What changed in this filing

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Item 1A. Risk Factors

2022-05-19 compared with 2021-05-20 · 99 added, 156 removed, 379 unchanged (40% of the section changed)

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In addition to the other information in this report, the following factors should be considered carefully in evaluating NetScout and our business.

Our operating results and financial condition have varied in the past and may vary significantly in the future depending on a number of factors.

Except for the historical information in this report, the matters contained in this report include forward-looking statements that involve risk and uncertainties.

The following factors are among many that could cause actual results to differ materially from those contained in or implied by forward-looking statements made in this report.

These statements involve the risks and uncertainties identified below as well as additional risks and uncertainties that are not yet identified or that we currently think are immaterial but may also impact our business operations.

Such factors are among many that may have a material adverse impact upon our business, results of operations, liquidity, and financial condition.

You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Annual Report on Form 10-K and other documents we file with the SEC.

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Because of the following factors, as well as other variables affecting our results of operations, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

Summary of the Material Risks Associated with Our Business

These risks include, but are not limited to, the following:

• Our business and operations, and the operations of our customers, partners, and/or suppliers, may be adversely affected by epidemics and pandemics, such as the COVID-19 pandemic.

• Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations.

• Potential product vulnerabilities or critical security defects, prioritization decisions regarding remedying vulnerabilities or security defects, or customers not deploying security releases or deciding not to upgrade products, services, or solutions could result in claims of liability against us, damage our reputation, or otherwise harm our business.

• If we or third parties who we work with experience a security incident, or the confidentiality, integrity, or availability of our information technology, software, services, communications or data is compromised, our business or platform may be perceived as not being secure, our reputation may be harmed, demand for our offering may be reduced, and we may incur significant liabilities.

• Our ability to quickly and successfully recover from a disaster, public health crisis (including a global pandemic such as the COVID-19 pandemic), or other business continuity event could affect our ability to deliver our products and negatively impact our business reputation.

• If our products contain errors or quality issues, such issues may be costly to correct, revenue may be delayed, we could be sued, and our reputation could be harmed.

• If we fail to introduce new products and solutions or enhance our existing products and solutions to keep up with rapid technological change, demand for our products and solutions may decline.

• Our success depends, in part, on our ability to manage our international research and development operations and related partnerships.

Our international research and development efforts may achieve delayed or lower than expected benefits and involve competitive and other risks.

• Necessary licenses for third-party technology may not be available to us on commercially reasonable terms or at all.

• Increased customer demands on our technical support services may adversely affect our relationships with our customers and our financial results.

• The success of our business depends, in part, on the continued growth in the market for and the continued commercial demand for service delivery, service assurance and network security solutions focused on the performance monitoring and management of applications and networks.

• Failure to manage growth properly and to implement enhanced automated systems could adversely impact our business.

• Our growth could suffer if the markets into which we sell our products and services experience cyclicality.

• Our reliance on sole source suppliers could adversely impact our business.

• We or our suppliers may be affected by new regulations related to climate change or other environmental issues.

• Our success depends, in part, on our ability to manage and leverage our distribution channels.

Disruptions to, or our failure to effectively develop and manage, these partners and the processes and procedures that support them could adversely affect our ability to generate revenues from the sale of our products and services.

• Our success depends on our ability to protect our intellectual property rights.

• Others may claim that we infringe on their intellectual property rights.

• Our indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to our indebtedness could adversely affect our liquidity and financial condition.

• Any failure to meet our debt obligations could damage our business.

• We may fail to secure necessary additional financing.

• The failure to recruit and retain qualified personnel and plan for and manage the succession of key executives could hinder our ability to successfully manage our business, which could have a material adverse effect on our financial position and operating results.

• We may not successfully complete acquisitions or integrate acquisitions we do make, which could impair our ability to compete and could harm our operating results.

• We face significant competition from other technology companies.

• Uncertainties of regulation of the Internet and data traveling over the Internet could have a material and adverse impact on our financial condition and results of operations.

• We are subject to stringent and changing laws, regulations, standards, contractual obligations, and other obligations related to privacy, data protection, and data security.

The actual, alleged, or perceived failure by us or the partners we work with to comply with such obligations could adversely affect our business, results of operations, and financial conditions.

• Foreign currency exchange rates may adversely affect our financial statements.

• If we violate the U.S.

Foreign Corrupt Practices Act or applicable anti-bribery laws in other countries, or if we fail to comply with U.S.

export controls and government contracting laws, our business could be harmed.

• The current economic and geopolitical environment may impact some specific industries into which we sell and may lead our customers to delay or forgo technology investments and could have other impacts, any of which could materially adversely affect our business, financial condition, operating results and cash flows.

• International economic, political, legal, compliance and business factors could negatively affect our financial statements and growth.

The summary risk factors described above should be read together with the text of the full risk factors below and in the other information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, as well as in other documents that we file with the SEC.

Risks Related to Our Business and Industry

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Such orders or restrictions, or the perception that such orders or restrictions could occur, may continue to result in business closures, work stoppages, slowdowns and delays, travel restrictions and cancellation of events, among other effects that could affect productivity and disrupt our operations and those of our suppliers, customers, and business partners.

To protect our employees, contractors, customers, suppliers, and our local communities, and limit the effect of the COVID-19 pandemic on our operations, many of our employees at our locations globally have been working remotely for the past year, with limited exceptions for site-essential personnel (with protective measures and protocols in place).

We may take further actions that alter our operations as may be required by federal, state, or local authorities, or by foreign governments in countries in which we operate, or which we determine are in the best interests of our employees, suppliers, customers, business partners, and stockholders.

We expect that work-from-home requirements and other restrictions on our employees, suppliers, customers, and business partners will change over time, whether becoming more or less restrictive, as the pandemic and global responses progress.

There continues to be uncertainty as to when all of our employees will be able to return to work on-site.

Similar to other companies, we have begun planning for our employees to return to work on-site in phases, in accordance with federal, state, and local government guidelines, as well as in accordance with foreign government guidelines in the countries in which we operate.

Furthermore, any process we implement to enable our employees to return to work on-site will be in accordance with prevailing health and science guidance, and in a manner that seeks to protect our employees, contractors, customers, suppliers, and our local communities.

To protect our employees, contractors, customers, suppliers, and our local communities, and limit the effect of the COVID-19 pandemic on our operations, many of our employees at our locations globally have been working remotely for the past two years, with limited exceptions for site-essential personnel (with protective measures and protocols in place).

Similar to other companies, we have begun allowing our employees to return to work on-sites, in accordance with federal, state, and local government guidelines, as well as in accordance with foreign government guidelines in the countries in which we operate.

Furthermore, the processes that we have implemented to enable our employees to return to work on-site are in accordance with prevailing health and science guidance, and in a manner that seeks to protect our employees, contractors, customers, suppliers, and our local communities.

We expect that on-site and work-from-home requirements and other restrictions on our employees, suppliers, customers, and business partners will change over time, whether becoming more or less restrictive, as the pandemic and global responses progress.

We may take further actions that could alter our operations as may be required by federal, state, or local authorities, or by foreign governments in countries in which we operate, or which we determine are in the best interests of our employees, suppliers, customers, business partners, and stockholders.

As part of our existing business continuity planning, we had established infrastructure and protocols to enable our employees to work from home.

While we believe that the majority of our employees are able to and can continue to effectively work remotely, it is possible that disruptions to our business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs could affect our ability to develop and design our products and services in a timely manner or meet required milestones or customer commitments, and that this could have an adverse effect on our revenue and operating results.

customers, it is possible that we or others may determine that it is necessary to direct that employees engaged in manufacturing and support refrain from working on-site for an indeterminate period of time, and that this could have an adverse effect on our revenue and operating results.

In addition, although we have been able to adequately staff our facilities with site-critical personnel with specific health and safety protocols, to satisfy our manufacturing and support obligations to our customers, it is possible that we or others may determine that it is necessary to direct that employees engaged in manufacturing and support refrain from working on-site for an indeterminate period of time, and that this could have an adverse effect on our revenue and operating results.

Furthermore, global travel has been sharply curtailed, and in some cases prohibited.

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These may include disruptions from temporary closure of third-party supplier and manufacturer facilities, interruptions in product supply or restrictions on the export or shipment of our products, as well as the import of products into countries in which we operate.

Although we have attempted to minimize the effects of these disruptions, it is possible that these attempts will be insufficient, and that these disruptions will likely have an adverse effect on our revenues and operating results.

Although we have attempted to minimize the effects of these disruptions,

it is possible that these attempts will be insufficient, and that these disruptions could have an adverse effect on our revenues and operating results.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this "Risk Factors" section, such as those relating to our quarterly revenue and operating results, the estimates made for our critical accounting policies, and the operation of internal controls over such estimates, as well as on our liquidity and on our ability to satisfy our indebtedness obligations, including the compliance with the covenants that apply to our indebtedness.

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Our results of operations may vary based on the impact of unfavorable changes in our industry or the global economy on us or our customers and potential customers.

Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from financial and credit market fluctuations, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious diseases (such as the ongoing COVID-19 pandemic), warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, could cause a decrease in business investments, including spending on information technology, disrupt the timing and cadence of key industry events, and negatively affect the growth of our business and our results of operations.

For example, these types of unfavorable conditions could disrupt the timing of and attendance at key industry events, which we rely upon in part to generate sales of our products.

If those events are disrupted, our marketing investments, sales pipeline, and ability to generate new customers and sales of our products could be negatively and adversely affected.

In addition, our competitors, many of whom are larger and have greater financial resources than we do, may respond to challenging market conditions by lowering prices in an attempt to attract our customers and may be less dependent on key industry events to generate sales for their products.

Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from financial and credit market fluctuations, elevated or prolonged inflation, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, could cause a decrease in business investments, including spending on information technology, and negatively affect the growth of our business and our results of operations.

Our competitors, many of whom are larger and have greater financial resources than we do, may respond to challenging market conditions by lowering prices in an attempt to attract our customers and may be less dependent on key industry events to generate sales for their products.

In addition, the increased pace of consolidation in certain industries may result in reduced overall spending on our products and solutions.

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Customers may also not deploy a security release or decide not to upgrade to the latest versions of our products, services, or cloud-based solutions containing the release, leaving them vulnerable.

If we or third parties who we work with experience a security incident, or the confidentiality, integrity, or availability of our information technology, software, services, communications or data is compromised, our business or platform may be perceived as not being secure, our reputation may be harmed, demand for our offering may be reduced, and we may incur significant liabilities.

If we or the third parties who we work with or rely on experience a security incident, or the confidentiality, integrity, or availability of our information technology, software, services, communications or data is compromised, our business or platform may be perceived as not being secure, our reputation may be harmed, demand for our offering may be reduced, and we may incur significant liabilities.

In the regular course of our business, we collect, use, store, transmit and process data, which can include information about our customers, employees, and others and which may be sensitive, proprietary, or confidential.

Security incidents compromising the confidentiality, integrity, and availability of this information or our systems could result from a wide variety of cyberattacks, computer malware, viruses, social engineering (including phishing), ransomware, supply chain attacks, credential stuffing, efforts by individuals or groups of hackers and sophisticated organizations, including state-sponsored organizations, errors or malfeasance of our personnel, security vulnerabilities in the software or systems on which we rely, cyber extortion, and denial of service attacks.

Security incidents compromising the confidentiality, integrity, and availability of this information or our systems could result from a wide variety of cyberattacks, computer malware, viruses, social engineering (including phishing), ransomware, supply chain attacks, credential stuffing, efforts by individuals or groups of hackers and sophisticated organizations, errors or malfeasance of our personnel (such as theft or misuse), security vulnerabilities in the software or systems on which we rely, cyber extortion, and denial of service attacks.

Such incidents have become more prevalent in our industry, and may in the future result in the unauthorized, unlawful, or inappropriate access to, inability to access, disclosure of, or loss of the sensitive, proprietary, and confidential information that we handle.

Additionally, due to the ongoing COVID-19 pandemic, certain functional areas of our workforce remain in a remote work environment and outside of our corporate network security protection boundaries, which imposes additional risks to our business, including increased risk of industrial espionage, phishing, and other cybersecurity attacks, and unauthorized dissemination of sensitive, proprietary, or confidential information.

We also rely on third parties to operate our business systems and process the sensitive, proprietary, and confidential information that we handle.

Threat actors, nation-states, and nation-state-supported actors now engage, and are expected to continue to engage, in cyber-attacks, including for geopolitical reasons and in connection with military conflicts and operations.

During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to heightened risk of these attacks, including cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.

Additionally, due to the ongoing COVID-19 pandemic, certain functional areas of our workforce remain in a remote work environment, which imposes additional risks to our business,

including increased risk of industrial espionage, phishing, and other cybersecurity attacks, and unauthorized dissemination of sensitive, proprietary, or confidential information.

We also rely on third parties to operate some of our business systems and process the sensitive, proprietary, and confidential information that we handle.

These third parties may not have adequate security measures and could experience a security incident that compromises the confidentiality, integrity, or availability of the systems they operate for us or the information they process on our behalf.

Cybercrime and hacking techniques are constantly evolving, and we or third parties who we work with may be unable to anticipate attempted security breaches, react in a timely manner, or implement adequate preventative measures, particularly given increasing use of hacking techniques designed to circumvent controls, avoid detection, and remove or hide forensic information.

We cannot be certain that our applicable contracts with these third parties will adequately limit our data security-related liability to them or be sufficient to allow us to obtain indemnification or recovery from them for data security-related liabilities that they cause us to incur.

Although we have multiple and layered controls and security measures in place designed to prevent cyberattacks, experienced computer hackers are increasingly organized and sophisticated and we cannot guarantee that our, or our third-party partners’ security measures will be sufficient to protect against unauthorized access to our IT networks, software and systems.

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Other individuals or entities, including personnel or vendors, may also intentionally or unintentionally provide unauthorized access to our IT environments.

If we or the third-parties who we work with were to experience a security incident or other incident that results in the compromise of the confidentiality, integrity, or availability of our sensitive or the sensitive, proprietary, or confidential information we process, we or our customers may experience system disruptions or slowdowns, security vulnerabilities of our products could be exploited, the information stored on our networks or those of our third-party service providers or partners could be accessed, publicly disclosed, misappropriated, deleted, altered, lost, or stolen, all of which could subject us to liability and cause us financial harm.

If we or the third-parties who we work with were to experience a security incident or other incident that results in the compromise of the confidentiality, integrity, or availability of our sensitive information or the sensitive, proprietary, or confidential information we process, we or our customers may experience system disruptions or slowdowns, security vulnerabilities of our products could be exploited, the information stored on our networks or those of our third-party service providers or partners could be accessed, publicly disclosed, misappropriated, deleted, altered, lost, or stolen, all of which could subject us to liability and cause us financial harm.

Any actual, alleged or perceived security breach or incident affecting us, our partners or our industry as a whole could result in damage to our reputation, negative publicity, loss of partners, customers and sales, increased costs to remedy any problems and otherwise respond to any incident, regulatory investigations and enforcement actions, costly litigation, and other liability.

In addition, we could incur substantial costs and liabilities, including but not limited to, expenses attributable to investigating, remediating and rectifying a security breach, cyberattack or other incident (including the cost of repairing any damage to our or our customers' systems or restoring data from backups), liability for stolen assets or information, lost revenue and income resulting from any system or product downtime, increased costs for cybersecurity protection, and costs to comply with any notification obligations resulting from any security incidents (including notifying affected individuals or relevant regulatory authorities).

In addition, we could incur substantial costs and liabilities, including but not limited to, expenses attributable to investigating, remediating and rectifying a security breach, cyberattack or other incident (including the cost of repairing any damage to our or our customers' systems, paying a ransom, or restoring data from backups), liability for stolen assets or information, lost revenue and income resulting from any system or product downtime, increased costs for cybersecurity protection, and costs to comply with any notification obligations resulting from any security incidents (including notifying affected individuals or relevant regulatory authorities).

Such outcomes could damage our reputation, cause customers and possibly investors to lose confidence in us, and adversely affect our business or operating results.

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Such notifications are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures and not use our services, and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual, alleged or perceived security incident.

Our ability to quickly and successfully recover from a disaster, public health crisis (including a global pandemic such as the COVID-19 pandemic), or other business continuity event could affect our ability to deliver our products and negatively impact our business reputation.

The occurrence of a natural disaster, public health crisis (including a global pandemic such as the COVID-19 pandemic) or an act of terrorism, or a decision or need to close any of our facilities without adequate notice or time for making alternative arrangements could result in interruptions in the delivery of our products and services.

Our ability to quickly and successfully recover from a disaster, public health crisis, or other business continuity event could affect our ability to deliver our products and negatively impact our business reputation.

The occurrence of a natural disaster, public health crisis or an act of terrorism, or a decision or need to close any of our facilities without adequate notice or time for making alternative arrangements could result in interruptions in the delivery of our products and services.

Our central business functions, including administration, human resources, finance services, legal, development, manufacturing and customer support depend on the proper functioning of our computer, telecommunication and other technology systems and operations, some of which are operated or hosted by third parties.

While we have business continuity programs in place, a disruption or failure of these systems or operations because of a disaster, public health crisis (including a global pandemic such as the COVID-19 pandemic) or other business continuity event could cause data to be lost or otherwise delay our ability to complete sales and provide the highest level of service to our customers.

While we have business continuity programs in place, a disruption or failure of these systems or operations because of a disaster, public health crisis or other business continuity event could cause data to be lost or otherwise delay our ability to complete sales and provide the highest level of service to our customers.

In addition, we could have difficulty producing accurate financial statements on a timely basis, which could have an impact on our ability to make timely disclosures and could adversely affect the trading value of our stock.

Although we endeavor to ensure there is redundancy in these systems and that they are regularly backed-up, there are no assurances that data recovery in the event of a disaster would be effective or occur in an efficient manner.

Although we endeavor to ensure there is redundancy in these systems and that they are regularly backed-up, there is no guarantee that data recovery in the event of a disaster would be effective or occur in an efficient manner.

Our operations are dependent upon our ability to protect our technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations.

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To meet this challenge and remain competitive in the market, we must introduce new enhancements and additional form factors to our existing product lines and service offerings.

products in a timely and successful manner, this inability could have a material and adverse impact on our business, operating results and financial condition.

If we are unable to develop, introduce and communicate new network and application performance management and service assurance products, network security products, business intelligence products, and solutions or enhancements to existing products in a timely and successful manner, this inability could have a material and adverse impact on our business, operating results and financial condition.

As our success depends in part on our ability to develop product enhancements and new products and solutions that keep pace with continuing changes in technology, cyber risk and customer preferences, we must devote significant resources to research and development, development and introduction of new products and enhancements on a timely basis, and obtaining market acceptance for our existing products and new products.

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If the introduction of these products and solutions is significantly delayed or if we are unsuccessful in bringing these products and solutions to market, our business, operating results, and financial condition could be materially and adversely impacted.

We are developing and are already deploying a number of new products as well as enhancements to our existing products and offerings, including software only solutions and products available in multiple form factors.

We are developing and are already deploying a number of new products as well as enhancements to our existing products and offerings, including our new Omnis cybersecurity suite as well as software only solutions and products available in multiple form factors for most of our existing solutions.

We must invest in research and development to remain competitive in our industry.

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If we fail to develop and deploy new products and product enhancements on a timely basis, or if we fail to gain market acceptance of our new products, our revenues will likely decline, and we may lose market share to our competitors.

Our success depends, in part, on our ability to manage our international research and development operations and related partnerships.

Our international research and development efforts may achieve delayed or lower than expected benefits and involve competitive and other risks.

We must continue to enhance our existing products and introduce new products to keep up with rapid technological change.

Our international research and development teams play a critical role in these efforts.

We must attract, train, motivate and retain our international research and development team members.

To maintain this international employee research and development talent, we believe we must provide our international engineers with compelling and strategically significant work, coupled with technical and architectural ownership of their respective development projects.

We must develop the leaders of these international teams, while ensuring their frequent inclusion and participation in corporate strategic and operational planning.

We are likely to recognize the costs associated with these investments earlier than some of the anticipated benefits, and the return on these investments may be lower, or may develop more slowly, than we expect.

These development efforts also involve risks, including, knowledge transfer issues related to our technology and resulting exposure to misappropriation of intellectual property or information that is proprietary to us, heightened exposure to economic, security and political conditions abroad, and exchange rate and tax compliance issues.

The risks related to our research and development efforts abroad could increase our expenses, impair our development efforts, harm our competitive position, and damage our reputation.

If we do not achieve the benefits anticipated from these investments, or if the achievement of these benefits is delayed, our operating results may be adversely affected.

Necessary licenses for third-party technology may not be available to us on commercially reasonable terms or at all.

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The unavailability of these licenses or the necessity of agreeing to commercially unreasonable terms for such licenses could materially adversely affect our business, financial condition, operating results, and cash flows.

Our reliance on sole source suppliers could adversely impact our business.

Specific components that are necessary for the hardware assembly of our instruments are obtained from separate sole source suppliers or a limited group of suppliers.

These components include our network interface cards and proprietary hardware.

Our reliance on sole or limited suppliers involves several risks, including a lack of control over the manufacturing process and inventory management and potential inability to obtain an adequate supply of required components and the inability to exercise control over pricing, quality and timely delivery of components.

For most of our products, we do not have the internal manufacturing capabilities to meet our customers' demands.

It is our practice to mitigate these risks by partnering with key suppliers, including distributors, to establish a variety of supply continuity practices.

These practices may include, among other approaches, establishing buffer supply requiring suppliers to maintain adequate stocks of materials, bonding agreements with distributors, and use-based and kanban programs to set supply thresholds.

We also enter into escrow arrangements for certain technologies.

Where possible, we use widely available off the shelf hardware and work with large suppliers with multiple factories and other risk management practices.

However, failure of supply or failure to execute effectively on any of these programs, including as a result of a public health crisis or geopolitical situation could result in our inability to obtain adequate deliveries or the occurrence of any other circumstance that would require us to seek alternative sources of supply for these components would impact our ability to ship our products on a timely basis.

Moreover, if we are unable to continue to acquire from these suppliers on acceptable terms, or should any of these suppliers cease to supply us with components for any reason, we may not be able to identify and integrate an alternative source of supply in a timely fashion or at the same costs.

Any transition to one or more alternate manufacturers would likely result in delays, operational problems, and increased costs, and may limit our ability to deliver our products to our customers on time for such transition period.

These risks could damage relationships with our current and prospective customers, cause shortfalls in expected revenue, and could materially and adversely impact our business, operating results and financial condition.

Increased customer demands on our technical support services may adversely affect our relationships with our customers and our financial results.

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Any failure to maintain high quality support and services would harm our operating results and reputation.

Further, if customers demand these services, and we cannot adequately meet their demand, or if we cannot realize revenues in connection with our provision of services related to product support, it could have a material and adverse impact on our financial condition and results of operations.

The success of our business depends, in part, on the continued growth in the market for and the continued commercial demand for service delivery, service assurance and network security solutions focused on the performance monitoring and management of applications and networks.

Further, if customers demand these services, and we cannot adequately meet their demand, or if we cannot realize revenues in

connection with our provision of services related to product support, it could have a material and adverse impact on our financial condition and results of operations.

The success of our business depends, in part, on the continued growth in the market for and the continued commercial demand for service delivery, service assurance and network security solutions.

We derive nearly all our revenue from the sale of products and services that are designed to allow our customers to assure the delivery of services through management of the performance and network security of applications across IP networks.

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Any disruptions or ineffectiveness relating to our systems implementations and enhancements could adversely affect our ability to process customer orders, ship products, provide services and support to our customers, bill and track our customers, fulfill contractual obligations, and otherwise run our business.

As a result of the diversification of our business, personnel growth, acquisitions, and international expansion in recent years, most of our employees are based outside of our headquarters.

Most of our employees are based outside of our headquarters.

If we are unable to appropriately increase management depth and enhance succession planning, we may not be able to achieve our financial or operational goals.

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These upgrades and improvements may be difficult and costly, and they may require employees to dedicate a significant amount of time to implement.

If we are unable to adapt our systems and organization in a timely, efficient, and cost-effective manner to

accommodate changing circumstances, our business may be adversely affected.

If we are unable to adapt our systems and organization in a timely, efficient, and cost-effective manner to accommodate changing circumstances, our business may be adversely affected.

If the third parties we rely on for hosted data solutions for our internal network and information systems are subject to a security breach or otherwise suffer disruptions that impact the services we utilize, the integrity and availability of our internal information could be compromised causing the loss of confidential or proprietary information, damage to our reputation and economic loss.

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Any of these factors could adversely affect the business, financial condition, and results of operations of the company in any given period.

Our reliance on sole source suppliers could adversely impact our business.

Specific components that are necessary for the hardware assembly of our instruments are obtained from separate sole source suppliers or a limited group of suppliers.

These components include our network interface cards and proprietary hardware.

For most of our products, we do not have the internal manufacturing capabilities to meet our customers' demands.

It is our practice to mitigate these risks by partnering with key suppliers, including distributors, to establish a variety of supply continuity practices.

We also enter into escrow arrangements for certain technologies.

Where possible, we use widely available off the shelf hardware and work with large suppliers with multiple factories and other risk management practices.

However, failure of supply or failure to execute effectively on any of these programs, including as a result of a public health crisis (included a global pandemic such as the COVID-19 pandemic) could result in our inability to obtain adequate deliveries or the occurrence of any other circumstance that would require us to seek alternative sources of supply for these components would impact our ability to ship our products on a timely basis.

For example, as a result of a significant downturn in domestic and

global travel at the onset of the COVID-19 pandemic, our customers in the travel industry experienced decreases in revenue and, as a result, spent less on our products and our revenue in this sector declined.

We or our suppliers may be affected by new regulations related to climate change and other environmental issues.

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Managing these distribution channels and relationships requires experienced personnel, and lack of sufficient expertise could lead to a decrease in sales of our products and services, which could cause our operating results to suffer.

Our future success may require us to increase the number and use of our indirect sales efforts through our distributors and channel partners and to leverage those relationships to expand these our distribution channels and to develop new indirect distribution channels to increase revenue.

Our future success may require us to increase the number and use of our indirect sales efforts through our distributors and channel partners and to leverage those relationships to expand these distribution channels and to develop new indirect distribution channels to increase revenue.

Our channel partners have no obligation to purchase any products from us.

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In addition, they could internally develop products that compete with our solutions or partner with our competitors and bundle or resell competitors' solutions, possibly at lower prices.

The potential

inability to develop relationships with new partners in new markets, expand and manage our existing partner relationships, the unwillingness of our partners to market and sell our products effectively or the loss of existing partnerships could have a material and adverse impact on our business, operating results and financial condition.

The potential inability to develop relationships with new partners in new markets, expand and manage our existing partner relationships, the unwillingness of our partners to market and sell our products effectively or the loss of existing partnerships could have a material and adverse impact on our business, operating results and financial condition.

Our international operations, including our operations in the United Kingdom, mainland Europe, India, Asia-Pacific and other regions, are generally also subject to the risk of longer sales cycles through our international distribution channels.

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We are and may continue to be subject to claims by others, whether valid or not, that our products infringe on their intellectual property rights, patents, copyrights, or trademarks.

These claims, whether or not valid, could require us to spend significant sums in litigation, pay damages or royalties, delay product shipments, reengineer our products, rename our products and rebuild name recognition or acquire licenses to such third-party intellectual property.

These claims, whether or not valid, could require us to spend significant sums in litigation, pay damages or royalties, delay product shipments, reengineer our products, rename our products

and rebuild name recognition or acquire licenses to such third-party intellectual property.

We may not be able to secure any required licenses on commercially reasonable terms or secure them at all.

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Our indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to our indebtedness could adversely affect our liquidity and financial condition.

On January 16, 2018, we amended and expanded our existing credit facility (Amended Credit Agreement) with a syndicate of lenders.

The Amended Credit Agreement provides for a five-year $1.0 billion senior secured revolving credit facility, including a letter of credit sub-facility of up to $75.0 million.

We have used the new credit facility for working capital purposes and to finance the repurchase of common stock under a previous accelerated stock repurchase plan.

The commitments under the Amended Credit Agreement will expire on January 16, 2023, and any outstanding loans will be due on that date.

As of the date of this report, we had approximately $350 million in outstanding indebtedness under the Amended Credit Agreement.

On July 27, 2021, we amended and extended our existing credit facility (Second Amended and Restated Credit Agreement) with a syndicate of lenders.

The Second Amended and Restated Credit Agreement provides for a five-year $800.0 million senior secured revolving credit facility, including a letter of credit sub-facility of up to $75.0 million.

We may elect to use the new credit facility for working capital purposes (including to finance the repurchase of common stock).

The commitments under the Second Amended and Restated Credit Agreement will expire on July 27, 2026, and any outstanding loans will be due on that date.

As of the date of this report, we had $200.0 million in outstanding indebtedness under the Second Amended and Restated Credit Agreement.

Our debt level can have negative consequences, including exposing us to future interest rate risk.

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Our current revolving credit facility also imposes certain restrictions on us;

Amended Credit Agreement and enforce certain other remedies under the Amended Credit Agreement and other loan documents, which would adversely affect our liquidity and financial condition.

for a more detailed description please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations." Upon an event of default, for example, the administrative agent, with the consent of, or at the request of, the holders of more than 50% in principal amount of the loans and commitments, may terminate the commitments and accelerate the maturity of the loans outstanding under the Second Amended and Restated Credit Agreement and enforce certain other remedies under the Second Amended and Restated Credit Agreement and other loan documents, which would adversely affect our liquidity and financial condition.

If we take on additional indebtedness, the risks described above could increase.

Interest on the outstanding balances under the Amended Credit Agreement is calculated based on the London Interbank Offered Rate (LIBOR).

At our election, revolving loans under the Second Amended and Restated Credit Agreement bear interest at either (a) an Alternate Base Rate per annum equal to the greatest of (1) the Wall Street Journal prime rate;

(2) the New York Federal Reserve Bank (NYFRB) rate plus 0.50% or (3) an adjusted one month LIBO rate plus 1%;

or (b) a Term Benchmark Borrowing rate (for the interest period selected by us, subject to customary provisions regarding succession from LIBO rate to SOF rate in anticipation of the upcoming discontinuation of the LIBO rate), in each case plus an applicable margin.

On July 27, 2017, the U.K.

Financial Conduct Authority (FCA), which regulates LIBOR, announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021.

Further, on March 5, 2021, the Intercontinental Exchange Benchmark Administration, the FCA-regulated and authorized administrator of LIBOR, announced, and the FCA confirmed, that one week and two-month USD LIBOR settings will cease on December 31, 2021, and that the USD LIBOR panel for all other tenors will cease on June 30, 2023.

The Amended Credit Agreement, which matures on January 16, 2023, prior to the cessation of USD LIBOR publications on June 30, 2023, provides a mechanism pursuant to which we and the administrative agent may agree, under certain circumstances, to transition to an alternate base rate borrowing or amend the credit agreement to establish an alternate interest rate to LIBOR that includes consideration of the then-prevailing market convention for determining interest rates for syndicated loans in the United States at that time.

If the methods of calculating LIBOR change from current methods for any reason, or if LIBOR ceases to perform as it has historically, or if we select an alternative benchmark rate our interest expense associated with our outstanding indebtedness or any future indebtedness we incur may increase.

Further, on March 5, 2021, the Intercontinental Exchange Benchmark Administration, the FCA-regulated and authorized administrator of LIBOR, announced, and the FCA confirmed, that one-week and two-month USD LIBOR settings would cease on December 31, 2021, and that the USD LIBOR panel for all other tenors will cease on June 30, 2023.

There is no assurance that the administrator of LIBOR and/or regulators will not take further action that could impact the availability, composition or characteristics of LIBOR or the currencies and/or tenors for which LIBOR is published.

There is uncertainty as to the performance of LIBOR during the transition period, the timing of the remaining transition from LIBOR and the performance of alternative interest rates.

Such uncertainties could result in pricing, operational and legal implementation risks.

In anticipation of the upcoming discontinuation of LIBOR, the Second Amended and Restated Credit Agreement includes customary provisions regarding succession from LIBOR to the Secured Overnight Financing Rate (SOFR) or certain other agreed upon replacement benchmark rates.

Such provisions require the consent of certain parties, such as the administrative agent and the lenders, under certain circumstances.

There is no guarantee that the necessary consents will be obtained.

If such consents are not obtained, pricing, operational and legal implementation risks may also arise.

If the methods of calculating a benchmark rate under the Second Amended and Restated Credit Agreement change from current methods for any reason, or if such benchmark rate ceases to perform as it historically has, or if we select an alternative benchmark rate, our interest expense and other costs associated with our outstanding indebtedness or any future indebtedness we incur under the Second Amended and Restated Credit Agreement may increase.

Any failure to meet our debt obligations could damage our business.

Our ability to meet our obligations under the Amended Credit Agreement will depend on market conditions and our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.

Our ability to meet our obligations under the Second Amended and Restated Credit Agreement will depend on market conditions and our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.

If we are unable to remain profitable, or if we use more cash than we generate in the future, our level of indebtedness at such time could adversely affect our operations by limiting or prohibiting our ability to obtain financing for additional capital expenditures, acquisitions and general corporate and other purposes.

In addition, if we are unable to make payments as required under the Amended Credit Agreement, we would be in default under the terms of the loans, which could seriously harm our business.

In addition, if we are unable to make payments as required under the Second Amended and Restated Credit Agreement, we would be in default under the terms of the loans, which could seriously harm our business.

If we incur significantly more debt, this could intensify the risks described above.

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However, our failure to generate sufficient cash as our debt becomes due or to renew credit lines prior to their expiration could materially adversely affect our business, financial condition, operating results, and cash flows.

Other Risks Related to Our Business

Risks Related to ESG Matters

The failure to recruit and retain qualified personnel and plan for and manage the succession of key executives could hinder our ability to successfully manage our business, which could have a material adverse effect on our financial position and operating results.

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We depend on our ability to identify, recruit, hire, train, develop and retain qualified and effective professionals and to attract and retain talent needed to execute our business strategy.

Our future success depends in large part upon our ability to attract, train, motivate and retain

highly skilled employees, particularly executives, sales and marketing personnel, software engineers, and technical support personnel.

Our future success depends in large part upon our ability to attract, train, motivate and retain highly skilled employees, particularly executives, sales and marketing personnel, software engineers, and technical support personnel.

The complexity of our products, processing functionality, software systems and services require highly trained professionals.

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Our future success depends to a significant degree on the skills, experience and efforts of Anil Singhal, our President, Chief Executive Officer, and co-founder, and our other key executive officers and senior managers to work effectively as a team.

Effective succession planning is also important for our long-term success.

Effective succession planning is also important for our

long-term success.

Failure to ensure effective transfers of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution.

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We must, therefore, plan for and manage the succession of key executives due to retirement, illness, or competitive offers elsewhere.

Our disclosures, initiatives and goals related to ESG matters expose us to numerous risks, including risks to our reputation, business, financial performance and growth.

As we identify ESG topics for voluntary disclosure, we have expanded and, in the future, may continue to expand our disclosures in these areas.

Statements about our ESG initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.

If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG goals on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.

Other Risks Related to Our Business

We may not successfully complete acquisitions or integrate acquisitions we do make, which could impair our ability to compete and could harm our operating results.

We may need to acquire complementary businesses, products, or technologies to remain competitive or expand our business.

We may choose to acquire complementary businesses, products, or technologies to remain competitive or expand our business.

We investigate and evaluate potential acquisitions of complementary businesses, products, and technologies in the ordinary course of business.

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We face significant competition from other technology companies.

The service assurance, application performa nce management, network security and business intelligence markets are highly competitive, rapidly evolving, and fragmented markets that have overlapping technologies and competitors, both large and small, and we expect competition on solutions offerings and pricing to increase.

We believe customers make service management system, network security and business intelligence purchasing decisions based primarily upon the following factors:

The service assurance, application performa nce management, network security, cybersecurity and business intelligence markets are highly competitive, rapidly evolving, and fragmented markets that have overlapping technologies and competitors, both large and small, and we expect competition on solutions offerings and pricing to increase.

We believe customers make service management system, network security, cybersecurity and business intelligence purchasing decisions based primarily upon the following factors:

• product and service performance, functionality and price;

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We are subject to numerous domestic and foreign laws and other obligations relating to privacy, data protection, and data security.

The regulatory framework for data privacy and security issues worldwide is rapidly evolving, and as a result, legal requirements and enforcement practices are likely to continue to evolve.

The regulatory framework for privacy, data protection, and data security issues worldwide is rapidly evolving, and as a result, legal requirements and enforcement practices are likely to continue to evolve.

In many jurisdictions, enforcement activities and consequences for noncompliance are rising.

In the United States, these activities include enforcement actions in response to rules and regulations promulgated under the authority of federal agencies, state attorneys general, states' legislation, and consumer protection agencies.

In addition, privacy advocates and industry groups in the United States have regularly proposed,

and may propose in the future, self-regulatory security standards with which we may be required to comply.

In addition, privacy advocates and industry groups in the United States have regularly proposed, and may propose in the future, self-regulatory security standards with which we may be required to comply.

If we fail to follow these standards, we may incur significant fines or experience a significant increase in costs.

Internationally, the data protection landscape is also rapidly evolving, and we expect there will continue to be new and proposed laws, regulations, and industry standards concerning privacy, data protection, and data security.

The General Data Protection Regulation ("GDPR") went into effect in the European Union ("EU") in May 2018 and has been adopted as law in the United Kingdom ("UK").

The GDPR requires companies to give detailed disclosures about how they collect, use, and share personal information;

contractually commit to data protection measures in contracts with customers and vendors;

maintain adequate data security measures;

notify regulators and affected individuals of certain data breaches;

meet extensive privacy governance and documentation requirements;

and honor individuals’ data protection rights, including their rights to access, correct, and delete their personal information.

The GDPR also requires controllers to conduct data protection impact assessments for certain types of processing and requires processors to assist controllers with such assessments, which may be complex and burdensome to conduct.

Laws in EU member states and the UK also impose restrictions on direct marketing communications and the use of cookies and similar technologies online.

European data protection laws including the GDPR also generally prohibit the transfer of personal information from Europe to the United States and most other countries unless the parties to the transfer have implemented specific safeguards to protect the transferred personal information.

there is uncertainty regarding how to ensure that transfers of personal information from Europe comply with European data protection laws.

As such, any transfers of personal information from Europe by us or our partners may increase our exposure to the GDPR’s heightened sanctions for violations of its cross-border data transfer restrictions, and may reduce demand for our services from companies subject to European data protection laws.

Loss of our ability to transfer personal information from Europe may also require us to increase our data processing capabilities in those jurisdictions at significant expense.

Many states have enacted laws regulating the online collection, use, and disclosure of personal information and requiring that companies implement reasonable data security measures, such as the California Consumer Privacy Act of 2018.

Virginia and Colorado also recently passed comprehensive privacy laws that take effect in 2023 and similar laws are being considered in other states and at the federal level.

Additionally, laws in all states and U.S.

territories require businesses to notify affected individuals, governmental entities, and/or credit reporting agencies of certain security breaches affecting personal information.

Compliance with these laws in the event of a widespread data breach is complex and costly and additional compliance measures will require investment and potential changes to our business process.

The data protection landscape is also rapidly evolving internationally, and we expect there will continue to be new and proposed laws, regulations, and industry standards concerning privacy, data protection, and data security.

We are subject to an increasing number of laws, regulations, and industry standards that apply to privacy and data security in other foreign jurisdictions in which we operate including the European Union’s General Data Protection Regulation, Brazil’s General Data Protection Law, Canada’s Personal Information Protection and Electronic Documents Act, and China’s Personal Information Protection Law, which all impose strict requirements for processing the personal data of individuals.

Complying with foreign and domestic data protection laws may cause us to incur additional operational costs or require us to change our business practices.

Despite our efforts, we may fail to achieve full compliance either due to internal or external factors such as lack of vendor cooperation.

Any actual, alleged, or perceived non-compliance could result in legal proceedings against us by governmental entities, customers, data subjects, or others.

We are or may become subject to the terms of our privacy and security policies, representations, certifications, standards, publications, and contractual obligations relating to privacy, data protection, and data security.

Although we endeavor to comply with our obligations, we and the third parties on which we rely may at times fail to do so or may be perceived to have failed to do so.

Such failures could subject us to regulatory enforcement action as well as costly legal claims by affected individuals or our customers.

We strive to comply with applicable privacy, data protection, and data security laws and other obligations, but we cannot fully determine the impact that current or future such laws and other obligations may have on our business or operations.

Such laws or obligations may be inconsistent from one jurisdiction to another or subject to differing interpretations, and courts or regulators may deem our efforts to comply as insufficient.

If we or the third parties we rely on to operate our business and deliver our services fail to comply, or are perceived as failing to comply, with our legal, contractual, or other obligations relating to privacy, data protection, or data security, or our policies and documentation relating to personal information, we could face governmental enforcement action;

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In the normal course of business, we employ various hedging strategies to partially mitigate these risks, including the use of derivative instruments.

pandemic and future global pandemics and other events.

These strategies may not be effective in fully protecting us against the effects of fluctuations from movements in foreign exchange rates, including the increased volatility in foreign exchange rates relating to the COVID-19 pandemic, the conflict between Russia and Ukraine and future global pandemics and other events.

Fluctuations of the foreign exchange rates could materially adversely affect our business, financial condition, operating results, and cash flow.

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Bribery Act, and other local laws prohibiting corrupt payments to government officials and others, as well as anti-competition regulations.

Foreign Corrupt Practices Act (FCPA), which continues to see increased enforcement in recent years, generally prohibits U.S.

Foreign Corrupt Practices Act (FCPA), generally prohibits U.S.

companies and their intermediaries from making corrupt payments to foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment and requires companies to maintain appropriate record-keeping and internal accounting practices to accurately reflect the transactions of the company.

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In addition to anti-bribery and anti-corruption laws, we are also subject to the export and re-export control laws of the U.S., including the U.S.

Export Administration Regulations (EAR) and the office of Foreign Asset Control (OFAC), as well as to U.S.

Export Administration Regulations (EAR) and the office of Foreign Asset Control (OFAC), as well as

government contracting laws, rules and regulations, and may be subject to government contracting laws of other countries in which we do business.

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Many of our customers are concentrated in certain industries, including financial services, public sector, healthcare, and the service provider market.

Certain industries may be more acutely affected by economic, geopolitical, and other factors, including public heath crises (including global pandemics such as the COVID-19 pandemic), and changes in U.S.

trade policy with China and other countries, than other sectors.

Certain industries may be more acutely affected by economic, geopolitical, and other factors, including public heath crises, and changes in U.S.

trade policy, than other sectors.

Our public sector customers are affected by federal, state, and local budget decisions.

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While we regularly assess the likelihood of adverse outcomes from such examinations and the adequacy of our provision for income taxes, there can be no assurance that such provision is sufficient and that a determination by a tax authority will not have an adverse effect on our results of operations.

An adverse change in our effective tax rate could have a material and

adverse effect on our financial condition and results of operations and the price of our common stock could decline if our financial results are materially affected by an adverse change in our effective tax rate.

An adverse change in our effective tax rate could have a material and adverse effect on our financial condition and results of operations and the price of our common stock could decline if our financial results are materially affected by an adverse change in our effective tax rate.

We may be impacted by changes in taxation, trade, and other regulatory requirements.

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Our estimates and judgments related to critical accounting policies could be inaccurate.

We consider accounting policies related to revenue recognition, marketable securities, valuation of goodwill, intangible assets and other acquisition and divestiture accounting items, and share-based compensation to be critical in fully understanding and evaluating our financial results.

We consider accounting policies related to revenue recognition, and valuation of goodwill, intangible assets and other acquisition accounting items to be critical in fully understanding and evaluating our financial results.

Management makes judgments and creates estimates when applying these policies.

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• sales of shares of our common stock by us, our officers, directors, or other stockholders;

• other events or factors, including those resulting from public health crises (including global pandemics such as the COVID-19 pandemic), war, incidents of terrorism, or responses to these events.

• other events or factors, including those resulting from public health crises, war, incidents of terrorism, or responses to these events.

In addition, the market for technology stocks and the stock markets in general have experienced extreme price and volume fluctuations.

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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