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Item 1A. Risk Factors

2022-02-28 compared with 2021-03-08 · 299 added, 174 removed, 782 unchanged (38% of the section changed)

The following are certain of the important risk factors that could cause, or contribute to causing, our actual operating results to differ materially from those indicated, expected, or suggested by forward-looking statements made in this Annual Report on Form 10-K or presented elsewhere by management from time to time.

The risks described below are not the only

ones we face.

The risks described below are not the only ones we face.

Additional risks not presently known to us, or that we currently deem to be immaterial, could also materially and adversely affect our business, results of operations, financial condition, cash flows, prospects, and/or the price of our outstanding securities.

Summary of Risk Factors

The following is a summary of the principal risks and uncertainties that could materially adversely affect our business, results

of operations, financial condition, cash flows, prospects and/or the price of our outstanding securities, and make an investment

in our securities speculative or risky.

You should read this summary together with the more detailed description of each risk

factor contained below.

The following is a summary of the principal risks and uncertainties that could materially adversely affect our business, results of operations, financial condition, cash flows, prospects, and/or the price of our outstanding securities, and make an investment in our securities speculative or risky.

You should read this summary together with the more detailed description of each risk factor contained below.

Risks Related to Operating our Business

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Risks Related to Industry Dynamics and Competition

• If we are unable to develop and maintain successful relationships with social media and other third-party consumer messaging platforms and endpoints, our business, results of operations and financial condition could be adversely affected.

• If we are unable to develop and maintain successful relationships with partners, service partners, social media, and other third-party consumer messaging platforms and endpoints, our business, results of operations, and financial condition could be adversely affected.

• If we are unable to effectively operate on mobile devices, our business could be adversely affected.

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If we do not meet these contractual commitments, we could be obligated to provide credits or refunds or face contract terminations, which could adversely affect our revenue and harm our reputation.

• We are dependent on technology systems and third-party content that are beyond our control.

• Failure to license necessary third party software for use in our products and services, or failure to successfully integrate third party software, could cause delays or reductions in our sales, or errors or failures of our service.

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In the technology industry, there is substantial competition for key personnel, including skilled engineers, sales executives and operations personnel.

We may not be able to successfully recruit, integrate and retain qualified personnel in the future, which could impact our ability to innovate and deliver new or updated products to our customers, which could harm our business.

Among other things, our decision to close virtually all of our offices following the onset of the COVID-19 pandemic may make it harder for us to recruit and retain our personnel.

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We anticipate that additional investments in our internal infrastructure, data center capacity, research, customer support and development, and real estate spending will be required to scale our operations and increase productivity, to address the needs of our customers, to further develop and enhance our services, to expand into new geographic areas, and to scale with our overall growth.

We may also need to make additional investments with third party outsourcing providers, such our announced plans to work with Infosys to move our technology infrastructure to the public cloud.

We may also need to make additional investments with third party outsourcing providers, such our announced plans to work with a digital services and consulting company to move our technology infrastructure to the public cloud.

The additional investments we are making will increase our cost base, which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term, and there is no guarantee that they will be successful or meet our customers’ needs.

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Because of the historically small amount of services sold in initial orders, we depend significantly on the growth of our customer base and sales to new customers and sales of additional services to our existing customers.

The success of our consumer offerings similarly depends on our ability to attract and retain new customers.

The success of our

consumer offerings similarly depends on our ability to attract and retain new customers.

Our revenue could decline unless we are able to obtain additional customers or alternate revenue sources.

Our Gainshare program offers contingent pricing and if we are unsuccessful at achieving customer objectives, the program could result in operating losses.

The Company has developed Gainshare, a fully managed solution where LivePerson provides messaging and AI automation technology as well as the labor, automation, and end-to-end program management.

Gainshare pricing is contingent on the degree to which a customer achieves its financial objectives, such as increased revenue or reduced operating costs.

If we are unsuccessful in achieving these objectives for our customers (including as a result of broader market events, such as normalization of pandemic-specific shopping trends and returns to physical, in-store shopping experiences), it will reduce the revenue that we recognize from Gainshare and could result in our operating the program at a financial loss, which could have a materially adverse impact on our financial results.

Our expansion into new products, services, and technologies could subject us to additional risks.

We have invested and expect to continue to expand in new products, services, and technologies.

We may have limited or no experience in new market segments that we enter or new services that we decide to offer, and customers may not choose to buy or use our service offerings.

These offerings, which can present new and difficult technology challenges, may subject us to claims if customers of these offerings experience service disruptions or failures or other quality issues.

Our newer activities may involve significant risks and uncertainties, including diversion of resources and management attention from current operations, as well as, in certain circumstances, the use of alternative investment, governance, or revenue strategies that may fail to adequately align incentives across our business or otherwise accomplish our objectives.

In addition, new and evolving products, services, and technologies, including those that use AI, machine learning, and blockchain, can raise ethical, technological, legal, regulatory, and other challenges, which may negatively affect our business and demand for our products and services.

In addition, profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them.

Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off.

Major public health issues, and specifically the pandemic caused by the spread of COVID-19, could have a material adverse

impact on our business, results of operations, financial condition, cash flows, prospects and/or the price of our outstanding

Our results of operations could in the future be materially adversely impacted by the coronavirus (COVID-19) pandemic.

Major public health issues, and specifically the pandemic caused by the spread of COVID-19, could have a material adverse impact on our business, results of operations, financial condition, cash flows, prospects, and/or the price of our outstanding securities.

Our results of operations could in the future be materially adversely impacted by the COVID-19 pandemic.

We closely monitor developments related to the COVID-19 pandemic to assess its impact on our business.

While still evolving, the global spread of the COVID-19 pandemic has created significant economic disruption, and financial volatility and uncertainty both in the U.S.

While still evolving, the COVID-19 pandemic (including the emergence and spread of more transmissible variants) has created significant economic disruption, and financial volatility and uncertainty both in the U.S.

and around the world.

Though vaccines believed to be highly effective at preventing symptomatic COVID-19 have been produced and are currently in the process of being distributed, it is not possible to estimate how long it will take to halt the spread of the virus or the longer term-effects that the COVID-19 pandemic could have on our business.

Although vaccines believed to be highly effective at preventing hospitalization from COVID-19 continue to be produced and distributed, it is not possible to predict the longer term-effects that the COVID-19 pandemic could have on our business, including after the COVID-19 pandemic has subsided.

The extent to which the COVID-19 pandemic impacts our business, results of operations, financial condition, cash flows or prospects will depend on future developments, which are highly uncertain and that we may not be able to accurately predict, including the duration and severity of the pandemic;

governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic;

the rate of vaccine adoption, the efficacy of vaccines in the broader population, and how widespread such vaccine adoption is;

governmental, business and individual actions that have been and continue to be taken in response to the pandemic;

the rate of vaccine adoption, the effectiveness of global vaccine distribution efforts and vaccine efficacy;

the impact of the pandemic on economic activity and actions taken in response;

the effect on our clients and client demand for our services and solutions, including the potential lengthening of the sales cycle;

our ability to sell and provide our services and solutions, including through in-person global customer summits, which have proven successful for us in the past, travel restrictions and people working from home;

our ability to sell and provide our services and solutions, including through global customer summits (which were held virtually in 2020 and 2021);

the ability of our clients to pay for our services and solutions;

travel restrictions and working from home;

and any closures of our and our clients’ offices and facilities.

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While we have implemented risk management and contingency plans and taken preventive measures and other precautions, the ultimate impact of the COVID-19 pandemic on our business is uncertain.

In 2020, due to health concerns related to the global novel coronavirus (COVID-19) pandemic, we vacated our physical offices around the world, and began transitioning to a work-from-anywhere model.

In 2020, due to health concerns related to the COVID-19 pandemic, we vacated our physical offices around the world, and transitioned to a work-from-anywhere model.

While we have been able to operate effectively from remote locations, the long-term impact of such work arrangements remains unknown.

For example, such remote work arrangements may increase the risk of cyber incidents or data breaches.

Furthermore, we have incurred, and will in the future incur, expenses associated with the early termination of various leases at our office locations around the world.

We also outsource certain critical business activities to third parties and plan to continue to increase these activities, such as through our announced outsourcing partnership with Infosys.

For example, such remote work arrangements may increase the risk of cyber incidents or data

breaches and may present workplace culture challenges.

Furthermore, we have incurred expenses associated with the early termination of various leases at our office locations around the world.

We also outsource certain critical business activities to third parties and plan to continue to increasingly do so.

As a result, we rely upon the successful implementation and execution of the business continuity and repopulation planning of such entities in the current environment.

closely monitor the business continuity activities of these third parties, successful implementation and execution of their business continuity and repopulation strategies are largely outside our control.

While we closely monitor the business continuity activities of these third parties, successful implementation and execution of their business continuity and repopulation strategies are largely outside our control.

If one or more of the third parties to whom we outsource certain critical business activities experience operational failures as a result of the impacts from the spread of COVID-19, or claim that they cannot perform due to a force majeure, it may have a material adverse effect on our business, financial condition, results of operations, liquidity and cash flows.

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As part of our business strategy, we have made and will continue to make acquisitions to add complementary businesses, products, technologies, revenue and intellectual property rights.

We have made a number of acquisitions in the past, including three in 2018.

In October 2018, we acquired AdvantageTec, Inc., a leading provider of texting solutions for service departments of automotive dealerships that helps enable the conversational experience across the entire dealership, including variable and fixed operations.

In September 2018, we acquired the employees and technology assets of Conversable, Inc.

a SaaS based Artificial Intelligence powered conversational platform.

a SaaS based AI powered conversational platform.

In January 2018, we acquired the employees and technology assets of BotCentral, Inc., a Silicon Valley based startup which has created a number of bot solutions for major brands in banking, insurance, and travel, running on LivePerson’s conversational platform.

In July 2021, we acquired German conversational AI company e-bot7.

In October 2021, we acquired VoiceBase, Inc., a leader in real-time speech recognition and conversational analytics;

and Callinize Inc., dba Tenfold, an advanced customer engagement platform for integrating communication systems with leading CRM and support services.

Acquisitions and investments involve numerous risks to us, including:

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• diversion of financial and management resources from efforts related to existing operations;

• risks of entering new markets in which we have little or no experience or where competitors may have stronger

market positions;

• risks of entering new markets in which we have little or no experience or where competitors may have stronger market positions;

• potential loss of our existing key employees or key employees of the company we acquire;

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The issuance of equity securities could be dilutive to our existing stockholders.

If we do not effectively implement our plans to migrate our technology infrastructure to the public cloud, our operations could be significantly disrupted.

We have announced plans to migrate our technology infrastructure to the public cloud.

This initiative is a major undertaking as we migrate and reconfigure our current system processes, transactions, data and controls to a new cloud-based platform.

It could have a significant impact on our business processes, financial reporting, information systems and internal controls.

As we implement the transition of our technology infrastructure to the public cloud, we may need to divert resources away from other important business operations, including management attention.

While we plan to implement business contingency and other plans to facilitate continuous internet access, sustained or concurrent service denials or similar failures could limit our ability to provide our customers access to cloud-based services or otherwise operate our business.

Additionally, we may experience issues with customer migration, as many of our customers may not migrate to cloud-based technologies on a timely basis or at all or may choose not to utilize our products and services during and after our transition to cloud-based technologies, which could negatively impact our revenue.

Additionally, we may experience difficulties as we manage these changes and transition our technology infrastructure to the public cloud, including loss or corruption of data, interruptions in service and downtime, increased cyber threats and activity, delayed financial reporting, unanticipated expenses including increased costs of implementation and of conducting business, and lost revenue.

Although we plan to conduct design validations and user testing, these may cause delays in transacting our business due to system challenges, limitations in functionality, inadequate management or process deficiencies in the development and use of our systems.

Difficulties in implementing or an inability to effectively implement our migration plans could disrupt our operations and harm our business.

As we increase our reliance on public cloud infrastructure, our products and services will become increasingly reliant on continued access to, and the continued stability, reliability, and flexibility of third-party public cloud services.

We have limited control over the public cloud operations and facilities on which we plan to host our technology infrastructure.

Any changes in third-party service levels or any disruptions or delays from errors, defects, hacking incidents, security breaches, computer viruses, DDoS attacks, bad acts or performance problems could harm our reputation, damage our customers’ businesses, and harm our business.

Our public cloud providers are also vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, war, public health crises, such as COVID-19, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events.

Although our transition and migration to the public cloud may increase our risk of liability and cause us to incur significant technical, legal or other costs, we may have limited remedies against third-party providers in connection with such liabilities.

Additionally, our public cloud providers may not be able to effectively manage existing traffic levels or increased demand in capacity requirements, especially to cover peak levels or spikes in traffic, and as a result, our customers may experience delays in accessing our solutions or encounter slower performance in our solutions, which could significantly harm the operations of our customers.

Interruptions in our services might reduce our revenue, cause us to issue credits to customers, subject us to potential liability, and cause customers to terminate their subscriptions or harm our renewal rates.

Finally, we may in the future be unable to secure additional cloud hosting capacity on commercially reasonable terms or at all.

If any of our public cloud providers increases pricing terms, terminates or seeks to terminate our contractual relationship or changes or interprets their terms of service or policies in a manner that is unfavorable, we may be required to transfer to another provider and may incur significant costs and experience service interruptions.

Capital needs necessary to execute our business strategy could increase substantially and we may not be able to secure additional financing to execute this strategy.

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We cannot assure you that additional funding, if required, will be available to us in amounts or on terms acceptable to us.

If sufficient funds are not available or are not available on acceptable terms, our ability to fund any potential expansion, take advantage of acquisition opportunities, develop or enhance our services or products, or otherwise respond to competitive pressures would be significantly limited.

otherwise respond to competitive pressures would be significantly limited.

Those limitations would materially and adversely affect our business, results of operations, cash flows, and financial condition.

Our sales cycles can be lengthy, and the timing of sales can be difficult to predict, which may cause our operating results to

vary significantly.

Our sales cycles can be lengthy, and the timing of sales can be difficult to predict, which may cause our operating results to vary significantly.

The sales cycle for our products can be several months or more and varies substantially from customer to customer, particularly for sales to enterprise customers.

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If we were found to be in violation of applicable laws or regulations, we could be subject to civil and criminal penalties or forced to cease our payments services business.

We may experience difficulties integrating e-bot7, VoiceBase and Tenfold, and may not realize expected business or financial benefits and our business could be adversely impacted.

In the third quarter of 2021, we acquired e-bot7, a Conversational AI company.

In the fourth quarter of 2021, we acquired VoiceBase, a leader in real time speech recognition and conversational analytics and Tenfold, an advanced customer engagement platform for integrating communication systems with leading CRM and support systems.

We intend to maintain the business operations of each of these companies while integrating and leveraging e-bot7’s self-service capabilities, Tenfold’s technology platform, and VoiceBase’s technology with our proprietary messaging and Conversational AI offerings.

However, acquiring and integrating a technology company presents unique risks including difficulties in adapting and developing new software technologies and systems protocols, increased software integration expenses, and incompatibility of acquired technologies in addition to the risks discussed under “ If we do not successfully integrate past or potential future acquisitions, we may not realize the expected business or financial benefits and our business could be adversely impacted.

Our business of facilitating at-home rapid-testing solutions poses substantial risks.

In the first quarter of 2021, our subsidiary Bella Health began to offer its corporate customers access to a digital mobile application that provides our customers’ employees with FDA-approved rapid-antigen COVID-19 tests (provided by a qualified third-party), guided self-administration, and access to experts through messaging and Conversational AI.

The business of Bella Health poses certain risks, including our lack of experience operating in the healthcare industry and elevated risks related to compliance with federal, state, and local laws, rules and regulations pertaining to the healthcare and diagnostic testing industry.

These risks include among other things, potential fines and other penalties for failure to protect the security of, and the unauthorized sharing of, health information, or our failure to comply with health care laws and regulations, for each of which we may not have sufficient insurance or indemnification rights.

In addition, the revenue we generate from Bella Health may decrease due to reduced demand for COVID-19 testing if the number of COVID-19 infections continues to decrease, unless we are able to develop other product offerings that offset this decrease.

Our expansion into digital healthcare poses substantial new risks to which we have not previously been exposed.

These risks include our lack of experience operating in the healthcare industry and elevated risks relating to compliance with certain U.S.

federal, state, and local healthcare laws, regulations, and rules in the heavily-regulated healthcare industry, including:

state laws relating to the licensure of medical professionals;

state laws regulating telehealth and online healthcare services;

state laws that prohibit general business corporations from practicing medicine, controlling physicians’ medical decisions, or engaging in certain practices, such as splitting fees with physicians;

state law provisions relating to anti-kickback, self-referral, and false claims;

provisions of, and regulations relating to the Health Insurance Portability and Accountability Act of 1996, as amended, and its accompanying regulations (“HIPAA”), including provisions relating to the confidentiality and security of individually identifiable health information;

and federal and state laws relating to the provision of services by non-physician clinical providers (such as physician assistants or nurses);

and exposure to liability, which may include liabilities for failure to comply with healthcare laws, regulations, and rules for which we may not have sufficient insurance or indemnification rights.

In addition, if we were to start accepting payments from third party payors, including, among others, private insurance companies or government payors (such as Medicaid or Medicaid), it would create additional compliance obligations, including:

federal laws that prohibit entities from submitting false claims to Medicare, Medicaid, or other government programs;

federal laws that prohibit the receipt of any form of remuneration in return for the referral of patients for items and services covered, in whole or in part, by federal healthcare programs;

federal laws prohibiting physicians from referring Medicare or Medicaid patients to an entity for the provision of certain “designated health services” if the physician (or a member of the physician’s immediate family) has a direct or indirect financial relationship with the entity;

federal laws relating to failure to disclose or refund overpayments by a government payor;

federal and state laws the prohibit healthcare providers from billing and receiving payment from Medicare or Medicaid for services, unless the services are medically necessary;

and federal laws that impose civil administrative sanctions for, among other violations, inappropriate billing of services to federally funded healthcare programs, or employing individuals who are excluded from participation in federally funded healthcare programs.

Accordingly, to the extent they are or become applicable as and if we continue to grow in the digital healthcare space, we must monitor our compliance with applicable healthcare laws, regulations, and rules in every jurisdiction in which we operate,

on an ongoing basis, and we cannot provide assurance that our activities and arrangements, if challenged, will be found to be in compliance.

Even if our activities and arrangements are found to be in compliance, investigations can be time- and resource-consuming and can divert management’s attention from the business.

Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

Achieving and sustaining compliance with these laws may prove costly.

Compliance may require obtaining appropriate licenses or certificates, increasing our security measures and expending additional resources to monitor developments in applicable rules and ensure compliance.

Additionally, it is possible that the laws, regulations and rules governing the provision of healthcare services may change significantly in the future.

Any new or changed healthcare laws, regulations or rules or any review of our business by judicial, law enforcement, regulatory or accreditation authorities could adversely affect our business, financial condition and results of operations.

Our reputation depends, in part, on factors which are partially or entirely outside of our control .

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As a result, we are not able to control the actions of these operators or Experts and the impression that such operator or Expert leaves the user with whom they interact.

not know that the operator or Expert is not a LivePerson employee.

A user may not know that the operator or Expert is not a LivePerson employee.

If a user were to have a negative experience in a LivePerson-powered real-time dialogue, it is possible that this experience could be attributed to us, which could diminish our brand and harm our business.

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• economic conditions specific to the web, mobile technology, electronic commerce, and cloud computing;

• consequences of unexpected geopolitical events, natural disasters, acts of war or terrorism, outbreaks of contagious disease (e.g., coronavirus) or climate change;

consequences of unexpected geopolitical events, natural disasters, acts of war or terrorism, outbreaks of contagious disease (e.g., COVID-19), or climate change;

• general, regional, and/or global economic and political conditions.

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If this occurs, the trading price of our securities could decline significantly.

In the past we have experienced losses, we had an accumulated deficit of $391.9 million as of December 31, 2020 and we

may incur losses in the future.

In the past we have experienced losses, we had an accumulated deficit of $516.9 million as of December 31, 2021 and we may incur losses in the future.

We have in the past incurred, and we may in the future incur, losses and experience negative cash flow, either or both of which may be significant.

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We recorded net income for the years ended December 31, 2004 through 2007 and 2009 through 2012, while we recorded net losses for the years ended December 31, 2008, and 2013 through 2021.

We recorded a net loss of $107.6 million for the year ended

December 31, 2020.

W e recorded a net loss of $125.0 million for the year ended December 31, 2021.

As of December 31, 2021, our accumulated deficit was approximately $516.9 million .

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In the future, these market risks associated with our investment portfolio may harm the results of our operations, liquidity and financial condition.

Although we believe we have chosen a more cautious portfolio designed to preserve our existing cash position, it may not adequately protect the value of our investments.

Although we believe we have chosen a portfolio reasonably designed to preserve our existing cash position, it may not adequately protect the value of our investments.

Furthermore, this more cautious portfolio is unlikely to provide us with any significant interest income in the near term.

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Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, because revenue from new customers and additional revenue from existing customers is generally recognized over the applicable subscription term, rather than immediately.

Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.

Accounting principles generally accepted in the United States are subject to interpretation by the Financial Accounting Standards Board (the “FASB”), the American Institute of Certified Public Accountants, the SEC, and various bodies formed to

promulgate and interpret appropriate accounting principles.

A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

If our goodwill or amortizable intangible assets become impaired, we may be required to record a significant charge to

Under accounting principles generally accepted in the United States, we review our amortizable intangible assets for impairment when events or changes in circumstances indicated that the carrying value may not be recoverable.

We review our goodwill for impairment at least annually and when events or changes in circumstances indicate that the carrying value may not

be recoverable.

If our goodwill or amortizable intangible assets become impaired, we may be required to record a significant charge to earnings.

Under GAAP, we review our amortizable intangible assets for impairment when events or changes in circumstances indicated that the carrying value may not be recoverable.

We review our goodwill for impairment at least annually and when events or changes in circumstances indicate that the carrying value may not be recoverable.

Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable include a decline in stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in our industry.

Based on our annual review for 2021, we determined that it is not more likely than not that the fair value of the reporting units is less than their carrying amount.

However, future assessments may yield a different result, and from time to time, we may be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill is determined, resulting in a negative impact on our results of operations.

However, future assessments may yield a different result, and from time to time, we may be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, resulting in a negative impact on our results of operations.

Risks Related to Industry Dynamics and Competition

If we are unable to develop and maintain successful relationships with social media and other third-party consumer messaging platforms and endpoints, our business, results of operations and financial condition could be adversely affected.

If we are unable to develop and maintain successful relationships with partners, service partners, social media, and other third-party consumer messaging platforms and endpoints, our business, results of operations, and financial condition could be adversely affected.

We believe that continued growth for companies in our industry depends, in part, on enabling brands to connect with consumers across consumers’ preferred conversational interfaces and messaging endpoints, such as SMS, Facebook Messenger, WhatsApp, Apple Business Chat, Google Rich Business Messenger, Line, and Alexa.

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As part of our growth strategy, we plan to further develop partnerships and specific solution areas with additional technology partners.

If we fail to establish these relationships in a timely and cost-effective manner, or at all, or if we lose any or all of our current relationships, then our business, results of operations and financial condition could be adversely affected.

We typically rely on our strategic partners and third-party service providers to supplement our own subject matter expertise and to leverage industry best practice, provide enhanced products and services, and reduce costs.

If we fail to establish these relationships in a timely and cost-effective manner or at all, if these strategic partners or third-party service providers fail to provide the services expected, or if we lose any or all of our current relationships, then our business, results of operations, and financial condition could be adversely affected.

Replacing a strategic relationship could also take a long period of time and result in increased expenses.

Additionally, even if we are successful at developing these relationships, but there are problems or issues with the integrations, or our ability to scale and onboard our customers onto new endpoints, our reputation, and ability to grow our business may be adversely affected.

We have announced plans to migrate our technology infrastructure to the public cloud, and may in the future be unable to secure additional cloud hosting capacity on commercially reasonable terms or at all.

If any of our public cloud providers increases pricing terms, terminates or seeks to terminate our contractual relationship, establishes more favorable relationships with our competitors, or changes or interprets their terms of service or policies in a manner that is unfavorable with respect to us, we may be required to transfer to another provider and may incur significant costs and experience service interruptions.

If we are unable to effectively operate on mobile devices, our business could be adversely affected.

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The markets for mobile and online business messaging and digital engagement and AI technology are intensely competitive, rapidly changing, and characterized by aggressive marketing, pricing pressure, evolving industry standards, rapid technology developments, and frequent new product introductions.

We believe that competition will continue to increase as our

current competitors increase the sophistication of their offerings and as new participants enter the market, which may cause additional pressure.

We believe that competition will continue to increase as our current competitors increase the sophistication of their offerings and as new participants enter the market, which may cause additional pressure.

If we are unable to accurately anticipate technology developments and continue to innovate in the markets in which we compete and develop successful integrations with third-party consumer messaging platforms, AI providers, and endpoints, or our competitors are more successful than us at developing compelling new products, services, and integrations, or at attracting and retaining customers, we may lose revenue and market share and our operating results could be adversely affected.

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• customers that develop and manage their messaging solutions in-house.

In addition, many of our current and potential competitors have substantial competitive advantages, such as greater brand recognition, significantly larger financial, marketing, and resource and development budgets, access to larger customer and/or consumer bases, larger and more established marketing and distribution relationships, and/or more diverse product and service offerings.

consumer bases, larger and more established marketing and distribution relationships, and/or more diverse product and service offerings.

As a result, these competitors may be able to respond more quickly and effectively than we can to any change in the general market acceptance of messaging services or any new or changing opportunities, technologies, standards, pricing strategies, or customer requirements.

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Downturns in the global economic environment or in particular industries in which our sales are concentrated may adversely affect our business and results of operations.

The United States and other global economies have experienced in the past and could in the future experience economic downturn that affects all sectors of the economy, particularly in the financial services and retail industries, resulting in declines in economic growth and consumer confidence, increases in unemployment rates and uncertainty about economic stability.

Further, there is increased uncertainty regarding social, political, immigration and trade policies in the United States, which could impact our global operations and our business.

and other global economies have experienced in the past and could in the future experience economic downturn that affects all sectors of the economy, particularly in the financial services and retail industries, resulting in declines in economic growth and consumer confidence, increases in unemployment rates and uncertainty about economic stability.

Further, there is increased uncertainty regarding social, political, immigration and trade policies in the U.S., which could impact our global operations and our business.

Global credit and financial markets have in the past experienced extreme disruptions, including diminished liquidity and credit availability and rapid fluctuations in market valuations.

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In the event that industry conditions deteriorate in one or more of these industries, we could experience, among other things, cancellation or non-renewal of existing contracts, reduced demand for our products and reduced sales.

It could be difficult to predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, either relating to the global economic environment or to the particular industries in which our sales are concentrated, which, in turn, could make it more challenging for us to forecast our operating results, make business decisions and identify risks that may adversely affect our business, sources and uses of cash, financial condition and results of operations.

our operating results, make business decisions and identify risks that may adversely affect our business, sources and uses of cash, financial condition and results of operations.

Weak economic conditions may also cause our customers to experience difficulty in supporting their current operations and implementing their business plans.

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Our security measures may also be breached due to employee or other error, intentional malfeasance and other third party acts, and system errors or vulnerabilities, including vulnerabilities of our third party service providers, or customers, or otherwise.

We have announced plans to move our technology infrastructure to the public cloud, which will require us to rely on third-party cloud providers to maintain appropriate safeguards.

Additionally, in response to the COVID-19 pandemic, a majority of our office employees are working remotely.

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And while technological advancements enable more data and processes, such as mobile computing and mobile payments, they also increase the risk that cyber-attacks and other security incidents will occur.

We engage third parties to review and assist in safeguarding our products and services from such

We engage third parties to review and assist in safeguarding our products and services from such threats.

Those parties may identify vulnerabilities, some of which may not be immediately remedied.

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The dialogue transcripts of the text-based chats, email interactions and other interactions between our customers and their users may include information, such as personal contact and demographic information.

Although we employ and continually test and update our security measures to protect this information from unauthorized access, it is still possible that our security measures could be breached and such a breach could result in unauthorized access to our customers’ data or our data, including our intellectual property and other confidential business information.

Although we employ and continually

test and update our security measures to protect this information from unauthorized access, it is still possible that our security measures could be breached and such a breach could result in unauthorized access to our customers’ data or our data, including our intellectual property and other confidential business information.

Because the techniques employed by hackers to obtain unauthorized access or to sabotage systems change frequently and are becoming more sophisticated in circumventing security measures and avoiding detection, we may be unable to anticipate all techniques or to implement adequate preventative measures.

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In the event of a security incident, we could be required to comply with a myriad of breach notification laws at the state, federal and international level, which may cause business disruption and extensive notification costs, and could lead to penalties, government investigations and lawsuits for compliance failures.

We may as a result of a security incident be deemed out of compliance with United States federal and state laws, international laws, or contractual commitments, and we may be subject to government investigations, lawsuits, fines, criminal penalties, statutory damages, and other costs to respond to breach or security incidents, which could have a material adverse effect on our business, results of operations and financial condition.

We may as a result of a security incident be deemed out of compliance with U.S.

federal and state laws, international laws, or contractual commitments, and we may be subject to government investigations, lawsuits, fines, criminal penalties, statutory damages, and other costs to respond to breach or security incidents, which could have a material adverse effect on our business, results of operations, and financial condition.

We may incur significant costs to protect against the threat of security breaches or to mitigate the harm and alleviate problems caused by such breaches.

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Furthermore, certain software and services that we use to operate our business are hosted and/or operated by third parties or integrated with our systems.

If these services were to be interrupted or their security breached, our business operations could be similarly disrupted and we could be exposed to liability and costly investigations or litigation.

For example, as we expand our use of cloud-based services, we will increasingly rely on third-party cloud providers to maintain appropriate safeguards to protect confidential or personal data we receive.

While we intend to conduct due diligence on these cloud providers with respect to their security and business controls, we may not have the visibility to effectively monitor the implementation and efficacy of these controls.

If third-party services were to be interrupted or their security breached, our business operations could be similarly disrupted and we could be exposed to liability and costly investigations or litigation.

The need to properly secure, and securely transmit and store, confidential information online has historically been a significant barrier to e-commerce and online communications, and will become increasingly highlighted as a consumer and regulatory focus and concern.

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As is common for many cloud service providers, we offer service level commitments in certain of our customer contracts, primarily related to uptime of our service.

If we are unable to meet the stated service level commitments or suffer periods of downtime that exceed the periods allowed under our customer contracts, whether due to downtime caused by us or our third-party service providers, which has occurred on several occasions in the past and could occur in the future, we may be contractually obligated to provide these customers with service credits and/or pay financial penalties, which could significantly impact our revenue.

If we are unable to meet the stated service level commitments or suffer periods of downtime that exceed the periods allowed under our customer contracts, whether due to downtime caused by us or our third-party service providers, which has occurred on several occasions in the past and could occur in the future (including in connection with the migration of our technology infrastructure to the public cloud), we may be contractually obligated to provide these customers with service credits and/or pay financial penalties, which could significantly impact our revenue.

In addition, even if our contracts provide otherwise, these customers may attempt to terminate or reduce their contracts, which has occurred from time to time, and/or pursue other legal remedies.

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Information technology system failures, including a breach of our or our third party service providers’ data security, could disrupt our ability to function in the normal course of business by potentially causing, among other things, an unintentional disclosure of customer information or loss of information.

Additionally, despite our security procedures or those of our third party service providers, information systems may be vulnerable to threats such as computer hacking, cyber-terrorism or other unauthorized attempts by third parties to access, obtain, modify or delete our or our customers’ data.

Additionally, despite our security procedures or those of our third party service providers, information systems may be vulnerable to threats such as computer hacking, ransomware, cyber-terrorism or other unauthorized attempts by third parties to access, obtain, modify or delete our or our customers’ data.

Any such breach could have a material adverse effect on our operating results and our reputation as a provider of business collaboration and communications solutions and could subject us to significant penalties and negative publicity, as well as government investigations and claims for damages or injunctive relief under state, federal and foreign laws or contractual agreements.

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Additionally, we must continually upgrade our software to improve the features and functionality of our services in order to be competitive in our markets.

If future versions of

our software contain undetected errors, our business could be harmed.

If future versions of our software contain undetected errors, our business could be harmed.

If third-party content is flawed, our business could be harmed.

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If we experience system failures or degraded response times, our reputation and brand could be harmed.

We may also experience technical problems in the process of installing and initiating the LivePerson services on new web hosting services.

We may also experience technical problems in the process of installing and initiating the LivePerson services on new web hosting services, including in connection with our plans to migrate our technology infrastructure to the public cloud.

These problems, if not remedied, could harm our business.

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Third-party licenses may expose us to increased risks, including risks associated with the integration of new technology, the impact of new technology integration on our existing technology, open source software disclosure requirements, the diversion of resources from the development of our own proprietary technology, and our inability to generate revenue from new technology sufficient to offset associated acquisition and maintenance costs.

Our business is subject to the risks of earthquakes, fires, floods and other natural catastrophic events and to interruption by man-made problems such as terrorism or computer viruses.

Our business is subject to the risks of earthquakes, fires, floods, and other natural catastrophic events and to interruption by man-made problems such as terrorism or cyber-attacks.

Although we intend to migrate our technology infrastructure to the public cloud, a substantial majority of our computer and communications infrastructure is running in our private cloud on hardware that is located at a limited number of facilities in the United States, Europe, and Australia.

Our systems and operations are vulnerable to damage or interruption from earthquakes, fires, floods, hurricanes, other acts of nature, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins, cyber-attacks or failures, pandemics or other public health crises, or similar events.

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Although we have implemented security measures and disaster recovery capabilities, there can be no assurance that we will not suffer from business interruption, or unavailability or loss of data, as a result of any such events.

As we rely heavily on our servers, computer and communications systems and the internet to conduct our business and provide high quality service to our

customers, such disruptions could negatively impact our ability to run our business, result in loss of existing or potential customers and increased expenses, and/or have an adverse effect on our reputation and the reputation of our products and services, any of which would adversely affect our operating results and financial condition.

As we rely heavily on our servers, computer and communications systems and the internet to conduct our business and provide

high quality service to our customers, such disruptions could negatively impact our ability to run our business, result in loss of existing or potential customers and increased expenses, and/or have an adverse effect on our reputation and the reputation of our products and services, any of which would adversely affect our operating results and financial condition.

Risks Related to Regulatory and Data Privacy Issues

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The foregoing could have a material adverse effect our business, results of operations, and financial condition.

The scope of U.S.

and international privacy laws and regulations is evolving and changing, subject to differing interpretations, may be costly to comply with, and may be inconsistent among countries and jurisdictions or conflict with other rules.

and international privacy laws and regulations are evolving and changing, subject to differing interpretations, may be costly to comply with, and may be inconsistent among countries and jurisdictions or conflict with other rules.

As we expand our operations in these countries, our liability exposure and the complexity and cost of compliance with data and privacy requirements will likely increase.

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Laws and practices regarding handling and use of personal and other information by companies have come under increased public scrutiny, and governmental entities, consumer agencies and consumer advocacy groups have called for, and in many instances, enacted increased regulation and changes in industry practices.

For example, the European Union (“E.U.”) General Data Protection Regulation (“GDPR”), which became effective in May 2018, replacing the E.U.

For example, the E.U.

General Data Protection Regulation (“GDPR”), which became effective in May 2018, replacing the E.U.

Data Protection Directive, imposes significantly greater compliance burdens on companies that control or process personal data of users primarily located in the E.U.

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We also must require vendors that process personal data to take on additional privacy and security obligations, and some may refuse, causing us to incur potential disruption and expense related to our business processes.

If our policies and practices, or those of our vendors, are, or are perceived to be, insufficient, we could be subject to enforcement actions or investigations by Data Protection Authorities (including in the EU) or lawsuits by private parties, and our business could be negatively impacted.

If our policies and practices, or those of our vendors, are, or are perceived to be, insufficient, we could be subject to enforcement actions or investigations by Data Protection Authorities (including in the E.U.) or lawsuits by private parties, and our business could be negatively impacted.

has also released a proposed Regulation on Privacy and Electronic Communications (“e-Privacy Regulation”) to replace the E.U.’s Privacy and Electronic Communications Directive (“e-Privacy Directive”) to, among other things, better align with the GDPR, to amend the current e-Privacy Directive’s rules on the use of cookies and other tracking technologies, and to harmonize across current E.U.

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Additionally, as web and mobile commerce continues to evolve, regulation by federal, state and foreign governments or agencies in the areas of data privacy and data security is likely to increase.

For instance, recent legal developments in Europe have created complexity and regulatory compliance uncertainty regarding certain transfers of personal information from the

European Economic Area (the “EEA”) to the United States and certain other third countries.

For instance, recent legal developments in Europe have created complexity and regulatory compliance uncertainty regarding certain transfers of personal information from the European Economic Area (the “EEA”) to the United States and certain other third countries.

For example, on July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated the E.U.-U.S.

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entities who had self-certified under the Privacy Shield program.

While the CJEU upheld the adequacy of E.U.-specified standard contractual clauses as an adequate personal information transfer mechanism, it made clear that reliance on them alone may not necessarily be sufficient in all circumstances and that their use must be assessed on a case-by-case basis taking into account the surveillance laws in and the right of individuals afforded by, the destination country.

The CJEU went on to state that, if the competent supervisory authority believes that the standard contractual clauses cannot be complied with in the destination country and the required level of protection cannot be secured by other means, such supervisory authority is under an obligation to suspend or prohibit that transfer unless the data exporter has already done so itself.

Similarly, on September 8, 2020, the Swiss Data Protection Authority announced in a position statement that it no longer considers the Swiss-U.S.

Privacy Shield adequate for the purpose of transferring personal data from Switzerland to the United States.

While the CJEU upheld the adequacy of E.U.-specified standard contractual clauses (“SCCs”) as an adequate personal information transfer mechanism, it made clear that reliance on them alone may not necessarily be sufficient in all circumstances and that their use must be assessed on a case-by-case basis taking into account the surveillance laws in and the right of individuals afforded by, the destination country.

The CJEU went on to state that, if the competent supervisory authority believes that the SCCs cannot be complied with in the destination country and the required level of protection cannot be secured by other means, such supervisory authority is under an obligation to suspend or prohibit that transfer unless the data exporter has already done so itself.

Ongoing legal challenges in the E.U.

to the mechanisms allowing companies to transfer personal data from the EEA to certain other jurisdictions, including the U.S., following the CJEU’s decision may result in further limitations on the ability to transfer data across borders, particularly if governments are unable or unwilling to reach new or maintain existing agreements that permit cross-border data transfers.

On January 31, 2020, the U.K.

withdrew its membership from the E.U., which is commonly referred to as “Brexit.” As a result, we became subject to the GDPR as incorporated into UK law through the Data Protection Act of 2018 (“U.K.

The relationship between the U.K.

in relation to certain aspects of data protection law remains unclear, however, and it is unclear how U.K.

data protection laws and regulations will develop in the medium to longer term, including how data transfers to and from the U.K.

will be regulated in the long term.

Any changes to these laws may require us to modify our data processing practices and policies and to incur substantial costs and expenses to comply.

The updated SCCs apply only to the transfer of data outside of the EEA and not the U.K.

Although the European Commission adopted an adequacy decision for the U.K.

on June 28, 2021, allowing the continued flow of personal data from the EEA to the United Kingdom, this decision will automatically expire four years after its entry into force, will be regularly reviewed going forward and may be revoked if the U.K.

diverges from its current adequate data protection laws following its exit from the E.U.

We rely on a mixture of mechanisms to govern the transfer of personal data from our E.U.

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and are continuing to evaluate what additional mechanisms may be required to establish adequate safeguards for the cross-border transfer of personal data.

In November 2020, the European Commission released a draft set of new standard contractual clauses.

It is unclear when the new contractual standards may be approved and what additional changes will be made, however we will ultimately need to be prepared to adopt and comply with them in order to legitimize data transfers between E.U.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used and/or start taking enforcement action, we could incur increased costs, lower revenue, reduced efficiency, and greater difficulty in competing with foreign-based firms.

The European Commission updated the SCCs on June 4, 2021, and additional regulatory guidance has been released that seeks to impose additional obligations on companies choosing to rely on the SCCs.

Parties transferring personal data from the EEA to third countries with “inadequate data protection” such as the U.S.

will have until December 27, 2022 to update any existing agreements, or any new agreements executed before September 27, 2021, that rely on SCCs.

The new SCCs apply only to the transfer of data outside of the EEA and not the U.K., though on January 31, 2022, the U.K.’s Information Commissioner’s Officer announced that proposals for the U.K.’s own form of agreement and addendum to the E.U.

SCCs (the “U.K.

SCCs”), which could be used for transfers for data from the U.K., have been laid before Parliament.

If no objections are raised in Parliament and the proposals are approved, the U.K.

SCCs will come into force on March 21, 2022 (subject to a grace period for implementation).

The outcome of the consultation has yet to be published.

As such, any transfers by us or our vendors of personal data from the E.U./U.K.

may not comply with E.U./U.K.

data protection laws, may increase our exposure to the GDPR’s/U.K.

GDPR’s heightened sanctions for violations of their cross-border data transfer restrictions and may reduce demand for our products from companies subject to E.U./U.K.

data protection laws.

If we are unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services and could adversely affect our financial results, and, until the legal uncertainties regarding how to legally continue transfers pursuant to the SCCs and other mechanisms are settled, we will continue to face uncertainty as to whether our efforts to comply with our obligations under the GDPR will be sufficient.

Failure to comply with existing or new rules may result in significant penalties or orders to stop the alleged noncompliant activity.

Moreover, if we are otherwise unable to transfer personal data or information between and among countries and regions in which we operate, it could affect how we provide our services and could adversely impact our financial results.

On January 31, 2020, the United Kingdom (“U.K.”) withdrew its membership from the European Union (“E.U.”), which is commonly referred to as “Brexit.” In the U.K., Brexit has created uncertainty with regard to the regulation of data protection.

In particular, while the Data Protection Act of 2018, which implements and complements the GDPR achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of personal data from the EEA to the United Kingdom will remain lawful under the GDPR after Brexit.

In December 2020, the Brexit Trade and Cooperation Agreement (“TCA”) established a four- to six-month grace period during which transfers of personal data from the E.U.

can continue without additional safeguards, provided that the U.K.

maintains its pre-TCA data protection laws.

On February 19, 2021, the European Commission released a draft adequacy decision for review by the European Data Protection Board.

If adopted, that decision would permit the continued flow of personal data between the U.K.

However, it is unclear how data transfers to and from the U.K.

will be regulated after the grace period expires and whether or not the U.K.

will receive a final adequacy decision from the European Commission permitting cross-border data transfer from the E.U.

In addition, we cannot fully predict how the Data Protection Act and other U.K.

data protection laws or regulations may develop in the medium to longer term.

In addition to the changing regulatory landscape in the E.U.

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The CCPA gives California residents new data privacy rights, allows consumers to opt out of certain data sharing with third parties, and provides a new private cause of action for data breaches.

Moreover, a new privacy law, the California Privacy Rights Act (“CPRA”), was approved by voters in California in a ballot proposition in the November 3, 2020 election.

The CPRA will significantly modify the CCPA, and will impose additional data protection obligations on companies doing business in California, potentially resulting in further complexity and requiring us to incur additional costs and expenses in an effort to comply.

We also may be subject to additional compliance obligations as other states consider and adopt similar legislation.

Moreover, a new privacy law, the California Privacy Rights Act (“CPRA”), which is scheduled to take effect on January 1, 2023 (with a lookback to January 1, 2022), will significantly modify the CCPA, and will impose additional data protection obligations on companies doing business in California, potentially resulting in further complexity and requiring us to incur additional costs and expenses in an effort to comply.

Similarly, other states, such as

Virginia and Colorado, have instituted privacy and data security laws, rules, and regulations, and many similar laws have been proposed at the federal and state level;

accordingly, we also may be subject to additional compliance obligations as such legislation is considered and adopted, which may require us to modify our data processing practices and policies and incur substantial costs and expenses to comply.

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

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Foreign data protection, privacy, and other laws and regulations may often be more restrictive than those in the United States.

The scope and interpretation of the laws and other obligations that apply to us, including those related to user privacy and data security, are often uncertain and may be conflicting, particularly laws and obligations outside the United States.

There is a risk that these laws may be interpreted and applied differently in any given jurisdiction in a manner that is not consistent with our current practices, which could cause us to incur substantial cost and could negatively impact our brand, reputation and business.

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Changes to applicable laws and how they are interpreted relating to privacy and data security could significantly increase the cost to us and our customers of regulatory compliance and could negatively impact our business.

For instance, some states in the United States have enacted legislation designed to protect consumer privacy by prohibiting the distribution of “spyware” over the Internet.

For instance, some states in the U.S.

have enacted legislation designed to protect consumer privacy by prohibiting the distribution of “spyware” over the Internet.

Such legislation typically focuses on restricting the proliferation of software that, when installed on an end user’s computer, is used to intentionally and deceptively take control of the end user’s machine.

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use clear and conspicuous disclosure to inform consumers that they are not speaking to a human.

Similar bills entitled the “Bot Disclosure and Accountability Act of 2019” were introduced to the U.S.

House and Senate in July 2019.

Similar bills have been introduced from time to time at the state and federal level in recent years.

Further, use of artificial intelligence and machine learning may be subject to laws and evolving regulations regarding the use of artificial intelligence, controlling for, among other things, data bias, and antidiscrimination.

For example, the Federal Trade Commission (“FTC”) enforces consumer protection laws such as Section 5 of the FTC Act, which prohibits unfair and deceptive practices, including use of biased algorithms in AI.

The European Commission also recently published its proposal for a regulation implementing harmonized rules on AI and amending certain union legislative acts.

The proposed regulation would impose additional restrictions and obligations on providers of AI systems, including increasing transparency so consumers know they are interacting with an AI system, requiring human oversight in AI,

and prohibiting certain practices of AI that could lead to physical or psychological harm.

Given the increased focus by the FTC and other regulators on the use of AI, it is possible that additional laws, regulations, and standards related to AI may be introduced in the future.

Regulation in this area could impact how businesses use our products and services to interact with consumers and how we provide our services to our customers.

AI tools can also present unique technological and legal challenges, such as the possibility of insufficient data sets, or data sets that contain biased information, which can negatively impact the decisions, predictions or analyses that AI applications produce.

AI tools can also present unique technological and legal challenges, such as the possibility of insufficient data sets, or (as stated above) data sets that contain biased information, which can negatively impact the decisions, predictions or analyses that AI applications produce.

Deficiencies such as these could cause us reputational harm and subject us to legal liability, including claims of product liability, breach of warranty, or negligence.

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It is difficult to predict how existing laws will apply to our business and what new laws and legal obligations we may become subject to.

If we are not able to comply with these laws or other legal obligations, or

if we become liable under them, we may be forced to implement material changes to our business practices, delay release of new and enhanced services and expend substantial resources, which would negatively affect our business, financial condition and results of operations.

If we are not able to comply with these laws or other legal obligations, or if we become liable under them, we may be forced to implement material changes to our business practices, delay release of new and enhanced services and expend substantial resources, which would negatively affect our business, financial condition and results of operations.

In addition, any increased attention focused on liability issues, or as a result of regulatory fines or lawsuits, could harm our reputation or otherwise impact the growth of our business.

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For example, the State of California and other states have passed laws relating to disclosure of companies’ practices with regard to Do-Not-Track signals from Internet browsers, the ability to delete information of minors, and new data breach notification requirements.

The CCPA, California’s new consumer privacy legislation, came into effect in January 2020.

Outside the E.U.

and the United States, a number of countries have adopted or are considering privacy laws and regulations that may result in significant greater compliance burdens.

and the U.S., a number of countries have adopted or are considering privacy laws and regulations that may result in significant greater compliance burdens.

Existing and proposed laws and regulations regarding cybersecurity and monitoring of online behavioral data, such as proposed “Do Not Track” regulations, regulations aimed at restricting certain targeted advertising practices and collection and use of data from mobile devices, new and existing tools that allow consumers to block online advertising and other content, and other proposed online privacy legislation could potentially apply to some of our current or planned products and services.

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Any investigation or review of our practices may require us to make changes to our products and policies, which could harm our business.

Currently there are many proposals by lawmakers and industry groups in this area, both in the United States and overseas, which address the collection, maintenance and use of personal information, web browsing and geolocation data, and establish data security and breach notification requirements.

requirements.

Further, regulators and industry groups have also released self-regulatory principles and guidelines for various data privacy and security practices.

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In addition, changes in our products or services, or changes in applicable export or economic sanctions regulations may create delays in the introduction and deployment of our products and services in international markets, or, in some cases, prevent the export of our products or provision of our services to certain countries or end users.

Any change in export or economic sanctions regulations, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies

targeted by such regulations, could also result in decreased use of our products and services, or in our decreased ability to export our products or provide our services to existing or prospective customers with international operations.

Any change in export or economic sanctions regulations, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could also result in decreased use of our products and services, or in our decreased ability to export our products or provide our services to existing or prospective customers with international operations.

Any decreased use of our products and services or limitation on our ability to export our products and provide our services could adversely affect our business, results of operations, and financial condition.

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

In addition, an inability to satisfy the standards of certain third-party certification bodies that our customers may expect, such as the Payment Card Industry (PCI) Data Security Standards, may have an adverse impact on our business.

In addition, an inability to satisfy the standards of certain third-party certification bodies that our customers may expect, such as the PCI Data Security Standards,

may have an adverse impact on our business.

If we are unable in the future to achieve or maintain these industry-specific certifications or comply with other similar requirements or standards that are relevant to our customers, our business and our revenue may be adversely impacted.

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Some jurisdictions have adopted regulations prohibiting certain forms of discrimination by Internet access providers;

however, substantial uncertainty exists in the United States and elsewhere.

For example, in the United States, the Federal Communications Commission repealed net neutrality rules effective June 11, 2018, which could lead internet access providers to restrict, block, degrade or charge for access to our products and services.

however, substantial uncertainty exists in the U.S.

and elsewhere.

For example, in the U.S., the Federal Communications Commission repealed net neutrality rules effective June 11, 2018, which could lead internet access providers to restrict, block, degrade or charge for access to our products and services, while California, among other states, have passed legislation that seeks to reestablish net neutrality.

Further, regulatory focus on data privacy, data security and consumer protection continues to expand on a worldwide basis and is becoming more complex, which will increase the risks to our business on reputational, operational, and compliance bases.

in these communications or the ways in which information may be collected, stored, used and transferred in the course of providing services.

The continued growth and development of the market for online services may prompt calls for more stringent consumer protection laws or laws that will inhibit the use of Internet-based or mobile-based communications or the information contained in these communications or the ways in which information may be collected, stored, used and transferred in the course of providing services.

For example, in the United States, the CAN-SPAM Act regulates the transmission and content of commercial emails, and, among other things, obligates the sending of such emails to provide recipients with the ability to opt-out or unsubscribe and other requirements;

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Any new legislation or regulations, application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or application of existing laws and regulations to the Internet, mobile and other online services could increase our costs and harm our growth.

We anticipate making investments in, and potentially holding, creating or managing blockchain-based assets, including cryptocurrency or other digital tokens and development of blockchain-based decentralized applications (“DApps”), which may subject us to exchange risk and additional tax and regulatory requirements.

In the fourth quarter of 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.

Under this policy, which was duly approved by our board of directors, we may invest a portion of such cash in investment instruments related to cryptocurrencies and other blockchain-based assets through a newly established subsidiary.

Our subsidiary is expected to contract with providers to invest in funds and/or directly hold blockchain-based, assets including cryptocurrencies such as USD

Coin, in order to engage in investment strategies such as yield farming, which involves lending or staking cryptocurrencies to generate returns in the form of transaction fees or interest.

The laws surrounding cryptocurrency and blockchain-based assets are uncertain and evolving.

Cryptocurrencies are not considered legal tender or backed by any government, and any cryptocurrencies we may hold or related investments we may experience price volatility, technological glitches and various law enforcement and regulatory interventions.

The use of cryptocurrency is currently limited both in the U.S.

and around the world, and the widespread acceptance and adoption of cryptocurrencies as a store of value or means of payment for goods and services is uncertain.

The application of securities laws and other regulations to cryptocurrency and blockchain-based assets is unclear, and it is possible that regulators in the U.S.

or other jurisdictions may create new regulations or interpret laws in a manner that adversely affect the price of blockchain-based assets, restrict our future ability to invest in or hold blockchain-based assets and subject us to additional regulatory requirements, including laws governing payments, financial services, virtual currency, anti-money laundering, counter-terrorism financing, trade sanctions, privacy and data protection, tax, consumer protection, environmental protection and competition.

Further, the use and development of cryptocurrency has been prohibited or effectively prohibited in some countries.

If we fail to comply with regulations or prohibitions applicable to us, we could face regulatory or other enforcement actions and potential fines and other consequences.

If any regulatory authority asserts that we require a license or other regulatory approval to conduct business involving cryptocurrencies or other blockchain-based assets, it could have a material adverse effect on our business, results of operations, cash flows and financial condition.

If we accept and hold cryptocurrency in the future, we may have exchange rate risk on the cryptocurrencies we hold as well as the risks that regulatory or other developments may adversely affect their value.

We may choose not to hedge, or may be unable to fully hedge, our exposure to cryptocurrencies and other blockchain-based assets and may at times be unable to convert them to U.S.

If we hold cryptocurrency and its value decreases relative to our acquisition price, our financial condition may be harmed.

Moreover, cryptocurrency and blockchain-based assets are currently considered indefinite-lived intangible assets under applicable accounting rules, meaning that any decrease in the asset’s fair value below our carrying value for such asset at any time subsequent to its acquisition will require us to recognize impairment charges, whereas we may make no upward revisions for any market price increases until a sale, which may adversely affect our operating results in any period in which such impairment occurs.

Moreover, there is no guarantee that future changes in GAAP will not require us to change the way we account for cryptocurrency held by us.

As intangible assets that may lack centralized issuers or governing bodies, cryptocurrencies’ and blockchain-based assets’ lack of a physical form, their reliance on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions that may result in the loss or destruction of private keys needed to access such assets.

As cryptocurrencies and blockchain-based assets have no physical existence beyond the record of transactions on a blockchain, a variety of technical factors related to blockchain technologies could also impact the price of cryptocurrencies and the stability of our investments.

For example, malicious attacks by cryptocurrency miners, inadequate mining fees to incentivize validation of transactions, hard “forks” of individual blockchains into multiple blockchains, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of blockchain technologies and negatively affect the price of cryptocurrencies and the stability of our investments.

While we intend to take all reasonable measures to secure any digital assets, if such threats are realized or the measures or controls we or our counterparties create or implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be harmed.

Finally, blockchain is an emerging technology that offers new capabilities which are not fully proven through sustained widespread use in the marketplace.

Furthermore, the creation and use of blockchain technology and DApps in new industries will be subject to potential technical, legal and regulatory constraints.

There is no warranty that blockchain-based assets and DApps will be uninterrupted or error-free and there is an inherent risk that the software, network, blockchain-based assets and related technologies and theories could contain undiscovered technical flaws or weaknesses, the cryptographic security measures that authenticate transactions and the distributed ledger could be compromised, and breakdowns could cause the partial or complete inability to use or loss of blockchain-based assets or DApps.

Global or local climate change and natural resource conservation regulations or requirements could adversely impact our business.

The long-term effects of climate change on the global economy and the cloud and SaaS industry remain unknown.

Changes in weather where we operate may increase the costs of powering and cooling computer hardware we use to develop software and provide cloud-based services.

In response to concerns about global climate change, governments may adopt new regulations affecting the use of fossil fuels or requiring the use of alternative fuel sources.

Our server infrastructure consumes significant energy resources, including those generated by the burning of fossil fuels.

Our customers, investors and other stakeholders may require us to take steps to demonstrate that we are taking ecologically responsible measures in operating our business.

The costs and any expenses we may incur to make our network more energy-efficient and comply with any new regulations could negatively impact our operating results.

Failure to comply with applicable laws and regulations or other requirements imposed on us could result in material fines and penalties, litigation, regulatory investigation and/or governmental orders requiring us to change our data practices, which could damage our reputation and harm our business.

Risks Related to our Intellectual Property

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We rely on a combination of patent, copyright, trade secret, trademark and other common law protections in the United States and other jurisdictions, as well as confidentiality requirements and contractual provisions, to protect our proprietary technology, processes and other intellectual property.

We own a portfolio of patents and patent applications in the United States and internationally and regularly file patent applications to protect intellectual property that we believe is important to our business, including intellectual property related to digital engagement technology, and/or web and mobile based consumer-facing services.

We own a portfolio of patents and patent applications in the U.S.

and internationally and regularly file patent applications to protect intellectual property that we believe is important to our business, including intellectual property related to digital engagement technology, and/or web and mobile based consumer-facing services.

We believe the duration of our patents is adequate relative to the expected lives of our products and services.

We pursue the registration of our domain names, trademarks and trade names in the United States and in certain locations outside the United States.

We pursue the registration of our domain names, trademarks and trade names in the U.S.

and in certain locations outside the U.S.

We also own copyrights, including in our software, publications and other documents authored by us.

These intellectual property rights are important to our business and marketing efforts.

We seek to protect our intellectual property rights by relying on federal, state, and common law rights, including registration, or otherwise in the United States and certain foreign jurisdictions, as well as contractual restrictions.

We seek to protect our intellectual property rights by relying on federal, state, and common law rights, including registration, or otherwise in the U.S.

and certain foreign jurisdictions, as well as contractual restrictions.

However, we believe that factors such as the technological and creative skills of our personnel, new service developments, frequent enhancements and reliable maintenance are more essential to establishing and maintaining a competitive advantage.

Others may develop technologies that are similar or superior to our technology.

We enter into confidentiality and other written agreements (including invention assignment agreements) with our employees, consultants, customers, potential customers, strategic partners, and other third parties, and through these and other written agreements, we attempt to control access to and distribution of our software, documentation and other proprietary information.

We enter into confidentiality and other written agreements (including invention assignment agreements) with our employees,

consultants, customers, potential customers, strategic partners, and other third parties, and through these and other written agreements, we attempt to control access to and distribution of our software, documentation and other proprietary information.

Despite our efforts to protect our proprietary rights, third parties may, in an unauthorized manner, attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights or technology or otherwise develop a service with the same functionality as our services.

sold or used, where the laws may not protect proprietary rights as fully as do the laws of the United States or where enforcement of laws protecting proprietary rights is not common or effective.

Policing unauthorized use of our services and intellectual property rights is difficult, and we cannot be certain that the steps we have taken will prevent misappropriation of our technology or intellectual property rights, particularly in foreign countries where we do business, where our services are sold or used, where the laws may not protect proprietary rights as fully as do the laws of the U.S.

or where enforcement of laws protecting proprietary rights is not common or effective.

The duration of the protection afforded to our intellectual property depends on the type of property in question, the laws and regulations of the relevant jurisdiction and the terms of its license agreements with others.

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While trademark registrations may generally be maintained in effect for as long as the mark is in use in the respective jurisdictions, there may be occasions where a mark or title is not registrable or protectable or cannot be used in a particular country.

In addition, a trademark registration may be cancelled or invalidated if challenged by others based on certain use requirements or other limited grounds.

The duration of property rights in trademarks, service marks and tradenames in the United States, whether registered or not, is predicated on our continued use.

In addition, a trademark registration may be canceled or invalidated if challenged by others based on certain use requirements or other limited grounds.

The duration of property rights in trademarks, service marks and trade names in the U.S., whether registered or not, is predicated on our continued use.

It is possible that:

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• effective intellectual property protection may not be available in every country in which we do business, where our services are sold or used, where the laws may not protect proprietary rights as fully as do the laws of the United States or where enforcement of laws protecting proprietary rights is not common or effective.

Further, to the extent that the invention described in any United States patent was made public prior to the filing of the patent application, we may not be able to obtain patent protection in certain countries.

We also rely upon copyright, trade secret, trademark and other common law in the United States and other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our proprietary technology, processes and other intellectual property.

Further, to the extent that the invention described in any U.S.

patent was made public prior to the filing of the patent application, we may not be able to obtain patent protection in certain countries.

We also rely upon copyright, trade secret, trademark and other common law in the U.S.

and other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our proprietary technology, processes and other intellectual property.

Any steps we might take may not be adequate to protect against infringement and misappropriation of our intellectual property by third parties.

Similarly, third parties may be able to independently develop similar or superior technology, processes or other intellectual property.

Third parties may register marks that are confusingly similar to the trademarks or services marks that we have used in the United States and our failure to monitor foreign registrations or mark usage may impact out rights in certain trademarks or services marks.

Third parties may register marks that are confusingly similar to the trademarks or services marks that we have used in the U.S.

and our failure to monitor foreign registrations or mark usage may impact out rights in certain trademarks or services marks.

or where enforcement of laws protecting proprietary rights is not common or effective.

The unauthorized reproduction or other misappropriation of our intellectual property rights could enable third parties to benefit from our technology without paying us for it.

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Issues in the use of AI in o ur product offerings may result in reputational harm or liability.

We have built, and will continue to build, AI into many of our product offerings and we expect this element of our business to grow.

We have built, and expect to continue to build, AI into many of our product offerings and we expect this element of our business to grow.

We envision a future in which AI operating in our devices, applications and the cloud helps our customers be more productive in their business activities and interactions with consumers.

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AI algorithms may be flawed.

Datasets may be insufficient or contain biased information.

Datasets may be

insufficient or contain biased information.

Inappropriate or controversial data practices by us or others could impair the acceptance of AI solutions.

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Our technology platforms enable representatives of our customers as well as individual service providers to communicate with consumers and other persons seeking information or advice on the web or via mobile devices.

The law relating to the liability of online platform providers such as us for the activities of users of their online platforms is often challenged in the United States and internationally.

We may be unable to prevent users of our technology platforms from providing negligent, unlawful or inappropriate advice, information or content via our technology platforms, or from behaving in

an unlawful manner, and we may be subject to allegations of civil or criminal liability for negligent, fraudulent, unlawful or inappropriate activities carried out by users of our technology platforms.

Claims could be made against online services companies under both United States and foreign law, such as fraud, defamation, libel, invasion of privacy, negligence, data breach, copyright or trademark infringement, or other theories based on the nature and content of the materials disseminated by users of our technology platforms.

The law relating to the liability of online platform providers such as us for the activities of users of their online platforms is often challenged in the U.S.

and internationally.

We may be unable to prevent users of our technology platforms from providing negligent, unlawful or inappropriate advice, information or content via our technology platforms, or from behaving in an unlawful manner, and we may be subject to allegations of civil or criminal liability for negligent, fraudulent, unlawful or inappropriate activities carried out by users of our technology platforms.

Claims could be made against online services companies under both U.S.

and foreign law, such as fraud, defamation, libel, invasion of privacy, negligence, data breach, copyright or trademark infringement, or other theories based on the nature and content of the materials disseminated by users of our technology platforms.

In addition, domestic and foreign legislation has been proposed that could prohibit or impose liability for the transmission over the Internet of certain types of information.

Our defense of any of these actions could be costly and involve significant time and attention of our management and other resources.

The Digital Millennium Copyright Act, or DMCA, is intended, among other things, to reduce the liability of online service providers for transmitting or storing materials that infringe copyrights of others or referring, listing or linking to third party web properties that include materials that infringe copyrights of others.

Additionally, Section 230 of the Communications Decency Act, or CDA, is intended to provide statutory protections to online service providers who host or distribute third party content.

The Digital Millennium Copyright Act (“DMCA”) is intended, among other things, to reduce the liability of online service providers for transmitting or storing materials that infringe copyrights of others or referring, listing or linking to third party web properties that include materials that infringe copyrights of others.

Additionally, Section 230 of the Communications Decency Act (“CDA”), is intended to provide statutory protections to online service providers who host or distribute third party content.

A safe harbor for copyright infringement is also available under the DMCA to certain online service providers that provide specific services, if the providers take certain affirmative steps as set forth in the DMCA.

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In addition to legislation and regulations relating to privacy and data security and collection, we may be subject to consumer protection laws that are enforced by regulators such as the FTC and private parties, and include statutes that regulate the collection and use of information for marketing purposes.

Any new legislation or regulations regarding the Internet, mobile devices, software sales or export and/or the cloud or Software-as-a-Service industry, and/or the application of existing laws and regulations to the Internet, mobile devices, software sales or export and/or the cloud or Software-as-a-Service industry, could create new legal or regulatory burdens on our business that could have a material adverse effect on our business, results of operations and financial condition.

Additionally, as we operate outside the United States, the international regulatory environment relating to the Internet, mobile devices, software sales or export, and/or the Software-as-a-Service industry could have a material adverse effect on our business, results of operations and financial condition.

Any new legislation or regulations regarding the Internet, mobile devices, software sales or export and/or the cloud or SaaS industry, and/or the application of existing laws and regulations to the Internet, mobile devices, software sales

or export and/or the cloud or SaaS industry, could create new legal or regulatory burdens on our business that could have a material adverse effect on our business, results of operations, and financial condition.

Additionally, as we operate outside the U.S., the international regulatory environment relating to the Internet, mobile devices, software sales or export, and/or the SaaS industry could have a material adverse effect on our business, results of operations, and financial condition.

Risks Related to our International Operations and Tax Issues

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dollars, fluctuations in currency exchange rates could adversely affect our results of operations.

For example, during the year ended

December 31, 2020, we experienced a foreign currency exchange impact of approximately 0.6% percent, or approximately $2.2 million if held in constant currency, to our revenue.

For example, during the year ended December 31, 2021, we experienced a foreign currency exchange impact of approximately 1.8% percent, or approximately $8.3 million if held in constant currency, to our revenue.

Fluctuations in the value of the U.S.

dollar relative to other foreign currencies could materially affect our revenue, cost of revenue and operating expenses, and result in foreign currency transaction gains and losses.

In January 2015, we began hedging a portion of our foreign currency exchange rate exposure;

however, significant fluctuations in exchange rates between the U.S.

dollar and foreign currencies may nonetheless adversely affect our net income (loss).

As of December 31, 2019, w e are no longer party to any foreign currency hedging transactions.

We may seek to enter into additional hedging transactions in the future or to use financial instruments, such as derivative financial instruments, to mitigate risk, but we may be unable to enter into them successfully, on acceptable terms or at all.

We may seek to enter into hedging transactions in the future or to use financial instruments, such as derivative financial instruments, to mitigate risk, but we may be unable to enter into them successfully, on acceptable terms or at all.

Additionally, these programs rely on our ability to forecast accurately and could expose us to additional risks that could adversely affect our financial condition and results of operations.

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Economic conditions and regulatory changes caused by the United Kingdom’s exit from the European Union could negatively impact our business.

On January 31, 2020, the United Kingdom (“U.K.”) withdrew its membership from the European Union (“E.U.”), which is commonly referred to as “Brexit.” Pursuant to the withdrawal arrangements entered into between the U.K.

On January 31, 2020, the U.K.

withdrew its membership from the E.U., which is commonly referred to as “Brexit.” Pursuant to the withdrawal arrangements entered into between the U.K.

in connection with Brexit, the U.K.

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We may be unsuccessful in expanding our operations internationally and/or into direct-to-consumer services due to additional regulatory requirements, tax liabilities, currency exchange rate fluctuations, and other risks, which could adversely affect our results of operations.

In addition to our operations in the United States, we have operations in Australia, Bulgaria, Canada, France, Germany, Israel, Italy, Japan, Latin America, Netherlands, Singapore, Spain and the United Kingdom.

In addition to our operations in the U.S., we have operations in Australia, Bulgaria, Canada, France, Germany, Israel, Italy, Japan, Latin America, Netherlands, Singapore, Spain, and the U.K.

We have also continued to invest in global messaging initiatives and in acquisitions.

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• fluctuations in currency exchange rates;

• strains on financial and other systems to properly administer VAT and other taxes;

• strains on financial and other systems to properly administer value-added tax (“VAT”) and other taxes;

• different consumer preferences and requirements in specific international markets;

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Bribery Act, and similar laws in other jurisdictions;

• local instability and shifting political, economic, and military conditions including armed conflict and terrorist activity.

In addition, we rely in part on third-party service providers with international operations.

For example, we rely on a third-party service provider that utilizes approximately 100 engineers based in Ukraine for a portion of our engineering and software development initiatives.

If this third party’s operations were disrupted or discontinued due to local instability or political, economic or military conditions, then our ability to provide services to some of our current customers and the development of new products or enhancement of existing products could be delayed, and our results of operations could be adversely affected.

Our current and any future international expansion plans will require management attention and resources and may be unsuccessful.

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There is heightened scrutiny by fiscal authorities in many jurisdictions on the potential taxation of e-commerce businesses.

The Organization for Economic Co-operation and Development (OECD) has issued guidelines, referred to as the Base Erosion and Profit Shifting project (BEPS), to its member-nations aimed at encouraging broad-based legislative initiatives intended to prevent perceived base erosion transactions and income shifting in a tax-advantaged manner.

The Organization for Economic Co-operation and Development (“OECD”) has issued guidelines, referred to as the Base Erosion and Profit Shifting project, to its member-nations aimed at encouraging broad-based legislative initiatives intended to prevent perceived base erosion transactions and income shifting in a tax-advantaged manner.

Further, for the past several years, the OECD has had a specific focus on the taxation implications of e-commerce business, generally referred by the OECD as the “digital economy.” In the fourth quarter of 2019, the OECD released details on its proposed approach which would, among other changes, create a new right to tax certain “digital economy” income not necessarily based on traditional nexus concepts nor on the “arm’s length principle.” At this point, there is a lack of consensus among the key members, particularly the United States, with the latest OECD proposal.

The United States has expressed that it would generally support a solution along the lines proposed by the OECD only if the solution was in the form of a “safe-harbor” rather than a mandatory requirement.

A failure to reach full consensus on an executable plan within the tight timeframe under which the OECD is operating could result in individual jurisdictions legislating digital tax provisions in an uncoordinated and unilateral manner, and further result in greater or even double taxation that companies may not have sufficient means to remedy.

For example, a number of jurisdictions, including the U.K., France and Italy, have already adopted or have formally proposed legislation to effect the taxation of certain e-commerce business based on differing criteria and metrics.

The United States has expressed that it would generally support a

solution along the lines proposed by the OECD only if the solution was in the form of a “safe-harbor” rather than a mandatory requirement.

A failure to reach full consensus on an executable plan within the tight time frame under which the OECD is operating could result in individual jurisdictions legislating digital tax provisions in an uncoordinated and unilateral manner, and further result in greater or even double taxation that companies may not have sufficient means to remedy.

For example, a number of jurisdictions, including the U.K., France and Italy, have already adopted or have formally proposed legislation that would affect the taxation of certain e-commerce businesses based on differing criteria and metrics.

Efforts to alleviate this increased tax burden will increase the cost of structuring and compliance as well as the cost of doing business internationally.

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federal taxable income necessary to utilize our remaining NOLs, our NOLs generated on or prior to December 31, 2017 could expire unused.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several changes to the Code including, but not limited to, allowing companies to carryback certain NOLs and increasing the amount of NOL carryforwards that corporations can use to offset taxable income in the 2018 through 2020 taxable years.

As a result of the CARES Act, we amended returns for net operating loss carrybacks available from 2013 to 2018 and for foreign tax, and research and development credit carrybacks from 2012 to 2013, resulting in refund claims of approximately $580,000.

Political, economic, and military conditions in Israel could negatively impact our Israeli operations.

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In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.

Further, shifting economic and political conditions in the United States and in other countries may result in changes in how the United States and other countries conduct business and other relations with Israel, which may have an adverse impact on our Israeli operations and a material adverse impact on our business.

Further, shifting economic and political conditions in the U.S.

and in other countries may result in changes in how the U.S.

and other countries conduct business and other relations with Israel, which may have an adverse impact on our Israeli operations and a material adverse impact on our business.

Our commercial insurance may not cover losses that could occur as a result of events associated with the security situation in the Middle East.

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Continued hostilities between Israel and its neighbors and any future armed conflict, terrorist activity or political instability in the region could adversely affect our operations in Israel and adversely affect the market price of our securities.

addition, escalation of tensions or violence might require more widespread military reserve service by some of our Israeli employees and might result in a significant downturn in the economic or financial condition of Israel, either of which could have a material adverse effect on our operations in Israel and our business.

In addition, escalation of tensions or violence might require more widespread military reserve service by some of our Israeli employees and might result in a significant downturn in the economic or financial condition of Israel, either of which could have a material adverse effect on our operations in Israel and our business.

Risks Related to our Outstanding Convertible Notes

Servicing our debt may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.

In March 2019, we issued $230.0 million in aggregate principal amount of 0.75% Convertible Senior Notes due 2024 in a private placement (the “2024 Notes”).

In March 2019, we issued $230.0 million in aggregate principal amount of 0.75% Convertible Senior Notes due 2024 in a private placement.

The interest rate on the 2024 Notes is fixed at 0.75% per annum and is payable semi-annually in arrears on March 1 and September 1 of each year.

In December 2020, we issued $517.5 million in aggregate principal amount of 0% Convertible Senior Notes due 2026 in a private placement (the “2026 Notes,” and together with the 2024 Notes, the “Notes”).

In December 2020, we issued $517.5 million in aggregate principal amount of 0% Convertible Senior Notes due 2026 in a private placement.

The 2026 Notes do not bear any regular interest payments.

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We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

In addition, any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives.

In addition, any of our future debt agreements may

contain restrictive covenants that may prohibit us from adopting any of these alternatives.

Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt.

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In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert their Notes at any time during specified periods at their option.

If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of

delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

In addition, even if holders of Notes do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results.

Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options , or ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.

The effect of ASC 470-20 on the accounting for the Notes is that the equity component, net of issuance costs, is required to be included in the additional paid-in capital section of stockholders’ equity on our condensed consolidated balance sheet at the issuance date and the value of the equity component is treated as original issue discount for purposes of accounting for the liability component of the Notes.

Under ASC 470-20, Debt with Conversion and Other Options , an entity must separately account for the liability and equity components of the convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.

The effect of ASC 470-20 on the accounting for the Notes is that the equity component, net of issuance costs, is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet at the issuance date and the value of the equity component is treated as original issue discount for purposes of accounting for the liability component of the Notes.

As a result, we are required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the Notes to their face amount over the term of the Notes.

We will report larger net losses (or lower net income) in our financial results because ASC 470-20 requires interest to include both the current period’s amortization of the debt discount and the instrument’s non-convertible coupon interest rate, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the Notes.

In addition, under certain circumstances, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash may be accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of such Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of such Notes exceeds their principal amount.

Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued.

We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method.

If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, then our diluted earnings per share would be adversely affected.

In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt - Debt with Conversion and Other Options” and ASC Subtopic 815-40 “Hedging - Contracts in Entity’s Own Equity” that changes the accounting for the convertible debt instruments described above.

Under the new standard, an entity may no longer separately account for the liability and equity components of convertible debt instruments.

Additionally, the treasury stock method for calculating earnings per share will no longer be allowed for convertible debt instruments the principal amount of which may be settled using shares.

Rather, the “if-converted” method may be required.

Application of the “if converted” method may reduce our reported diluted earnings per share.

The standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and early adoption is permitted.

We cannot be sure whether other changes may be made to the accounting standards related to the 2024 Notes and 2026 Notes, or otherwise, that could have an adverse impact on our financial statements.

The capped call transactions may affect the value of the Notes and our common stock.

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The option counterparties to the capped call transactions are financial institutions, and we are subject to the risk that any or all of them may default under the capped calls.

Our exposure to the credit risk of the option counterparties is not secured by

any collateral.

Our exposure to the credit risk of the option counterparties is not secured by any collateral.

Global economic conditions have in the recent past resulted in, and may again result in, the actual or perceived failure or financial difficulties of many financial institutions.

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• additions or departures of key personnel;

• our exposure, or perceptions or misperceptions of our exposure to cryptocurrencies;

• consequences of unexpected geopolitical events, natural disasters, acts of war or climate change;

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Our common stock is traded on more than one market and this may result in price variations .

Our common stock is currently traded on the Nasdaq Global Select Market and the Tel Aviv Stock Exchange (“TASE”).

Our common stock is currently traded on the Nasdaq and the TASE.

Trading in our common stock on these markets takes place in different currencies (U.S.

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If we or our stockholders sell substantial amounts of our common stock, including shares issuable upon the exercise of outstanding options and warrants, or upon the conversion of the Notes, in the public market, or if the market perceives that these sales might occur, the market price of our common stock could fall.

These sales also might make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate.

These sales also might make it more difficult for us to

sell equity securities in the future at a time and price that we deem appropriate.

No prediction can be made as to the effect, if any, that market sales of our common stock will have on the market price of our common stock.

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• Stockholders must provide advance notice to nominate individuals for election to our board of directors or to propose other matters that can be acted upon at a stockholders’ meeting;

• We require super-majority voting by stockholders to amend certain provisions in our amended and restated certificate of incorporation and to amend our amended and restated bylaws.

• Our amended and restated bylaws expressly authorize a super-majority of the board of directors to amend our amended and restated bylaws.

• We require supermajority voting by stockholders to amend certain provisions in our amended and restated certificate of incorporation and to amend our amended and restated bylaws;

• Our amended and restated bylaws expressly authorize a supermajority of the board of directors to amend our amended and restated bylaws.

As a Delaware corporation, we are also subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless certain conditions are met.

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We cannot assure our stockholders that any stock repurchase programs will be fully consummated or will enhance long-term stockholder value, and stock repurchases could increase the volatility of the price of our common stock and will diminish our cash reserves.

From 2012 through 2018, we had a stock repurchase program in place, pursuant to which we were authorized to repurchase shares of our common stock, in the open market or privately negotiated transactions, at times and prices considered appropriate by the Board of Directors depending upon prevailing market conditions and other corporate considerations.

The timing and actual number of shares repurchased depended on a variety of factors including the timing of open trading windows, price, corporate and regulatory requirements, and other market conditions.

The program was discontinued at the end of 2018.

We may or may not enter into a new stock repurchase program in the future.

Repurchases pursuant to our stock repurchase program could affect our stock price and increase its volatility.

Repurchases pursuant to any stock repurchase program that we may enter could affect our stock price and increase its volatility.

The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock.

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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