more features to our solution, and integrate those features within our client’s technology infrastructure;

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

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• 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;

• the amount and timing of costs and expenses related to the maintenance and expansion of our business, operations and infrastructure;

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

• our ability to expand, and effectively utilize, our network of technology solution brokers, resellers and systems integrators;

• the timing of recognition of revenues under current and future GAAP;

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• the level of professional services and support we provide our clients;

• fluctuations or changes in the components of our revenue;

• the addition or loss of key clients, including through acquisitions or consolidations;

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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.

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

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.

Accordingly, the effect of potential changes in our pricing policies or renewal rates, and significant downturns in sales, number of agent seats, market acceptance and implementation of our solution, including as a result of the impact of macroeconomic deterioration on our clients, increased inflation rates, increased interest rates, decreased economic output and fluctuations in currency exchange 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.

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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.

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

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

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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.

If the mix of organizations that purchase our solution 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.

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

• maintain our existing clients and their level of subscriptions and related usage, and grow subscriptions within our existing client base;

• respond to adverse economic conditions, including the impact of macroeconomic deterioration, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the impact of the Russia-Ukraine conflict, or other factors;

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

• further develop our partner ecosystem;

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• selectively pursue acquisitions that enhance our solution offerings.

• address the challenges of recent widespread increases in employee resignations as a result of the COVID-19 pandemic;

• 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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Moreover, we continue to expand our headcount and operations.

We grew from 983 employees as of December 31, 2018 to 1,210 employees as of December 31, 2019, to 1,549 employees as of December 31, 2020, and to 2,138 employees as of December 31, 2021.

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

We grew from 1,549 employees as of December 31, 2020, to 2,138 employees as of December 31, 2021, and to 2,380 employees as of December 31, 2022.

We anticipate that we will continue to expand our operations and headcount in the near term and beyond in accordance with our overall strategy and taking into consideration macroeconomic conditions.

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

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To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures.

Failure to effectively manage growth could result in difficulty or delays in adding new clients, declines in quality or client satisfaction, increases in costs, system failures, difficulties

in introducing new features or solutions, the need for more capital than we anticipate or other operational difficulties, and any of these difficulties could harm our business performance and results of operations.

Failure to effectively manage growth could result in difficulties or delays in adding new clients, declines in quality or client satisfaction, increases in costs, system failures, difficulties in introducing new features or solutions, the need for more capital than we anticipate or other operational difficulties, and any of these difficulties could harm our business performance and results of operations.

The expected addition of new employees, particularly outside the United States, and the capital investments that we anticipate will be necessary to help us grow and to manage that growth will make it more difficult for us to generate earnings or offset any future revenue shortfalls by reducing costs and expenses in the short term.

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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 leverage strategic relationships with third parties, such as CRM providers, WFO providers, other technology providers, systems integrators, and telephony providers.

We leverage strategic relationships with third parties, such as CRM providers, WFO providers, systems integrators, telephony and other technology providers.

For example, our relationship with CRM providers and systems integrators provide significant lead generation for new client opportunities.

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Our competitors may also have deeper or broader relationships with third parties, including a broader suite of products 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.

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.

Furthermore, there has and continues to be a significant amount of consolidation in our industry and adjacent industries, and if our partners are acquired, fail to work effectively with us or go out of business, they may no longer support or promote our solution, or may be less effective in doing so, which could harm our business, financial condition and operations.

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

As the complexity of our solution and our third-party 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.

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

We also license technology from certain third parties, including through OEM relationships.

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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.

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

Our recent growth, the COVID-19 pandemic and recent adverse economic conditions make 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.

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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.

Financial results during the COVID-19 pandemic may not be illustrative of our current business and future prospects.

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.

These uncertainties are exacerbated by the effects of recent adverse economic conditions, including macroeconomic deterioration, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the Russia-Ukraine conflict, or other factors.

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.

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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.

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Subscriptions and related usage by our existing clients may decrease if:

• our clients’ business or demand for our services slows or declines due to industry cycles, seasonality, business difficulties or other reasons, including the impact of macroeconomic deterioration, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the Russia-Ukraine conflict, or other factors;

• clients are not satisfied with our services, prices or the functionality of our solution;

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or global economy declines;

• 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, including as a result of the COVID-19 pandemic.

• our clients or potential clients experience financial difficulties, including as a result of macroeconomic deterioration.

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, or increase, 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, 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.

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 macroeconomic deterioration, including increased interest inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the Russia-Ukraine conflict, or other factors, 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.

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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.

Increased client demand for these services, without corresponding revenues, would 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.

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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, all of which are exacerbated as a result of remote working in connection with the COVID-19 pandemic.

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.

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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;

We have established, and are continuing to increase, our network of technology solution brokers 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.

We have established, and are continuing to increase, our network of technology solution brokers, 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.

These technology solution brokers 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 technology solution brokers or resellers to favor their services over ours, either through financial incentives, technological innovation, solution features or performance, by offering a broader array of products 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 technology solution brokers and resellers, fail to develop relationships with new technology solution brokers and resellers in new and existing markets, if we fail to manage, train, or provide appropriate incentives to our existing technology solution brokers and resellers, or if our technology solution brokers 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.

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For example, our solution does not currently permit clients to modify our software code, but instead requires them to use our set of APIs.

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.

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 professional services or third-party service providers or we may lose sales opportunities with larger organizations and our business could suffer.

The markets in which we participate involve a high number of competitors that is continuing to increase, and if we do not compete effectively, our operating results could be harmed.

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

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.

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.

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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.

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

Many of our competitors have stronger name recognition, longer operating histories, larger marketing budgets, greater financial or technical resources, better established relationships with clients, more comprehensive product offerings, larger installed bases and major distribution agreements with consultants, system integrators and resellers.

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We plan to continue to dedicate significant resources to our marketing programs, including internet advertising, digital marketing campaigns, social media, trade shows, industry events, co-marketing with strategic partners, telemarketing and out of home campaigns.

In addition, we have shifted certain events, such as our user group meetings, from in-person to virtual and various trade shows from in-person to fully virtual or hybrid attendance in response to the COVID-19 pandemic.

The effectiveness of our internet advertising has varied over time and may vary in the future due to competition for key search terms, changes in search engine use and changes in the search algorithms used by major search engines.

The effectiveness of our internet advertising and the overall cost of internet advertising has varied over time and may vary in the future due to competition for key search terms, changes in search engine use, changes in the manner in which the leading internet advertising companies approach internet advertising, including through their policies, and changes in the search algorithms used by major search engines, any of which could result in an increase in the time spent and other financial expenditures associated with our internet advertising and a decrease in the effectiveness of our internet advertising.

All of these efforts will continue to require us to invest significant financial and other resources in our marketing efforts.

Our business will be seriously harmed if our efforts and expenditures do not generate a proportionate increase in revenue.

In addition, we believe that developing and maintaining widespread awareness of our brand in a cost-effective manner, both in the United States and internationally, is critical to achieving widespread acceptance of our solution and attracting new clients.

Brand promotion activities may not generate client awareness or increase revenues, and even if they do, any increase in revenues typically occurs after the expense has been incurred, and may not offset the costs and expenses of building our brand.

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Risks Related to Our Solution

If we fail to manage our technical operations infrastructure, our existing clients may experience service outages, our new clients may delay or decide against deployment of our solution, existing clients may decide to move to another vendor, and we could be subject to, among other things, claims for credits or damage.

Our success depends in large part upon the capacity, stability, security and performance of our technical operations infrastructure, which currently relies upon a mix of external data centers and, increasingly, public cloud providers.

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These service interruptions may be caused by a variety of factors, including infrastructure changes, human or software errors, telecom network outages, 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, and remediate them 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, cause customer attrition, and harm our business.

In some instances, we may not be able to identify the cause or causes of these performance problems, or remediate them 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 or other actions, damage our reputation, significantly reduce client demand for our solution, cause us to incur significant expense and personnel time replacing and upgrading our infrastructure, cause customer attrition, and harm our business.

We have experienced significant growth in the number of agent 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 availability and 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.

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 availability, 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.

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Problems with cooling equipment, generators, uninterruptible power supply, routers, switches, or other equipment, whether or not within our control, could result in service interruptions for our clients as well as equipment damage.

Our data centers are subject to disasters such as earthquakes, floods, fires, hurricanes, acts of terrorism, sabotage, break-ins, acts of vandalism and other events, which could cause service interruptions or the operators of these data centers to close their facilities for an extended period of time or permanently.

Our data centers are subject to disasters such as earthquakes, floods, fires, hurricanes, cyber attacks, acts of terrorism, sabotage, break-ins, acts of vandalism and other events, which could cause service interruptions or the operators of these data centers to close their facilities for an extended period of time or permanently.

The destruction or impairment of any of our data center facilities could result in significant downtime for our solution and the loss of client data.

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Additionally, in connection with the continuing expansion of our existing data center facilities, there is a risk that service interruptions may occur as a result of server addition, relocation or other issues.

We also host some of our voice services on the public cloud in Europe, Asia, South America and Australia.

We also host some of our voice services on the public cloud in Europe, Asia, South America and Australia as well as additional core services in Europe.

We are also establishing new public cloud deployments of our platform in certain additional international markets.

We develop, test and deploy our technology to offer a full stack of services on the public cloud in certain international markets.

Our public cloud-based platform offering is critical to developing and providing our solution to our clients, scaling our business for future growth, accurately maintaining data and otherwise operating our business.

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Any disruption of the public cloud, deficiencies in the design, implementation, maintenance, or migration from one public cloud provider to another, or any failure of our public cloud providers to effectively design and implement sufficient security systems or plan for increases in capacity could, in turn, cause delays or disruptions in our services.

In addition, using the public cloud presents a variety of additional risks, including risks related to sharing the same computing resources with others, reliance on public cloud providers’ authentication, security, authorization and access control mechanisms, a lack of control over the public cloud’s redundancy and security systems and fault tolerances, and a reduced ability to control data security and privacy.

Development of our AI solutions to make agents more efficient and improve customer experience may not be successful and may result in reputational harm and our future operating results could be materially harmed.

We plan to continue to increase and provide our customers with AI-powered applications, including conversational virtual agents, agent assistance and business insights.

In addition, using the public cloud presents a variety of additional risks, including risks related to sharing the same computing resources with others, reliance on public cloud providers’ authentication, security, authorization and access control mechanisms, a lack of control over the public cloud’s redundancy and security systems and fault tolerances, a reduced ability to control data security and privacy, and future unpredictable costs of these services.

Development of our AI solutions to make people more efficient, automate interactions through virtual agents to improve customer experience and provide conversational insights to customers may not be successful and may result in reputational harm and our future operating results could be materially harmed.

We plan to continue to increase, and provide our customers with, our AI-powered applications, including conversational virtual agents, agent assistance and business insights.

In the fourth quarter of 2020, we enhanced our AI-powered applications with the acquisition of Inference Solutions Inc., or Inference, and now offer an integrated IVA platform with AI-enabled omni-channel service solutions.

These applications are part of our comprehensive AI & Automation portfolio, which is now comprised of eight distinct modules, including speech analytics, workflow automation, voice IVA, digital IVA and Agent Assist as well as the recently launched Five9 Analytics, AI Insights and AI Summaries.

While we aim for our AI-powered applications to make agents more efficient and improve customer experience, our AI models may not achieve sufficient levels of accuracy.

In addition, we may not be able to acquire sufficient training data or our training data may contain biased

or otherwise inaccurate information.

Furthermore, the costs of AI technologies, such as speech recognition and natural language processing, may currently be too high for broad market adoption.

Our competitors or other organizations may incorporate AI features into their products more quickly or more successfully and their AI features may achieve higher market acceptance than ours, which may result in us failing to recoup our investments in developing AI-powered applications.

Should any of these items or others occur, our ability to compete, our reputation and operating results may be materially and adversely affected.

In addition, we may not be able to acquire sufficient training data or our training data may contain biased or otherwise inaccurate information.

Should any of these items

or others occur, our ability to compete, our reputation and operating results may be materially and adversely affected.

If our solution fails, or is perceived to fail, to perform properly or if it contains technical defects, our reputation could be harmed, our market share may decline and we could be subject to product liability claims.

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Moreover, our clients could incorrectly implement or inadvertently misuse our solution, which could result in client dissatisfaction and harm the perceived utility of our solution and our brand.

Because our clients use our solution for mission-critical aspects of their business, any real or perceived errors or defects in, or other performance problems with, our solution may damage our clients’ businesses and could significantly harm our reputation.

If that occurs, we could lose future sales, or our existing clients could cancel our solution, seek payment credits, seek damages against us, or delay or withhold payment to us, which could result in reduced revenues, an increase in our provision for uncollectible accounts and service credits, an increase in collection cycles for accounts receivable, and harm our financial results.

Because our clients use our solution for critical aspects of their business, any real or perceived errors or defects in, or other performance problems with, our solution may damage our clients’ businesses and could significantly harm our reputation.

If that occurs, we could lose future sales, or our existing clients could cancel or reduce the use of our solution, seek payment credits or damages against us, or delay or withhold payment to us, which could result in reduced revenues, an increase in our provision for uncollectible accounts and service credits, an increase in collection cycles for accounts receivable, and harm our financial results.

In addition, since telecommunications billing and associated telecom taxes and the related calculations and billing of telecom taxes are inherently complex and require highly sophisticated information systems to administer, our billing system may experience errors or we may improperly operate the system, which could result in the system incorrectly calculating the fees owed by our clients or related taxes and administrative fees.

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Any product liability, intellectual property, warranty or other claims against us could damage our reputation and relationships with our clients, and could require us to spend significant time and money in litigation or pay significant settlements or damages.

Although we maintain general liability insurance, including coverage for errors and omissions, this coverage may not be sufficient to cover liabilities resulting from such claims.

Although we maintain general liability insurance, including coverage for errors and omissions, this coverage may not be available or sufficient to cover liabilities resulting from such claims.

Also, our insurers may disclaim coverage.

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If we are unable to develop or acquire new features for our existing solution or new applications that achieve market acceptance or that keep pace with technological developments, our business would be harmed.

For example, we are focused on enhancing the reliability, features and functionality of our contact center solution to enhance its utility to our clients, particularly larger clients, with complex, dynamic and global operations.

Cloud-based technology advancements in areas such as AI are designed to enable improved customer experience, significant operational efficiencies and business insights.

For example, real-time, accurate and increasingly economical automatic speech recognition and natural language processing increasingly allow mundane contact center tasks to be handled more economically and efficiently by virtual agents and make live agents more efficient.

We are focused on enhancing the reliability, features and functionality of our contact center solution to enhance its utility to our clients, particularly larger clients, with complex, dynamic and global operations.

In addition, cloud-based technology advancements in areas such as AI are designed to enable improved customer experience, significant operational efficiencies and business insights.

The success of these enhancements depends on many factors, including timely development, introduction and market acceptance, as well as our ability to transition our existing clients to these new solutions, applications and features.

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We may not be successful in developing, acquiring or integrating these modifications and enhancements or bringing them to market in a timely fashion.

Furthermore, uncertainties about the timing and nature of new network platforms or

technologies, or modifications to existing platforms or technologies, could delay introduction of changes and updates to our solution and increase our research and development expenses.

Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could delay introduction of changes and updates to our solution and increase our research and development expenses.

Any failure of our solution to operate effectively, including with future network platforms and technologies, could reduce the demand for our solution, result in client dissatisfaction and harm our business.

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If we are unable to develop products, applications or features internally due to constraints, such as high employee turnover, insufficient cash, other cash needs of our business, inability to hire sufficient research and development personnel or a lack of other research and development resources, we may miss market opportunities.

Furthermore, many of our competitors have greater financial resources and expend considerably greater amounts on their research and development programs than we do, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ research and development programs.

Furthermore, many of our competitors have greater financial resources and expend greater amounts on their research and development programs than we do, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ research and development programs.

Our failure to devote adequate research and development resources or compete effectively with the research and development programs of our competitors could harm our business.

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These third-party providers or their partners could alter their products so that our solution no longer integrates well with them, or they could delay or deny our access to technology releases that allow us to adapt our solution to integrate with their products in a timely fashion.

In addition, to the extent that third-party providers are adversely impacted by macroeconomic deterioration, their development of software that is integrated with our solution may be delayed, which could have an adverse impact on the implementation of, or demand for, our solution by our clients.

Such third-party providers could also favor integration of our competitors’ products over our solution, making our solution less attractive to our clients.

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Our operations are subject to many hazards inherent in the cloud contact center software business, including:

• damage to third-party and our infrastructure and data centers, related equipment and surrounding properties caused by earthquakes, hurricanes, tornadoes, floods, fires and other natural disasters, explosions and acts of terrorism;

• security breaches resulting in loss or disclosure of confidential client and customer data and potential liability to clients and non-client third parties for such losses on disclosures;

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These risks could result in substantial losses and the curtailment or suspension of our operations.

For example, in the event of a major earthquake along the West Coast of the United States (where our corporate headquarters and one of our data centers are located), hurricane, tropical storm, flooding or severe weather in the southeastern United States (where our other U.S.

For example, in the event of a major earthquake or flooding on the West Coast of the United States (where our corporate headquarters and one of our data centers are located), hurricane, tropical storm, flooding or severe weather in the southeastern United States (where our other U.S.

data center is located) or catastrophic events such as fire, power loss, telecommunications failure, cyber-attack, global pandemic, war or terrorist attack, we may be unable to continue our operations and may endure system and service interruptions, reputational harm, delays in product development, breaches of data security and loss of critical data, any of which could harm our business and operating results.

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We may also incur significant expense in enforcing our rights against our insurance providers, whether or not successful.

In addition to being denied

coverage under existing insurance policies, we may not be able to maintain or obtain insurance of the type and amount we desire at reasonable rates.

In addition to being denied coverage under existing insurance policies, we may not be able to maintain or obtain insurance of the type and amount we desire at reasonable rates.

Risks Related to Third-Party Technology Providers

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In addition, we depend on our internet bandwidth suppliers to provide uninterrupted and error-free service through their telecommunications networks.

Some of our services may require that users of our service obtain their own internet bandwidth.

We exercise little control over these third-party providers, which increases our vulnerability to problems with the services they provide.

When problems occur, it may be difficult to identify the source of the problem.

Service disruption or outages, whether caused by our service, the products or services of our third party service providers, or our clients’ or their customers’ equipment and systems, may result in loss of market acceptance of our solution and any necessary repairs or other remedial actions may force us to incur significant costs and expenses.

Service disruption or outages, whether caused by our service, the products or services of our third party service providers, or our clients’ or their customers’ equipment and systems, may result in loss of market acceptance of our solution and harm to our reputation and any necessary repairs or other remedial actions may force us to incur significant costs and expenses.

If any of these service providers fail to provide reliable services, suffer outages, degrade, disrupt, increase the cost of or terminate the services that we and our clients depend on, we may be required to switch to another service provider.

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However, we already have significant operations outside these countries and regions, and we expect to grow our international presence in the future.

Our international employees are primarily located in the Philippines, where technical support, training and other professional services are performed, Russia, where portions of engineering and operations are currently performed, but where production access is being reduced in 2022, and Australia, after our acquisition of Inference, where additional portions of engineering and operations are now

The future success of our business will depend, in part, on our ability to expand our operations and customer base to other countries.

Our international employees are primarily located in the Philippines, where technical support, training and other professional services are performed, Portugal, where we continue to transition portions of engineering and operations previously performed in Russia, and Australia, where additional portions of engineering and operations are now performed.

In March 2022, we made a decision to close our Russia office and to establish a new European development center in Portugal.

While approximately half of our Russian-citizen employees have received visas and have moved to Portugal, it was not feasible to move and retain all of the Russian-citizen employees in connection with growing our overall operations presence in Portugal, we have

expanded recruiting and employment-related efforts in Portugal to further enhance our operations.

We have and will continue to incur costs in connection with this transition, and during the transition we have and may continue to experience operational disruptions.

There can be no assurance that our new Portuguese operations will be as effective or as efficient as our prior Russian operations, which could harm our business and results of operations.

The future success of our business will depend, in part, on our ability to expand our operations and customer base to other countries, including our new location in Portugal.

Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic, and political risks that are different from those in the U.S.

In addition, in order to effectively market and sell our solution in international markets, we will be required to localize our solution, including the language in which our solution is offered, which will increase our costs, could result in delays in offering our solution in these markets and may decrease the effectiveness of our sales efforts.

In addition, in order to effectively market and sell our solution in international markets, we often must localize our solution, including the language in which our solution is offered, which increases our costs, could result in delays in offering our solution in these markets and may decrease the effectiveness of our sales efforts.

Due to our limited experience with international operations and developing and managing sales and distribution channels in international markets, our international expansion efforts may not be successful.

In addition, our operations in Russia are subject to additional regulatory and political risk and additional compliance costs in connection with sanctions and other trade controls imposed by the United States and other governments in response to Russia’s military operations in Ukraine.

These government measures include export controls restricting certain exports, re-exports, transfers or releases of commodities, software, and technology to Russia, and sanctions targeting certain Russian individuals and entities, including certain large Russian banks.

Relevant governments continue to express an interest in pursuing a diplomatic solution to these issues and in holding negotiations regarding a cessation of military operations in Ukraine, but we cannot be certain that these negotiations will occur, continue, or succeed in forestalling additional hostilities or additional trade controls.

Although we have taken steps designed to ensure that the company complies with applicable regulations and that these events will not affect the services that we offer customers, these steps involve additional compliance costs and operational costs.

If the relationship between Russia and the United States significantly worsens, or if Russia, the United States, or other countries impose additional economic sanctions, supply chain restrictions, or other restrictions on doing business, and we are restricted or precluded from continuing our software development operations in Russia, our costs could increase, and our product development efforts, business and results of operations could be harmed.

In addition, compliance with laws and regulations applicable to our international operations increases our cost of doing business outside the United States.

We may be unaware or unable to keep current with changes in foreign government requirements and laws as they change from time to time, which often occurs with minimal or no advance notice.

We also will continue to incur additional compliance costs associated with our international operations, including costs associated with expanding and rapidly changing sanctions and other trade controls.

In addition, we may be unaware or unable to keep current with changes in foreign government requirements and laws as they change from time to time, which often occurs with minimal or no advance notice.

Failure to comply with these regulations could harm our business.

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Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, strategic partners and agents will comply with these laws and policies.

Violations of laws or key control policies by our employees, contractors, strategic partners or agents could result in delays in revenue recognition, financial reporting misstatements, fines, delays in filing financial reports required as a public company, penalties, or prohibitions on selling our solution, any of which could harm our business.

Violations of laws or key control policies by our employees, contractors, strategic partners or agents could result in delays in revenue recognition, financial reporting misstatements, fines, delays in filing financial reports required as a public company, penalties, prohibitions on selling our solution or harm to our reputation, any of which could harm our business.

While we have worked to avoid and mitigate any effects of the Russia-Ukraine conflict on our business, employees and clients, the conflict is ongoing, and its ultimate scope and broader impacts cannot be predicted with certainty.

While the conflict has not yet had a negative impact on our employees, business, or operations outside of Russia, it could, and if the conflict or related geopolitical tensions extend to other countries, negative impacts could also expand.

Our business and operations could be harmed and our costs could increase if our or our clients’ or other partners’ manufacturing, logistics or other operations, costs or financial performance are disrupted or adversely affected.

The Russia-Ukraine conflict has also had an adverse impact on the global economy, including on the inflation rate, and has contributed to significant fluctuation in global stock markets, including The NASDAQ Stock Market, on which our common stock is listed.

All of these risks and conditions could harm our future sales, business and operating results.

Sales to clients outside the United States or with international operations and our international sales efforts and operations support expose us to risks inherent in international sales and operations.

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These risks could harm our international operations, increase our operating costs and hinder our ability to grow our international business and, consequently, our overall business and results of operations.

The results of the U.K.’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

formally left the European Union on January 31, 2020, or Brexit, and a transition period followed which ended on December 31, 2020.

Brexit has resulted in significant economic and political uncertainty in both Europe and the U.K.

entered into a trade and cooperation agreement, or the U.K.-E.U.

Trade Agreement, with the European Union which came into effect on January 1, 2021.

Even though the U.K.-E.U.

Trade Agreement has come into effect, there may be increased costs on regulatory compliance between the U.K.

and other countries, including those in the European Union, as the U.K.-E.U.

Trade Agreement only provides for limited market access with respect to services.

The lack of a comprehensive trade deal that governs services, along with future unanticipated trade disputes between the U.K.

and the European Union, including the equivalency of regulations and standards, may also disrupt the provision of services between the U.K.

and member states of the European Union.

In addition, the U.K.

will also need to negotiate new trade and tax treaties with other countries, and such negotiations may not complete for a number of years.

The U.K.-E.U.

Trade Agreement creates legal uncertainty and the possibility of divergent national laws and regulations in the U.K., Europe and globally.

These factors could contribute to instability in global financial and foreign exchange markets, including weakening in the value of the British pound relative to the U.S.

dollar, making our solution more expensive to U.K.

and international clients.

Brexit could also cause disruptions to, and create uncertainty surrounding, the global economy, which could harm our ability to sell our solution and may harm our results of operation, financial condition and cash flows.

Brexit could also affect our relationships with our existing and future clients, owners of our data center facilities in the U.K.

and the Netherlands and our data center partners’ ability to retain and hire qualified employees, which could harm our business, results of operations, financial condition and cash flows.

Changing immigration laws due to Brexit could result in our or the owners of our data center facilities in the U.K.

and the Netherlands finding it difficult to retain and hire qualified employees, which could harm our business, results of operations, financial condition and cash flows.

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 transitioned to work-from-home operations and we canceled all business travel by our employees except where necessary and properly authorized, which 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.

Recently, we have re-opened our U.S.

offices for employees to voluntarily return, subject to capacity restrictions and applicable government regulations.

Appropriate measures are being taken to protect the health of employees who return to the office.

We have also reinstated business travel on a voluntary basis and subject to prior approval.

Our efforts to re-open our offices and reinstate business travel safely may not be successful;

could expose our employees, customers and clients to health risks and us to associated liability;

and will involve additional financial burdens.

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 to the extent that our clients remain subject to 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 components;

• 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 while we continue to transition to fully re-opened facilities that are not subject to capacity restrictions;

• harm our ability to maintain our corporate culture with a portion of our employee base temporarily working remotely while we remain subject to capacity restrictions on re-opening our offices and facing unique personal and professional challenges;

• increase costs in returning to work as our offices continue to re-open, including changes to the workplace, such as space planning, food service, and amenities, and the design, implementation and enforcement of new workplace safety protocols;

• 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 to the extent that they remain subject to office closures, 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 and variants of the virus, the extent and effectiveness of vaccine programs and other containment actions, the duration of social distancing, office closures, office capacity restrictions 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 pandemic 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.

Other Operational Risks

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.

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

In addition to the United States, Canada, Europe, Latin America and Australia, we plan in the future to market and sell our solution in 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, including as a result of the effects of the COVID-19 pandemic, 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.

Adverse economic conditions in these markets, including declining worldwide economic conditions, increased inflation rates, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency exchange rates, has and will likely continue to reduce overall demand for our solution, particularly in our installed base.

These factors could also delay our clients' implementation of our solution, delay or lengthen sales cycles, delay international expansion, lower prices for our solution, and may also lead to longer collection cycles for payments due from our clients, as well as result in an increase in client bad debt.

While the implications of macroeconomic events on our business, results of operations and overall financial position remain uncertain over the long term, we continue to experience macroeconomic headwinds on our installed base business, which typically contributes approximately half of our revenue growth, particularly in two verticals, healthcare and consumer, which are typically our two strongest seasonal industries in the fourth quarter.

There has also been some adverse impact on the mid-market portion of our net new clients business.

All of these potential circumstances could 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 solutions we provide, degrade the user experience, or cause clients to lose confidence in our solution.

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 solutions we provide, degrade the user experience, harm our reputation or cause clients to lose confidence in our solution.

We are required to comply with laws and regulations that require us to maintain the security of personal data and we may have contractual and other legal obligations to notify customers or other relevant stakeholders of security breaches.

While we have implemented security measures to protect client information and minimize the risk 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 unlawfully or without authorization obtains access to our clients’ information, including personal data, 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.

Such disclosures could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures and require us to and other resources to respond to and/or mitigate the security breach.

Such security breaches could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures and require us to respond to and/or mitigate the security breach.

Accordingly, if our cybersecurity measures fail to protect against unauthorized access, attacks, compromise or the mishandling of data by our employees, then our reputation, business, results of operations and financial condition could be adversely affected.

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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.

We depend on our senior management team, and the loss of one or more key employees or an inability to attract and retain highly skilled executives and other employees could harm our business and results of operations.

Our success depends, in part, upon the performance and continued services of our executive officers and senior management team.

If our executive leadership team fails to perform effectively or if we fail to attract or retain our key executives or senior management, our business, financial condition or results of operations could be harmed.

We also rely on our leadership team in the areas of research and development, marketing, sales, services and general and administrative functions, and on mission-critical individual contributors.

The loss of one or more of our executive officers or key employees could seriously harm our business.

We are undergoing changes to our management team;

we depend on our senior management team, and the loss of one or more of our senior leadership team or other key employees could harm our business and results of operations.

On October 7, 2022, our Chief Executive Officer resigned as our Chief Executive Officer and from our Board of Directors, effective November 28, 2022.

On October 10, 2022, we announced the appointment, effective as of November 28, 2022, of Michael Burkland as our new Chief Executive Officer.

Burkland previously served as our Chief Executive Officer from 2008 until he resigned due to personal health reasons in 2017, and has remained on our Board of Directors either as Executive Chairman or Chairman since that time.

Our Chief Executive Officer transition may be disruptive to, or cause uncertainty in, our business and our relationships with clients, business partners, stockholders and employees, and could lead to attrition of management and key employees.

If we are unable to execute an orderly transition and successfully integrate Mr.

Burkland back into our management team, our business could be harmed.

Our success depends, in part, upon the performance and continued services of our senior leadership team, including our new Chief Executive Officer.

If our senior leadership team, including our Chief Executive Officer, fails to perform effectively or if we fail to attract or retain key executives, senior management or other key employees, our business, financial condition or results of operations could be harmed.

We also rely on our leadership team, key employees, and critical individual contributors in all of our functional areas.

The loss of one or more of our leadership team, key employees, and critical individual contributors could harm our business.

We currently do not maintain key person life insurance policies on any of our employees.

To execute our growth plan, we must attract and retain highly qualified personnel and we may incur significant costs (including stock-based compensation expense) to do so.

If we are unable to attract and retain highly skilled leaders and other employees, our business and results of operations may be adversely affected.

To execute our growth plan, we must attract and retain highly qualified personnel, including key executives, senior management or other key employees, and we may incur significant costs, including stock-based compensation expense, to do so.

Competition for these personnel is intense, especially for senior executives, engineers highly experienced in designing and developing cloud software and for senior sales personnel.

We have, from time to time, experienced, and we expect to continue to experience, difficulty

in hiring and retaining employees with appropriate qualifications, and this risk may be exacerbated by factors related to, among other things, the termination of our proposed merger with Zoom, the much publicized “Great Resignation,” and increased recruiting efforts by other companies.

We invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them and increases our costs.

We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications, and this difficulty could be further exacerbated by our Chief Executive Officer transition and any other senior leadership or other key employee transitions we experience.

We invest significant time and expense in

training our employees, which increases their value to competitors who may seek to recruit them and increases our costs.

We believe that our corporate culture is a critical component to our ability to attract and retain employees.

As we grow, we will need to continually enhance our efforts to maintain our corporate culture, which is more difficult due to our work from home policies during the COVID-19 pandemic.

We may experience increased attrition of employees to other opportunities, particularly as we reopen our offices, as certain employees may seek more flexible work alternatives than we offer, may seek positions with companies outside of the geographic area in which they live that offer remote work opportunities, or may decide to scale back their work life for personal reasons.

If we fail to attract new personnel or fail to retain and motivate our current personnel, particularly our executive officers and senior management team, our business and future growth prospects would be harmed.

As we grow, we will need to continually enhance our efforts to maintain our corporate culture, which is more difficult due to our policies that continue to allow limited work from home flexibility stemming from the COVID-19 pandemic.

We may experience increased attrition of employees to other opportunities, as certain employees may seek more flexible work alternatives than we offer, may seek positions with companies outside of the geographic area in which they live that offer remote work opportunities, or may decide to scale back their work life for personal reasons.

Many of the companies with which we compete for experienced personnel have greater resources than we have and may offer more flexible work alternatives such as permanent remote work or work from home.

If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources and, potentially, damages.

Volatility or lack of performance in the trading price of our common stock, including the recent volatility in our trading price during the pendency, and after termination, of the Merger, may also affect our ability to attract and retain qualified personnel because job candidates and existing employees often emphasize the value of stock awards when considering whether to accept or continue employment.

If we fail to attract new personnel or fail to retain and motivate our current personnel, particularly our senior leadership team and our other key employees, our business and future growth prospects would be harmed.

In addition, if we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources and, potentially, damages.

Volatility or lack of performance in the trading price of our common stock, including the declines in our trading price over the recent past, may also affect our ability to attract and retain qualified personnel because job candidates and existing employees often emphasize the value of stock awards when considering whether to accept or continue employment.

If the perceived value of our stock awards is low or declines, it may harm our ability to recruit and retain highly skilled employees.

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Acquisitions could also result in dilutive issuances of equity securities, the use of our available cash, or the incurrence of additional debt to fund such acquisitions, which could harm our operating results.

To the extent that we determine to issue stock in any acquisitions, volatility in our stock price could make it more difficult or dilutive to make these acquisitions.

To the extent that we intend to issue stock in any acquisitions, volatility in our stock price could make it more difficult or dilutive to make these acquisitions.

If an acquired business fails to meet our expectations, our operating results, business and financial condition could suffer.

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See Note 6 to the consolidated financial statements.

Any debt financing obtained by us in the future would cause us to incur additional debt service expenses and could include restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and pursue business opportunities and could be secured by all of our assets.

If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.

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If we have material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated.

registered public accounting firm is unable to attest that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decrease.

If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective or if our independent registered public accounting firm is unable to attest that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our

common stock could decrease.

We could also become subject to stockholder or other third-party litigation as well as investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources and could result in fines, penalties, trading suspensions or other remedies.

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New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and will occur in the future.

Changes to existing rules or the questioning of current practices may harm our reported financial results or the way we account for or conduct our business.

For example, in August 2020, the FASB issued Accounting Standards Update, or ASU, No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 2020-06"), which simplified the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature.

We elected to early adopt ASU 2020-06 as of January 1, 2021 using a modified retrospective transition method.

Applying the transition guidance, we were required to apply the guidance to all impacted financial instruments that were outstanding as of January 1, 2021 with the cumulative effect recognized as an adjustment to the opening balance of accumulated deficit.

See Notes 1 and 6 to consolidated financial statements for more information.

Changes to existing rules or the questioning of current practices may harm our reported financial results, result in restatements of prior periods, or the way we account for or conduct our business.

The application of any new accounting guidance is, and will be, based on all information available to us as of the date of adoption and up through subsequent interim reporting, including transition guidance published by the standard setters.

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trademarks, 15 issued U.S.

patents, two pending U.S.

patent applications, two pending international PCT patent applications and one registered U.S.

As of December 31, 2021, we also had five issued patents and 10 trademark registrations outside the U.S.

patents, one pending U.S.

patent application and one registered U.S.

As of December 31, 2022, outside the U.S.

we also had 10 trademark registrations, five issued patents, and two pending international PCT patent applications.

The expiration dates of our issued patents range from 2030 to 2041.

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However, the steps we take to secure, protect and enforce our intellectual property rights may be inadequate.

We may not be able to obtain any further patents or

trademarks, our current patents could be invalidated or our competitors could design their products around our patented technology, and our pending applications may not result in the issuance of patents or trademarks.

We may not be able to obtain any further patents or trademarks, our current patents could be invalidated or our competitors could design their products around our patented technology, and our pending applications may not result in the issuance of patents or trademarks.

We have pending patent applications and trademark registrations outside the U.S., and we may have to expend significant additional resources to obtain additional protection and maintain current registrations as we expand our international operations.

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In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights.

Litigation brought to protect and enforce our intellectual property rights will be costly, time consuming and distracting to our management and could result in the impairment or loss of our intellectual property.

Litigation brought to protect and enforce our intellectual property rights will be

costly, time consuming and distracting to our management and could result in the impairment or loss of our intellectual property.

Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights, which could weaken our intellectual property protection.

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Although we typically contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them.

Any dispute with a client with respect to such obligations could be expensive, even if we ultimately

prevail, and could harm our relationship with that client and other current and prospective clients, reduce demand for our solution and harm our business, results of operations and financial condition.

Any dispute with a client with respect to such obligations could be expensive, even if we ultimately prevail, and could harm our relationship with that client and other current and prospective clients, reduce demand for our solution and harm our business, results of operations and financial condition.

We employ third-party licensed software for use in or with our solution, and the inability to maintain these licenses or errors in the software we license could result in increased costs, or reduced service levels, which could harm our business.

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In addition, integration of the software used in our solution with new third-party software may require significant work and require substantial investment of our time and resources.

To the extent that our solution depends upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our solution, delay new product or solution introductions, result in increased costs, or a failure of our solution and injure our reputation.

To the extent that our solution

depends upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our solution, delay new product or solution introductions, result in increased costs, or a failure of our solution and injure our reputation.

Our use of additional or alternative third-party software would require us to enter into license agreements with third parties and to integrate such software to our solution.

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The loss of, or inability to maintain, existing licenses could result in lost product features and litigation.

The loss of existing licenses could also result in implementation delays or reductions until equivalent technology or suitable alternative solutions could be developed, identified, licensed and integrated, and could increase our costs and harm our business.

The loss of existing licenses could also result in implementation delays or reductions until equivalent technology or suitable alternative solutions could be developed or identified, and licensed and these replacements integrated, and could increase our costs and harm our business.

Our solution utilizes open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

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By the terms of certain open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under open source licenses, if we combine our proprietary software with open source software in a certain manner.

In the event that portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and solutions.

In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software.

Given the nature of open source software, there is also a risk that third parties may assert copyright and other intellectual property infringement claims against us based on our use of certain open source software programs.

Many of the risks associated with the usage of open source software cannot be eliminated and could harm our business.

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Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory recalls, notification obligations, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions.

governmental sanctions, fines or penalties are imposed, or if we do not prevail in any civil or criminal litigation, our business, operating results, financial condition and reputation could be harmed.

If any governmental sanctions, fines or penalties are imposed, or if we do not prevail in any civil or criminal litigation, our business, operating results, financial condition and reputation could be harmed.

In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees.

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The legal and contractual environment surrounding calling consumers and wireless phone numbers is constantly evolving.

In the United States, two federal agencies, the Federal Trade Commission, or the FTC, and the FCC, and various states have laws including, at the federal level, the TCPA that restrict the placing of certain telephone calls and texts to residential and wireless telephone subscribers by means of automatic telephone dialing systems, prerecorded or artificial voice messages and fax machines.

In the United States, two federal agencies, the Federal Trade Commission, or the FTC, and the

FCC, and various states have laws including, at the federal level, the TCPA that restrict the placing of certain telephone calls and texts to residential and wireless telephone subscribers by means of automatic telephone dialing systems, prerecorded or artificial voice messages and fax machines.

These laws require companies to institute processes and safeguards to comply with these restrictions.

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Prior to our making such determination, we neither collected nor remitted these taxes, fees or surcharges to applicable local, municipal or state jurisdictions.

We continue to analyze our activities to determine if we are subject to these taxes in additional jurisdictions and based

on our ongoing assessment of our U.S.

We continue to analyze our activities to determine if we are subject to these taxes in additional jurisdictions and based on our ongoing assessment of our U.S.

state and local tax collection and remittance obligations, we register for tax and regulatory purposes in such jurisdictions and commence collecting and remitting applicable state and local taxes and surcharges to these jurisdictions.

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While we have accrued for these potential liabilities in each period, such accruals are based on analyses of our business activities, the operation of our solution, applicable statutes, regulations and rules in each state and locality and estimates of sales subject to sales tax or other charges.

State and local taxing and regulatory authorities may challenge our position and may decide to audit our business and operations with respect to state or local sales, use, gross receipts, excise and utility user taxes, fees or surcharges, which could result in our being liable for taxes, fees, or surcharges, as well as related penalties and interest, above our recorded accrued liability or additional liability for taxes, fees, or surcharges, as well as penalties and interest for our clients, which could harm our results of operations and our relationships with our clients.

State and local taxing and regulatory authorities may

challenge our position and may decide to audit our business and operations with respect to state or local sales, use, gross receipts, excise and utility user taxes, fees or surcharges, which could result in our being liable for taxes, fees, or surcharges, as well as related penalties and interest, above our recorded accrued liability or additional liability for taxes, fees, or surcharges, as well as penalties and interest for our clients, which could harm our results of operations and our relationships with our clients.

In addition, if our international sales grow, additional foreign countries may seek to impose sales or other tax collection obligations on us, which would increase our exposure to liability.

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We have implemented these remedial measures to ensure that other carriers do not misidentify or block voice traffic originated by our clients.

Although we believe we have achieved full compliance, the regulatory measures to prevent robocalling and caller ID spoofing are relatively new and complex and therefore pose a risk to all voice service providers with respect to the possible misidentification and blocking of voice calls originated by their clients.

These new compliance measures have and will increase our regulatory compliance and other costs, could make our

solution less attractive to our clients, and any non-compliance could subject us to fines, damages and penalties, or injunctions precluding the use of our solutions or certain features thereof.

Although we believe we have achieved full compliance, the regulatory measures to prevent robocalling and caller ID spoofing are relatively new, complex and continue to change and therefore pose a risk to all voice service providers with respect to the possible misidentification and blocking of voice calls originated by their clients.

These new compliance measures have and will increase our regulatory compliance and other costs, could make our solution less attractive to our clients, and any non-compliance could subject us to fines, damages and penalties, or injunctions precluding the use of our solutions or certain features thereof.

Our ability to offer services outside the United States is subject to different regulatory and taxation requirements, which may be complicated and uncertain.

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We are subject to assessments for unpaid USF contributions, as well as interest thereon and civil penalties, due to our late registration and past failure to recognize our obligation as a USF contributor and as an international carrier.

We are classified as a telecommunications service provider for regulatory purposes and we are required to make direct contributions to the USF based on revenue we receive from the resale of interstate and international telecommunications services.

In order to comply with the obligation to make direct contributions, we are registered with the Universal Service Administrative Company, or USAC, which is charged by the FCC with administering the USF, and have been remitting the required contributions to USAC since our registration with USAC in April 2013.

In June 2015, in connection with our late registration with the USAC and past failure to make USF contributions prior to 2013, we entered into a consent decree with the FCC Enforcement Bureau.

In the consent decree, we agreed to pay a civil penalty of $2.0 million to the U.S.

Treasury, which was paid in installments ending on December 31, 2018.

We also agreed to make USF contributions of $3.9 million based on our revenues for the period from 2008 to 2012.

We are still in dispute with the FCC regarding whether we are liable for USF contributions related to the period from 2003 through 2007.

We also made retroactive USF contributions based on our revenues for the period from 2008 to 2012.

We have an unresolved and arguably dormant dispute with the FCC, however, regarding whether we are liable for USF contributions related to the period from 2003 through 2007.

As of December 31, 2022, we had accrued $0.1 million in interest related to the disputed assessments for the period of 2003 through 2007.

See Note 10 to the consolidated financial statements.

Although the effective period of the FCC consent decree has terminated, the FCC routinely imposes a higher expectation of regulatory compliance on companies that were previously subject to consent decrees and any further violations of FCC rules could subject us to heightened enforcement action, including higher fines and penalties.

Our ongoing obligations to pay federal, state and local telecommunications contributions and taxes may decrease our price advantage over, and ability to compete with our competitors who are not subject to, or choose not to comply with, those requirements.

In addition, if we are unable to continue to pass some or all of the cost of these contributions and taxes to our clients, our profit margins on the minutes we resell will decrease.

In addition, if we are unable to continue to pass some or all of the cost of these contributions and taxes to our clients, our profit margins on the telecommunication service minutes we resell will decrease.

Our federal contributions and tax obligations may significantly increase in the future, due to new interpretations by governing authorities, governmental budget pressures, changes in our business model or solutions or other factors.

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Since our business is regulated by the FCC, we are subject to existing or potential FCC regulations relating to privacy, disability access, porting of numbers, USF contributions and other requirements.

If we do not comply with FCC rules and regulations, we could be subject to further FCC enforcement actions, fines, loss of licenses and possibly restrictions on our ability to operate or offer certain of our services.

Any further enforcement action by the FCC, which may be a public process, would hurt our reputation in the industry, could impair our ability to sell our services to clients and could harm our business and results of operations.

If we do not comply with FCC rules and regulations, we could be subject to FCC enforcement actions, fines, loss of licenses and possibly restrictions on our ability to operate or offer certain of our services.

Any enforcement action by the FCC, which may be a public process, would hurt our reputation in the industry, could impair our ability to sell our services to clients and could harm our business and results of operations.

The regulations to which we are subject (in whole or in part) include:

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• the Communications Assistance for Law Enforcement Act, or CALEA, which requires covered entities to assist law enforcement in undertaking electronic surveillance;

• KARI’s Law and RAY BAUM’s Act, which require telecommunications carriers to ensure their users can directly dial 911 emergency services and, if technically feasible, automatically convey dispatchable location information with the call;

• contributions to the USF which requires that we pay a percentage of our revenues resulting from the provision of interstate telecommunications services to support certain federal programs;

• enhanced 911 rules, KARI’s Law and RAY BAUM’s Act, which, in some circumstances, require telecommunications service providers to ensure their users can directly dial 911 emergency services and, if technically feasible, automatically convey dispatchable location information with the call;

• contributions to the USF which requires that we pay a percentage of our revenues resulting from the provision of interstate and some international telecommunications services to support certain federal programs;

• payment of annual FCC regulatory fees based on our interstate and international revenues;

• rules pertaining to access to our services by people with disabilities and contributions to the Telecommunications Relay Services fund;

• FCC rules regarding CPNI which prohibit us from using such information without client approval, subject to certain exceptions.

• FCC rules regarding CPNI which requires that we limit disclosure of certain information received from customers without client approval, subject to certain exceptions.

If we do not comply with any current or future rules or regulations that apply to our business, we could be subject to additional and substantial fines and penalties, we may have to restructure our solution, exit certain markets, accept lower margins or raise the price of our solution, any of which could harm our business and results of operations.

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As of December 31, 2022, we had federal, state and foreign net operating loss carryforwards due to prior period losses of $456.9 million, $310.9 million and $13.5 million, respectively, available to reduce future income subject to income taxes.

If not utilized, the federal and state net operating loss carryforwards will begin to expire in 2024 and 2028, respectively, while the foreign net operating loss carryforwards do not expire.

If not utilized, the federal and significant state net operating loss carryforwards will begin to expire in 2024 and 2028, respectively, while the foreign net operating loss carryforwards do not expire.

As of December 31, 2022, we also had gross research credit carryforwards for federal and California state tax purposes of $10.8 million and $7.0 million, respectively.

If not utilized, the federal research credit carryforwards will begin to expire in 2022.

A portion of the federal research credit carryforwards will continue to expire in 2023.

The California research credit carryforwards do not expire.

If we are unable to generate sufficient taxable income to utilize our net operating loss and research tax credit carryforwards, these carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could harm our profitability and financial condition in future periods.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five years pursuant to the Internal Revenue Code of 1986 Section 174.

Although Congress is considering legislation that would defer the amortization requirement to later years, it is not certain that the provision will be repealed or otherwise modified.

the requirement is not modified, it will reduce our net operating losses beginning in 2022.

Given our carryover attributes, this is not expected to have a material impact on our consolidated financial statements.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or IRC Section 382, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.” An IRC Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.

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This could potentially cause those tax attributes to expire unused or to be reduced, which would increase and accelerate our liability for income taxes.

It is possible that such an ownership change could materially reduce our ability to use our net operating loss carryforwards or other tax attributes to offset taxable income, which could require us to pay more income taxes than if we were able to fully utilize our net operating loss carryforwards and harm our profitability.

It is possible that such an

ownership change could materially reduce our ability to use our net operating loss carryforwards or other tax attributes to offset taxable income, which could require us to pay more income taxes than if we were able to fully utilize our net operating loss carryforwards and harm our profitability.

Privacy concerns and domestic or foreign laws and regulations may reduce the demand for our solution, increase our costs and harm our business.

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Domestic and international government authorities are considering adopting, or may adopt, laws and regulations in the future, regarding the Processing of personal data obtained from consumers and individuals.

In the U.S., there are numerous federal and state laws governing the privacy and security of personal information.

In the U.S., there are numerous federal and state laws governing the privacy and security of personal data.

For instance, we may be subject to FTC enforcement actions if the FTC has reason to believe we have engaged in unfair or deceptive privacy or data security practices in violation of the FTC Act.

There are also new state privacy laws, including the California Consumer Privacy Act, or CCPA, the California Privacy Rights Act, or CPRA, the Colorado Privacy Act, or CPA, and the Virginia Consumer Data Protection Act, or VCDPA, that set forth comprehensive privacy obligations regarding the Processing of personal data.

There are also new state privacy laws, including the California Consumer Privacy Act, or CCPA, the California Privacy Rights Act, or CPRA, the Colorado Privacy Act, or CPA, the Connecticut Data Privacy Act, or CDPA, the Utah Consumer Privacy Act, or UCPA, and the Virginia Consumer Data Protection Act, or VCDPA, that set forth comprehensive privacy obligations regarding the Processing of personal data.

It is possible that other states may pass their own versions of data privacy laws.

Moreover, data protection laws and regulations outside the United States, including Brazil, Canada, China, Japan, Russia, the United Kingdom and particularly in the EU, often are more restrictive than those in the United States.

Moreover, data protection laws and regulations outside the United States, including Brazil, Canada, China, Japan, Russia, Singapore, the United Kingdom and particularly in the EU, often are more restrictive than those in the United States.

Such laws and regulations may have more stringent compliance obligations in regards to data protection.

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The costs of compliance with, and other burdens imposed by, such laws and regulations that are applicable to us and the businesses of our clients may limit the use and adoption of our solution and reduce overall demand for our solution.

Also, failure to comply with such laws may lead to significant fines, penalties or other regulatory

liabilities, such as orders or consent decrees forcing us or our clients to modify business practices, and reputational damage or third-party lawsuits for any noncompliance with such laws.

Also, failure to comply with such laws may lead to significant fines, penalties or other regulatory liabilities, such as orders or consent decrees forcing us or our clients to modify business practices, and reputational damage or third-party lawsuits for any noncompliance with such laws.

Our business could be harmed if legislation or regulations are adopted, interpreted or implemented in a manner that is inconsistent from country to country and inconsistent with our current policies and practices, or those of our clients.

Furthermore, privacy and data protection concerns may cause consumers to resist providing the personal data or other types of protected data that may be subject to laws and regulations that is necessary to allow our clients to use our solution effectively.

Furthermore, data privacy and protection concerns may cause consumers to resist providing personal data or other types of protected data that may be subject to laws and regulations that is necessary to allow our clients to use our solution effectively.

Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our solution in certain industries or countries.

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Failure to comply with data protection regulations may result in data protection authorities and other privacy regimes imposing additional obligations to obtain consent from data subjects by or on behalf of our customers.

Additionally, the

inability to guarantee compliance or otherwise provide acceptable privacy assurances may inhibit the sale and use of our software in the EU and certain other markets, which could, were it to occur, harm our business and operating results.

Additionally, the inability to guarantee compliance or otherwise provide acceptable privacy assurances may inhibit the sale and use of our software in the EU and certain other markets, which could, were it to occur, harm our business and operating results.

Because the interpretation and application of many privacy and data protection laws (including the GDPR), commercial frameworks, and standards are uncertain, it is possible that these laws, frameworks, and standards may be interpreted and applied in a manner that is inconsistent with our existing data protection practices.

If so, we and our customers are at risk of enforcement actions taken by EU data protection authorities or litigation from consumer advocacy groups acting on behalf of data subjects.

In addition to the possibility of fines, lawsuits, breach of contract claims, and other claims and penalties, we could be required to fundamentally change our business activities and practices or modify our solutions, which could have an adverse effect on our business.

In addition to the possibility of fines, lawsuits, breach of contract claims, and other claims and penalties, we could be required to fundamentally change our business activities and

practices or modify our solutions, which could have an adverse effect on our business.

Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and security or data security laws, regulations, and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business.

The CCPA and the CPRA could increase our costs and the costs of our clients to operate, limit the use of our solution or change the way we operate, and expose us to substantial fines and class action risk if we fail to comply, and lead to similar laws being enacted in other states.

The CCPA applies to certain for-profit entities doing businesses in California.

We and our qualifying customers were required to comply with the requirements of the CCPA on January 1, 2020.

The CCPA established a new privacy framework for covered businesses by creating an expanded definition of personal information and creating new data privacy rights for consumers in the State of California.

As required by the statute, covered entities doing business in California have disclosure obligations to consumers for whom they collect or process personal data.

Businesses must also provide consumers with the right to dictate how their personal information is used and shared.

state privacy laws, including the CCPA, CPA, CTDPA, UCPA and VCDPA could increase our costs and the costs of our clients to operate, limit the use of our solution or change the way we operate, and expose us to substantial fines and class action risk if we fail to comply, and lead to similar laws being enacted in other states.

The CCPA, CPA, CTDPA, UCPA and VCDPA apply to certain entities doing business in California, Colorado, Connecticut, Utah and Virginia.

We and our qualifying customers were required to comply with the requirements of the CCPA on January 1, 2020 and have been subject to the VCDPA since January 1, 2023.

The CPA and CTDPA will be effective July 1, 2023 and the UCPA will come into effect on December 31, 2023.

state privacy laws establish a privacy framework for covered businesses by creating an expanded definition of personal data and creating new data privacy rights for eligible residents in those states, including the right to the right to access, delete or correct such data, the right to opt out of sales or use of their personal data for targeted advertising or profiling purposes, the right to limit the use and disclosure of their sensitive personal data and the right to be free from discrimination for exercising their rights.

Eligible residents of those states may also appeal any decision or indecision related to the exercise of any of their data privacy rights.

As required by the statutes, covered entities doing business in California, Colorado, Connecticut, Utah and Virginia have disclosure obligations to consumers for whom they collect or process personal data.

Complying with these obligations involves continued expenditures that could increase as more consumers exercise their rights under the statute.

The CCPA created a new and potentially severe statutory damages framework for violations of its provisions.

The CCPA also creates a private right of action for consumers whose personal data is subject to a data breach.

state privacy laws create new and potentially severe statutory damages frameworks for violations of their provisions.

Additionally, the CCPA creates a private right of action for consumers whose personal data is subject to a data breach.

This private right of action has the potential to create significant class action liability for businesses, like ours, that operate in California.

To protect against these new risks, it may be necessary to change our insurance programs.

The CCPA has been amended on multiple occasions, and is the subject of the regulations of the California Attorney General, which could be subject to additional modifications.

The CCPA was most recently modified by the final regulations, which took effect in August 2020.

In addition, voters in California approved the ballot initiative known as the California Privacy Rights Act of 2020, or CPRA.

The CPRA creates certain obligations relating to consumer data beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement beginning July 1, 2023.

The CPRA significantly amends the CCPA by creating additional privacy rights for California consumers and additional obligations on businesses, which could subject us to additional compliance costs as well as potential fines, individual claims and commercial liabilities.

Further, the CPRA establishes the California Privacy Protection Agency which has the power to implement and enforce the CCPA and CPRA through administrative actions, including administrative fines.

The effects of the CCPA and the CPRA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.

Certain other state laws, including Colorado and Virginia’s data privacy laws, impose similar privacy obligations and will take effect beginning in 2023.

We anticipate that more states may enact legislation similar to the CCPA, by providing consumers with new privacy rights and increases the privacy and security obligations of entities handling certain personal information of such consumers.

The CCPA has prompted a number of proposals for new federal and state-level privacy legislation.

The effects of the U.S.

state privacy laws are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.

We anticipate that more states may enact legislation similar to the CCPA, CPA, CTDPA, UCPA and VCDPA, by providing consumers with new privacy rights and increases the privacy and security obligations of entities handling certain personal data of such consumers.

These laws have prompted a number of proposals for new federal and state-level privacy legislation.

Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.

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Servicing our debt may require a significant amount of cash.

We may not have sufficient cash flow from our business to pay our indebtedness, and we may not have the ability to raise the funds necessary to settle for cash conversions of the convertible senior notes or to repurchase the convertible senior notes for cash upon a fundamental change, which could adversely affect our business and results of operations.

We may not have sufficient cash flow from our business to pay our indebtedness, and we may not have the ability to raise the funds necessary to settle conversions of the convertible senior notes in cash or to repurchase the convertible senior notes for cash upon a fundamental change, which could adversely affect our business and results of operations.

In May 2018, we issued $258.8 million in aggregate principal amount of the 2023 convertible senior notes in a private offering.

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The 2025 convertible senior notes mature on June 1, 2025, and the interest rate of the 2025 convertible senior notes is fixed at 0.500% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020.

Our ability to make scheduled payments of principal and interest, or to refinance our indebtedness, including the convertible senior notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.

Our business may not generate cash flows from operations in the future that are sufficient to service our debt and make necessary capital expenditures.

If we are unable to generate sufficient cash flows, we may be required to pursue one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive to existing holders of our common stock.

Our ability to obtain additional financing or refinance either or both series of the convertible senior notes, or any future indebtedness, will depend on conditions in the capital markets and our financial condition at such time, among other factors.

Our ability to obtain additional financing or refinance the 2025 convertible senior notes, or any future indebtedness, will depend on conditions in the capital markets and our financial condition at such time, among other factors.

We may not be able to engage in any of these activities on favorable terms or at all, which could result in a default on our debt obligations or other material adverse effects on our business and financial condition.

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If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness or repurchase any convertible senior notes when required, or to make cash payments upon conversions thereof.

The conditional conversion feature of the 2023 convertible senior notes and, if triggered, the 2025 convertible senior notes, may adversely affect our financial condition and operating results.

If and to the extent the conditional conversion features of either or both series of convertible senior notes are triggered, holders of such convertible senior notes will be entitled to convert their convertible senior notes at any time during specified periods at their option.

During the three months ended December 31, 2021, one of the conversion features of the 2023 convertible senior notes was triggered, entitling the holders thereof to convert such convertible senior notes from January 1, 2022 to March 31, 2022.

Whether the 2023 convertible senior notes will be

convertible after March 31, 2022 will depend on the continued satisfaction of this condition or other conversion conditions.

To the extent that the respective conditional conversion features of either or both series of convertible senior notes are triggered in the future, holders of such convertible senior notes, as applicable, will be entitled to convert their convertible senior notes at any time during the specified periods at their option.

If triggered, the conditional conversion feature of the 2025 convertible senior notes may adversely affect our financial condition and operating results.

If and to the extent the conditional conversion feature of our 2025 convertible senior notes is triggered, holders of such convertible senior notes will be entitled to convert their convertible senior notes at any time during specified periods at their option.

During the three months ended December 31, 2022, the conversion features of the 2025 convertible senior notes were not triggered.

Accordingly, holders of the 2025 convertible senior notes are not entitled to convert such convertible senior notes from January 1, 2023 to March 31, 2023.

Whether the 2025 convertible senior notes will be convertible after March 31, 2023 will depend on the satisfaction of the conversion conditions.

To the extent that the conditional conversion features of the 2025 convertible senior notes are triggered in the future, holders of the 2025 convertible senior notes will be entitled to convert their 2025 convertible senior notes at any time during the specified periods at their option.

If one or more holders elect to convert their 2025 convertible senior notes during any such specified period, we have the option to pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

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Transactions relating to the convertible senior notes may dilute the ownership interests of our existing stockholders or adversely affect the market price of our common stock;

the trading price of our convertible senior notes may be affected by volatility in the price of our common stock.

The conversion of some or all of either series of convertible senior notes would dilute the ownership interests of our existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock.

In this regard, if holders of the convertible senior notes elect to convert their notes during one of the specified conversion periods referred to above, we may settle our conversion obligations by delivering to them cash, shares of our common stock or a combination thereof.

In this regard, if holders of the convertible senior notes elect to convert their notes, we may settle our conversion obligations by delivering to them cash, shares of our common stock or a combination thereof.

In addition, we may issue shares of our common stock in connection with repurchases, exchanges or other transactions involving the convertible senior notes, such as the 2023 Note Repurchase Transactions, which involved the issuance of 2,723,581 shares of our common stock to certain holders of the 2023 convertible senior notes.

We received elections to convert a limited number of 2023 convertible senior notes from the fourth quarter of 2019 through December 31, 2021.

elections to convert a significant portion of 2023 convertible senior notes from the fourth quarter of 2019 through the fourth quarter of 2022.

We have elected to satisfy our obligations through the payment of cash in certain circumstances, the issuance of shares of common stock in other circumstances, or a combination thereof, to such convertible senior note holders.

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These activities could negatively affect the market price of our common stock.

Volatility and declines in the trading price of our common stock may result in decreases in the trading prices of our convertible senior notes.

Our convertible senior notes do not trade in a liquid market and are thus subject to increased volatility, particularly when our common stock price is volatile.

General Risk Factors

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The market price of our common stock has been volatile in the past and may fluctuate significantly in the future in response to numerous factors, many of which are beyond our control.

On September 30, 2021, at a special meeting of our stockholders, stockholders voted against a proposal to approve our proposed merger, or the Merger, with Zoom Video Communications, Inc., or Zoom.

Immediately following the special meeting, on September 30, 2021, we and Zoom mutually agreed to terminate the Merger, effective immediately.

During the pendency of the Merger, the trading price of our Common Stock was volatile, has continued to be volatile since the termination of the Merger, and may fluctuate significantly in the future in response to numerous factors, many of which are outside our control.

During the twelve months ended December 31, 2022, the sale price per share of our common stock ranged from a low of $46.61 to a high of $144.24.

Factors that may contribute to continuing volatility in the price of our common stock include:

• actual or anticipated fluctuations in our operating results;

• now that the Merger has terminated, certain investors who acquired our common stock during the pendency of the Merger may sell their shares of common stock, and other investors may buy shares of our common stock;

• actual or anticipated fluctuations or declines in our operating results;

• the impact of adverse economic conditions, including the impact of macroeconomic deterioration, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the impact of the Russia-Ukraine conflict, or other factors;

• loss of clients or a reduction, or slower growth, in subscriptions or features subscribed to by our existing clients;

• any major change in our board of directors or management, including in connection with our recent CEO transition;

• loss of key personnel;

• the impacts of the COVID-19 pandemic and related matters on the equity capital markets and economy in general, or on us or our industry in particular;

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• ratings changes by any securities analysts who follow our company;

• sales of our common stock (or securities that convert to our common stock) by us or our significant stockholders, or the public announcement of same;

• sales of our common stock (or securities that convert into our common stock) by us or sales by our significant stockholders, or the public announcement of same;

• the assessment of our business or position in our market published in research and other reports;

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or global economy;

• any major change in our board of directors or management;

• lawsuits threatened or filed against us;

• security breaches or incidents impacting our clients or their customers and security breaches of companies that provide solutions similar to our solution, which could negatively impact our industry as a whole;

• legislation or regulation of our business, the internet and/or contact centers;

• loss of key personnel;

• legislation or regulation of our business, the business of our clients, the internet and/or contact centers;

• new entrants into and consolidations of the contact center market, including the transition by providers of legacy on-premise contact center systems to cloud solutions;

• acquisitions by us or our competitors, and our ability to effectively integrate and achieve the desired benefits from acquisitions by us;

• the perceived or real impact of events that harm our direct competitors;

• the perceived or real impact of events that harm our competitors;

• developments with respect to patents or proprietary rights;

• general market conditions;

• other events or factors, including those resulting from war, incidents of terrorism or responses to these events, which would be unrelated to our business and industry, and outside of our control.

Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies.

In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies, particularly in connection with the continued macroeconomic deterioration, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the Russia-Ukraine conflict and the COVID-19 pandemic.

Stock prices of many technology companies have recently declined, including in some cases in a manner unrelated or disproportionate to the operating performance of those companies.

These and other factors may disproportionately impact the trading price of our common stock.

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If securities or industry analysts discontinue publishing research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.

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

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

We do not have any control over these analysts.

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If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in financial markets or our industry market, which could cause our share price or trading volume to decline.

Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.

The market price of shares of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders or the perception in the market that holders of a large number of shares intend to sell their shares.

The future registration of shares of our common stock may cause our stock price to decline, even before such shares are actually sold in the market.

Substantial future sales of shares of our common stock could cause the market price of our common stock and our convertible senior notes to decline.

The market price of shares of our common stock and our convertible senior notes could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders or the perception in the market that holders of a large number of shares intend to sell their shares.

The future registration of shares of our common stock may cause our stock price and the price of our convertible senior notes to decline, even before such shares are actually sold in the market.

We have registered shares of common stock that we may issue under our employee equity incentive plans.

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Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near the State of Delaware.

The Court of Chancery or federal district courts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders.

such judgments or results may be more favorable to us than to our stockholders.

Alternatively, if a court were to find either of these choice of forum provisions to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

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

What changed 10-K

Item 1A. Risk Factors