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A summary of our risks includes, but is not limited to, the following:
−Removed: • The effects of the COVID-19 pandemic have affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.
• Adverse general economic and market conditions and reductions in workforce identity and customer identity spending may reduce demand for our products, which could harm our revenue, results of operations and cash flows.
+Added: • The effects of the COVID-19 pandemic have affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.
• We have experienced rapid growth in recent periods, which makes it difficult to forecast our revenue and evaluate our business and future prospects.
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• If there are interruptions or performance problems associated with our technology or infrastructure, our existing customers may experience service outages, and our new customers may experience delays in the deployment of our platform.
−Removed: • An application, data security or network incident may allow unauthorized access to our systems or data or our customers’ data, disable access to our service, harm our reputation, create additional liability and adversely impact our financial results.
+Added: • In the past we have experienced and in the future we may experience cybersecurity incidents that may allow unauthorized access to our systems or data or our customers’ data, disable access to our service, harm our reputation, create additional liability and adversely impact our financial results.
• Any actual or perceived failure by us to comply with the privacy or security provisions of our privacy policy, our contracts and/or legal or regulatory requirements could result in proceedings, actions or penalties against us.
−Removed: • The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our IPO, including our directors, executive officers, and their affiliates, who held in the aggregate 42.8% of the voting power of our capital stock as of October 31, 2021.
+Added: • The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial public offering (“IPO”), including our directors, executive officers, and their affiliates, who held in the aggregate 42.4% of the voting power of our capital stock as of April 30, 2022.
This will limit or preclude your ability to influence corporate matters, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
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Risks Related to Our Business and Industry
+Added: Adverse general economic and market conditions and reductions in workforce identity and customer identity spending may reduce demand for our products, which could harm our revenue, results of operations and cash flows.
+Added: Our revenue, results of operations and cash flows depend on the overall demand for our products.
+Added: Concerns about the inflation and interest environment, the COVID-19 pandemic, the systemic impact of a widespread recession (in the United States or internationally), energy costs, geopolitical issues, such as Russia’s invasion of Ukraine, or the availability and cost of credit have and could continue to lead to increased market volatility, decreased consumer confidence and diminished growth expectations in the U.S.
+Added: economy and abroad, which in turn could result in reductions in workforce identity and customer identity spending by our existing and prospective customers.
+Added: These economic conditions can occur abruptly.
+Added: Prolonged economic slowdowns may result in customers requesting us to renegotiate existing contracts on less advantageous terms to us than those currently in place or defaulting on payments due on existing contracts or not renewing at the end of the contract term.
+Added: Our customers may merge with other entities who use alternative identity solutions and, during weak economic times, there is an increased risk that one or more of our customers will file for bankruptcy protection, either of which may harm our revenue, profitability and results of operations.
+Added: We also face risk from international customers that file for bankruptcy protection in foreign jurisdictions, particularly given that the application of foreign bankruptcy laws may be more difficult to predict.
+Added: In addition, we may determine that the cost of pursuing any claim may outweigh the recovery potential of such claim.
+Added: As a result, if economic growth in countries where we do
+Added: business slows or if such countries experience further economic recession, it could harm our business, revenue, results of operations and cash flows.
The effects of the COVID-19 pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.
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We shifted our customer, employee and industry events, including our annual user conferences Oktane20 Live and Oktane21 Live, to virtual-only formats.
−Removed: In fiscal 2022, as the administration of vaccines has increased, we have reopened our offices to partial capacity, allowing our employees to voluntarily return, and we continue to evaluate our strategy to return to in-person sales formats and experiences for future annual user conferences.
+Added: In fiscal 2022, as the administration of vaccines increased, we reopened our offices to partial capacity, allowing our employees to voluntarily return, and in fiscal 2023, we are shifting to hybrid in-person and virtual sales formats and experiences for future annual user conferences.
The conditions caused by the COVID-19 pandemic have and may continue to affect the rate of IT spending and have and could adversely affect our current and potential customers’ ability or willingness to purchase our offerings.
It has and could continue to delay current and prospective customers’ purchasing decisions, adversely impact our ability to provide professional services to our customers, delay the provisioning of our offerings, lengthen payment terms, reduce the value or duration of our subscription contracts, or affect customer attrition rates, all of which could adversely affect our future sales, operating results and overall financial performance.
−Removed: Our operations have been and may continue to be negatively affected by a range of external factors related to the COVID-19 pandemic that are not within our control.
+Added: Our operations have been and may continue to be affected by a range of external factors related to the COVID-19 pandemic that are not within our control.
For example, many cities, counties, states and countries imposed or may impose a wide range of restrictions on our employees’, partners’, customers’ and potential customers’ physical movement to limit the spread of COVID-19.
−Removed: Additionally, in September 2021, President Biden issued an Executive Order mandating vaccinations for the U.S.
−Removed: federal workforce and federal contractors.
−Removed: compliance with the federal contractor vaccine mandate, which requires our U.S.-based employees to be fully vaccinated against COVID-19 unless legally entitled to an accommodation, could lead to employee absences, resignations or strains on the labor market.
If the COVID-19 pandemic has a substantial impact on our employees’, partners’, customers’ or potential customers’ attendance or productivity, our results of operations and overall financial performance may be harmed.
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Despite our best efforts to manage the impact of such events effectively, our business still may be harmed.
−Removed: Adverse general economic and market conditions and reductions in workforce identity and customer identity spending may reduce demand for our products, which could harm our revenue, results of operations and cash flows.
−Removed: Our revenue, results of operations and cash flows depend on the overall demand for our products.
−Removed: Concerns about the COVID-19 pandemic, the systemic impact of a related widespread recession (in the United States or internationally), energy costs, geopolitical issues or the availability and cost of credit have and could continue to lead to increased market volatility, decreased consumer confidence and diminished growth expectations in the U.S.
−Removed: economy and abroad, which in turn could result in reductions in workforce identity and customer identity spending by our existing and prospective customers.
−Removed: These economic conditions can occur abruptly.
−Removed: Prolonged economic slowdowns may result in customers requesting us to renegotiate existing contracts on less advantageous terms to us than those currently in place or defaulting on payments due on existing contracts or not renewing at the end of the contract term.
−Removed: Our customers may merge with other entities who use alternative identity solutions and, during weak economic times, there is an increased risk that one or more of our customers will file for bankruptcy protection, either of which may harm our revenue, profitability and results of operations.
−Removed: We also face risk from international customers that file for bankruptcy protection in foreign jurisdictions, particularly given that the application of foreign bankruptcy laws may be more difficult to predict.
−Removed: In addition, we may determine that the cost of pursuing any claim may outweigh the recovery potential of such claim.
−Removed: As a result, if economic growth in countries where we do business slows or if such countries experience further economic recession, it could harm our business, revenue, results of operations and cash flows.
We have experienced rapid growth in recent periods, which makes it difficult to forecast our revenue and evaluate our business and future prospects.
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In future periods, we may not be able to sustain revenue growth consistent with recent history, or at all.
−Removed: We believe our revenue growth depends on a number of factors, such as macroeconomic conditions and the economic impact of the COVID-19 pandemic, as well as, but not limited to, our ability to:
+Added: We believe our revenue growth depends on a number of factors, such as macroeconomic conditions including the inflation and interest environment and the economic impact of the COVID-19 pandemic, as well as, but not limited to, our ability to:
• price our platform effectively so that we are able to attract and retain customers without compromising our profitability;
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We have experienced, and may continue to experience, rapid growth and organizational change, which has placed, and may continue to place, significant demands on our management and our operational and financial resources.
−Removed: For example, our headcount has grown from 2,604 employees as of October 31, 2020 to 4,584 employees as of October 31, 2021.
−Removed: We have also experienced significant growth in the number of customers, users and logins and in the amount of data that our SaaS infrastructure supports.
−Removed: Finally, our organizational structure is becoming more complex as we improve our operational, financial and management controls as well as our reporting systems and procedures.
+Added: For example, our headcount has grown from 3,056 employees as of April 30, 2021 to 5,342 employees as of April 30, 2022.
+Added: We have also experienced significant growth in the number of customers, users and logins and in the amount of data that our Software-as-a-Service (“SaaS”) infrastructure supports.
+Added: Finally, our organizational
+Added: structure is becoming more complex as we improve our operational, financial and management controls as well as our reporting systems and procedures.
We will require significant capital expenditures and the allocation of valuable management resources to grow and change in these areas without undermining our culture of rapid innovation, teamwork and attention to customer success, which has been central to our growth so far.
−Removed: If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our corporate culture, the quality of our platform
−Removed: may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers and employees.
+Added: If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our corporate culture, the quality of our platform may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers and employees.
We have established international offices in the Americas, Asia-Pacific and Europe, and we plan to continue to expand our international operations in the future.
−Removed: Moreover, we have added several additional offices through our acquisition of Auth0.
Our expansion has placed, and our expected future growth will continue to place, a significant strain on our managerial, customer operations, research and development, marketing and sales, administrative, financial and other resources.
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Our competitors may also seek to acquire new offerings or repurpose their existing offerings to provide identity solutions with subscription models.
−Removed: Conditions in our market could change rapidly and significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.
+Added: Conditions in our market could change rapidly and
+Added: significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.
New start-up companies that innovate and large competitors that are making significant investments in research and development may invent similar or superior products and technologies that compete with our products.
−Removed: In addition, some of our competitors may enter into new alliances with each other or may establish or
−Removed: strengthen cooperative relationships with systems integrators, third-party consulting firms or other parties.
+Added: In addition, some of our competitors may enter into new alliances with each other or may establish or strengthen cooperative relationships with systems integrators, third-party consulting firms or other parties.
Any such consolidation, acquisition, alliance or cooperative relationship could lead to pricing pressure and our loss of market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our ability to compete.
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If we are unable to successfully develop new products, enhance our existing products to meet customer requirements, or otherwise gain market acceptance, our business, results of operations and financial condition would be harmed.
−Removed: Further, to grow our business, we must convince developers to adopt and build their applications using our APIs and products.
+Added: Further, to grow our business, we must convince developers to adopt and build their applications using our application programming interfaces (“APIs”) and products.
We believe that these developer-built applications facilitate greater usage and customization of our products.
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In the past, some of our customers have elected not to renew their agreements with us, and it is difficult to accurately predict long-term customer retention and expansion rates.
−Removed: Our customer retention and expansion may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our products, our product support, our prices and pricing plans, particularly in light of COVID-19-related economic conditions, the prices of competing software products, reductions in our customers’ spending levels, user adoption of our platform, deployment success, utilization rates by our customers, new product releases and changes to the packaging of our product offerings.
+Added: Our customer retention and expansion may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our products, our product support, our prices and pricing plans, particularly in light of COVID-19-related economic conditions, the inflation and interest environment and increased costs, the prices of competing software products, reductions in our customers’ spending levels, user adoption of our platform, deployment success, utilization rates by our customers, new product releases and changes to the packaging of our product offerings.
If our customers do not purchase additional subscriptions or renew their subscriptions, renew on less favorable terms or fail to add more users, our revenue may decline or grow less quickly than anticipated, which would harm our future results of operations.
−Removed: Furthermore, if our contractual subscription terms were to shorten it could lead to increased volatility of, and diminished visibility into, future recurring revenue.
+Added: Furthermore, if our contractual subscription terms were to shorten it
+Added: could lead to increased volatility of, and diminished visibility into, future recurring revenue.
If our sales of new or recurring subscriptions and software-related support service contracts decline from existing customers, our revenue and revenue growth may decline, and our business will suffer.
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• the timing and success of new product introductions by us or our competitors or any other change in the competitive landscape of our market;
−Removed: • pricing pressure as a result of competition, COVID-19 or otherwise;
+Added: • pricing pressure as a result of competition, the inflation and interest environment and increased costs, COVID-19 or otherwise;
• seasonal buying patterns for IT spending;
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• expenses related to real estate, including our office leases, and other fixed expenses;
−Removed: • general economic conditions in either domestic or international markets, including geopolitical uncertainty and instability.
+Added: • general economic conditions in either domestic or international markets, including the inflation and interest environment, geopolitical uncertainty and instability.
Any one or more of the factors above may result in significant fluctuations in our results of operations.
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For further risks related to our acquisition of Auth0, please see below under “Risks Related to the Acquisition of Auth0.”
+Added: Because our long-term success depends, in part, on our ability to expand the sales of our products to customers located outside of the United States, our business will be susceptible to risks associated with international operations.
+Added: We currently have sales personnel outside the United States and maintain offices outside the United States in the Americas, Asia-Pacific and Europe, and we plan to expand our international operations.
+Added: We also have added several offices outside the United States through our acquisition of Auth0.
+Added: Our international revenue was 16% and 20% of our total revenue in fiscal 2021 and fiscal 2022, respectively.
+Added: Any international expansion efforts that we may undertake may not be successful.
+Added: In addition, conducting international operations subjects us to new risks, some of which we have not generally faced in the United States.
+Added: These risks include, among other things:
+Added: • health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses;
+Added: • macroeconomic conditions, including the inflation and interest environment and the economic impact of the COVID-19 pandemic;
+Added: • unexpected costs and errors in the localization of our products, including translation into foreign languages and adaptation for local practices and regulatory requirements;
+Added: • lack of familiarity and burdens of complying with foreign laws, legal standards, privacy standards, regulatory requirements, tariffs and other barriers;
+Added: • laws and business practices favoring local competitors or commercial parties;
+Added: • costs and liabilities related to compliance with the numerous and ever-growing landscape of U.S.
+Added: and international data privacy and cybersecurity regimes, many of which involve disparate standards and enforcement approaches, including implementation of the recently-announced agreement in principle between the European Union and United States to implement a successor framework to the EU-U.S.
+Added: Privacy Shield, to address cross-border data flows;
+Added: • greater risk that our foreign employees or partners will fail to comply with U.S.
+Added: and foreign laws;
+Added: • practical difficulties of enforcing intellectual property rights in countries with fluctuating laws and standards and reduced or varied protection for intellectual property rights in some countries;
+Added: • restrictive governmental actions focusing on cross-border trade, including taxes, trade laws, tariffs, import and export restrictions or quotas, barriers, sanctions, custom duties or other trade restrictions;
+Added: • unexpected changes in legal and regulatory requirements;
+Added: • difficulties in managing systems integrators and technology partners;
+Added: • differing technology standards;
+Added: • longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
+Added: • difficulties in managing and staffing international operations and differing employer/employee relationships and local employment laws;
+Added: • political, economic and social instability, war, terrorist activities or armed conflict, including Russia's invasion of Ukraine;
+Added: • global economic uncertainty caused by global political events, including the United Kingdom's exit from the European Union, and similar geopolitical developments;
+Added: • fluctuations in exchange rates that may increase the volatility of our foreign-based revenue and expense;
+Added: • potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems and restrictions on the repatriation of earnings.
+Added: Additionally, operating in international markets also requires significant management attention and financial resources.
+Added: We cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenue or profitability.
+Added: We have not engaged in currency hedging activities to limit risk of exchange rate fluctuations.
+Added: Changes in exchange rates affect our costs and earnings, and may also affect the book value of our assets located outside the United States and the amount of our stockholders’ equity.
+Added: We have limited experience in marketing, selling and supporting our platform abroad.
+Added: Our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful.
+Added: If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business and results of operations will suffer.
If we fail to adapt to rapid technological change, our ability to remain competitive could be impaired.
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These assumptions are based upon historical trends for sales cycles and conversion rates associated with our existing customers.
−Removed: As we continue to focus on sales to larger organizations and in light of the current COVID-19 environment, our sales cycles are lengthening in certain circumstances and becoming less predictable, which may harm our financial results.
+Added: As we continue to focus on sales to larger organizations and in light of the current COVID-19 environment, our sales cycles are lengthening in certain circumstances and becoming less predictable, which may
+Added: harm our financial results.
Other factors that may influence the length and variability of our sales cycle include, among other things:
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Various factors may cause implementations to be delayed, inefficient or otherwise unsuccessful.
−Removed: For example, changes in the functional requirements of our customers, delays in timeline, or deviation from recommended best practices may occur during the course of an implementation project.
+Added: For example, changes in the functional requirements of our customers, delays in timeline, or deviation from recommended best practices may occur during
+Added: the course of an implementation project.
As a result of these and other risks, we or our customers may incur significant implementation costs in connection with the purchase, implementation and enablement of our products.
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The sale of our services to government agencies is tied to budget cycles, and there are government requirements and authorizations that we may be required to meet.
−Removed: Further, we may be subject to audits and investigations regarding
−Removed: our role as a subcontractor in government contracts, and violations could result in penalties and sanctions, including contract termination, refunding or forfeiting payments, fines, and suspension or debarment from future government business.
+Added: Further, we may be subject to audits and investigations regarding our role as a subcontractor in government contracts, and violations could result in penalties and sanctions, including contract termination, refunding or forfeiting payments, fines, and suspension or debarment from future government business.
Selling to these entities can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense.
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In the past, we have at times adjusted our prices either for individual customers in connection with long-term agreements or for a particular product.
−Removed: We expect that we may need to change our pricing in future periods and potentially in response to COVID-19 pricing pressures.
+Added: We expect that we may need to change our pricing in future periods and potentially in response to COVID-19 pricing pressures, the inflation and interest environment and increased costs.
Further, as competitors introduce new products that compete with ours or reduce their prices, we may be unable to attract new customers or retain existing customers based on our historical pricing.
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As a result, we may be required or choose to reduce our prices or change our pricing model, which could harm our business, results of operations and financial condition.
−Removed: Because our long-term success depends, in part, on our ability to expand the sales of our products to customers located outside of the United States, our business will be susceptible to risks associated with international operations.
−Removed: We currently have sales personnel outside the United States and maintain offices outside the United States in the Americas, Asia-Pacific and Europe, and we plan to expand our international operations.
−Removed: We also have added several additional offices outside the United States through our acquisition of Auth0.
−Removed: In each of fiscal 2020 and 2021, our international revenue was 16% of our total revenue.
−Removed: Any international expansion efforts that we may undertake may not be successful.
−Removed: In addition, conducting international operations subjects us to new risks, some of which we have not generally faced in the United States.
−Removed: These risks include, among other things:
−Removed: • health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses;
−Removed: • macroeconomic conditions and the economic impact of the COVID-19 pandemic;
−Removed: • unexpected costs and errors in the localization of our products, including translation into foreign languages and adaptation for local practices and regulatory requirements;
−Removed: • lack of familiarity and burdens of complying with foreign laws, legal standards, privacy standards, regulatory requirements, tariffs and other barriers;
−Removed: • laws and business practices favoring local competitors or commercial parties;
−Removed: • costs and liabilities related to compliance with the numerous and ever-growing landscape of U.S.
−Removed: and international data privacy and cybersecurity regimes, many of which involve disparate standards and enforcement approaches;
−Removed: • greater risk that our foreign employees or partners will fail to comply with U.S.
−Removed: and foreign laws;
−Removed: • practical difficulties of enforcing intellectual property rights in countries with fluctuating laws and standards and reduced or varied protection for intellectual property rights in some countries;
−Removed: • restrictive governmental actions focusing on cross-border trade, including taxes, trade laws, tariffs, import and export restrictions or quotas, barriers, sanctions, custom duties or other trade restrictions;
−Removed: • unexpected changes in legal and regulatory requirements;
−Removed: • difficulties in managing systems integrators and technology partners;
−Removed: • differing technology standards;
−Removed: • longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
−Removed: • difficulties in managing and staffing international operations and differing employer/employee relationships and local employment laws;
−Removed: • political, economic and social instability, war, armed conflict or terrorist activities;
−Removed: • global economic uncertainty caused by global political events, including the United Kingdom's exit from the European Union, and similar geopolitical developments;
−Removed: • fluctuations in exchange rates that may increase the volatility of our foreign-based revenue and expense;
−Removed: • potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems and restrictions on the repatriation of earnings.
−Removed: Additionally, operating in international markets also requires significant management attention and financial resources.
−Removed: We cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenue or profitability.
−Removed: We have not engaged in currency hedging activities to limit risk of exchange rate fluctuations.
−Removed: Changes in exchange rates affect our costs and earnings, and may also affect the book value of our assets located outside the United States and the amount of our stockholders’ equity.
−Removed: We have limited experience in marketing, selling and supporting our platform abroad.
−Removed: Our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful.
−Removed: If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business and results of operations will suffer.
Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies in the future could reduce our ability to compete successfully and harm our results of operations.
We may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms, if at all.
−Removed: If we raise additional equity or convertible debt financing, our security holders may
−Removed: experience significant dilution of their ownership interests.
+Added: If we raise additional equity or convertible debt financing, our security holders may experience significant dilution of their ownership interests.
If we engage in additional debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions.
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Risks Related to the Acquisition of Auth0
−Removed: The acquisition of Auth0 may cause a disruption in our business.
−Removed: The acquisition of Auth0 (the “Acquisition”) could cause disruptions to our business or business relationships, which could have an adverse impact on results of operations.
+Added: The ongoing integration of Auth0 may cause a disruption in our business.
+Added: The ongoing integration following the acquisition of Auth0 (the “Acquisition”) could cause disruptions to our business or business relationships, which could have an adverse impact on results of operations.
Parties with which we have business relationships may experience uncertainty as to the future of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us.
Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties.
−Removed: The integration of Auth0 may place a significant burden on our management and internal resources.
+Added: The ongoing integration of Auth0 may place a significant burden on our management and internal resources.
The diversion of management’s attention away from day-to-day business concerns and any difficulties encountered in the integration process could adversely affect our financial results.
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Prior to the consummation of the Acquisition, we and Auth0 operated independently, and there can be no assurances that our businesses can be combined in a manner that allows for the achievement of substantial benefits.
−Removed: Any integration process may require significant time and resources, and we may not be able to manage the process successfully as our ability to acquire and integrate larger or more complex companies, products or technologies in a successful manner is unproven.
+Added: The ongoing integration process may require significant time and resources, and we may not be able to manage the process successfully as our ability to acquire and integrate larger or more complex companies, products or technologies in a successful manner is unproven.
If we are not able to successfully integrate Auth0’s businesses with ours or pursue our customer and product strategy successfully, the anticipated benefits of the Acquisition may not be realized fully or may take longer than expected to be realized.
−Removed: Further, it is possible that there could be a loss
−Removed: of our and/or Auth0’s key employees and customers, disruption of either company’s or both companies’ ongoing businesses or unexpected issues, higher than expected costs and an overall post‑completion process that takes longer than originally anticipated.
−Removed: Specifically, the following issues, among others, must be addressed in combining Auth0’s operations with ours in order to realize the anticipated benefits of the Acquisition so the combined company performs as the parties hope:
+Added: Further, it is possible that there could be a loss of our and/or Auth0’s key employees and customers, disruption of either company’s or both companies’ ongoing businesses or unexpected issues, higher than expected costs and an overall post‑completion process that takes longer than originally anticipated.
+Added: Specifically, the following issues, among others, must be addressed in combining Auth0’s operations with ours in order to realize the anticipated benefits of the Acquisition:
• combining the companies’ corporate functions;
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• developing products and technology that allow value to be unlocked in the future;
−Removed: • evaluating and forecasting the financial impact of the Acquisition transaction, including accounting charges.
+Added: • evaluating and forecasting the financial impact of the Acquisition transaction.
In addition, at times the attention of certain members of our management and resources may be focused on integration of the businesses of the two companies and diverted from day‑to‑day business operations, which may disrupt our ongoing business and the business of the combined company.
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Management cannot ensure that the elimination of duplicative costs or the realization of other efficiencies will offset the transaction and integration costs in the long term or at all.
−Removed: Purchase price accounting in connection with our Acquisition requires estimates that may be subject to change and could impact our condensed consolidated financial statements and future results of operations and financial position .
−Removed: Pursuant to the acquisition method of accounting, the purchase price we paid for Auth0 will be allocated to the underlying Auth0 tangible and intangible assets acquired and liabilities assumed based on their respective fair market values with any excess purchase price allocated to goodwill.
−Removed: The acquisition method of accounting is dependent upon certain valuations and other studies that are preliminary.
−Removed: Accordingly, the purchase price allocation as of the Acquisition date is preliminary.
−Removed: We currently anticipate that all the information needed to identify and measure values assigned to the assets acquired and liabilities assumed will be obtained and finalized during the one‑year measurement period following the date of completion of the Acquisition.
−Removed: Differences between these preliminary estimates and the final acquisition accounting may occur, and these differences could have a material impact on the condensed consolidated financial statements and the combined company’s future results of operations and financial position.
−Removed: Auth0 may have liabilities that are not known to us.
−Removed: Auth0 may have liabilities that we failed, or were unable, to discover, or that we underestimated, in the course of performing our due diligence investigations of Auth0’s business and we, as the successor owner of such acquired company, might be responsible for those liabilities.
−Removed: Such potential liabilities could include employment-related obligations under applicable law or other benefits arrangements, legal or regulatory claims, tax liabilities, warranty or similar liabilities to customers, product liabilities, claims related to infringement of third-party intellectual property rights, and claims by or amounts owed to vendors or other third parties.
−Removed: We cannot assure you that the indemnification available to us under the Merger Agreement with respect to the Acquisition will be sufficient in amount, scope or duration to fully offset the possible liabilities associated with Auth0’s business or property that we assumed upon consummation of the Acquisition.
−Removed: We may learn additional information about Auth0 that materially adversely affects us, such as unknown or contingent liabilities and liabilities related to compliance with applicable
−Removed: Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, results of operations and financial condition.
Risks Related to Intellectual Property, Infrastructure Technology, Data Privacy and Security
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Moreover, we depend on services from various third parties to maintain our infrastructure and distribute our products via the internet.
−Removed: If a service provider fails to provide sufficient capacity to support our platform or otherwise experiences service outages, such failure could interrupt our customers’ access to our service, which could adversely affect their perception of our platform's reliability and our revenues.
+Added: If a service provider fails to provide sufficient capacity to support our platform or
+Added: otherwise experiences service outages, such failure could interrupt our customers’ access to our service, which could adversely affect their perception of our platform's reliability and our revenues.
Any disruptions in these services, including as a result of actions outside of our control, would significantly impact the continued performance of our products.
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Any of the above circumstances or events may harm our reputation, cause customers to terminate their agreements with us, impair our ability to obtain subscription renewals from existing customers, impair our ability to grow our customer base, result in the expenditure of significant financial, technical and engineering resources, subject us to financial penalties and liabilities under our service level agreements, and otherwise harm our business, results of operations and financial condition.
−Removed: An application, data security or network incident may allow unauthorized access to our systems or data or our customers’ data, disable access to our service, harm our reputation, create additional liability and adversely impact our financial results.
−Removed: Increasingly, companies are subject to a wide variety of attacks on their systems and networks on an ongoing basis.
−Removed: In addition to threats from traditional computer “hackers,” malicious code (such as malware, viruses, worms and ransomware), employee or contractor theft or misuse, password spraying, phishing and denial-of-service attacks, we and our third-party service providers now also face threats from sophisticated nation-state and nation-state supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risks to our systems (including those hosted on AWS or other cloud services), internal networks, our customers’ systems and the information that they store and process.
+Added: In the past we have experienced and in the future we may experience cybersecurity incidents that may allow unauthorized access to our systems or data or our customers’ data, disable access to our service, harm our reputation, create additional liability and adversely impact our financial results.
+Added: Increasingly, companies, including Okta, are subject to a wide variety of attacks on their systems and networks on an ongoing basis.
+Added: In addition to threats from traditional computer “hackers,” malicious code (such as malware, viruses, worms and ransomware), employee or contractor theft or misuse, password spraying, phishing and denial-of-service attacks, we and our third-party service providers now also face threats from sophisticated nation-state and nation-state-supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risks to our systems (including those hosted on AWS’ or other cloud services providers’ systems), internal networks, our customers’ systems and the information that they store and process.
For example, like other companies, we have experienced numerous cybersecurity attacks and have had to expend increasing amounts of human and financial capital to respond.
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In addition, techniques used to sabotage or to obtain unauthorized access to networks in which data is stored or through which data is transmitted change frequently, become more complex over time and generally are not recognized until launched against a target.
−Removed: As a result, we and our third-party service providers may be unable
−Removed: to anticipate these techniques or implement adequate preventative measures quickly enough to prevent either an electronic intrusion into our systems or services or a compromise of customer data, employee data or other protected information.
−Removed: Our customers’ use of Okta to access business systems and store data concerning, among others, their employees, contractors, partners and customers is essential to their use of our platform, which stores, transmits and processes customers’ proprietary information and personal data.
−Removed: If a breach of customer data on our platform were to occur, as a result of third-party action, technology limitations, employee or contractor error, malfeasance or otherwise, and the confidentiality, integrity or availability of our customers’ data or systems was disrupted, we could incur significant liability to our customers and to individuals or businesses whose information was being stored by our customers, and our platform may be perceived as less desirable, which could negatively affect our business and damage our reputation.
+Added: As a result, we and our third-party service providers may be unable to anticipate these techniques or implement adequate preventative measures quickly enough to prevent either an electronic intrusion into our systems or services or a compromise of customer data, employee data or other protected information.
+Added: Our customers’ use of Okta to access business systems and store data concerning, among others, their employees, contractors, partners and customers is essential to their use of our platform, which stores, transmits and processes customers’ proprietary information and users’ personal data.
+Added: Okta has experienced and likely will in the future experience attacks targeting such customer data.
+Added: When such breaches occur, as a result of third-party action, technology limitations, employee or contractor error, malfeasance or otherwise, and if the confidentiality, integrity or availability of our customers’ data or systems is disrupted, we could incur significant liability to our customers and to individuals or businesses whose information was being stored by our customers, and our platform may be perceived as less desirable, which could negatively affect our business and damage our reputation.
Because techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and generally are not recognized until launched against a target, we, our third-party service providers and our customers may be unable to anticipate these techniques or to implement adequate preventive measures.
Further, because we do not control our third-party service providers, or the processing of data by our third-party service providers, we cannot ensure the integrity or security of measures they take to protect customer information and prevent data loss.
−Removed: In addition, security breaches impacting our platform could result in a risk of loss or unauthorized disclosure of this information, or the denial of access to this information, which, in turn, could lead to enforcement actions, litigation, regulatory or governmental audits, investigations and possible liability, and increased requests by individuals regarding their personal data.
−Removed: Security breaches could also damage our relationships with and ability to attract customers and partners, and trigger service availability, indemnification and other contractual obligations.
+Added: In addition, security breaches impacting our platform have in certain cases resulted in and could in the future result in a risk of loss or unauthorized disclosure of this information, or the denial of access to this information, which, in turn, could lead to enforcement actions, litigation, regulatory or governmental audits, investigations and possible liability, and increased requests by individuals regarding their personal data.
+Added: Security breaches could also
+Added: damage our relationships with and ability to attract customers and partners, and trigger service availability, indemnification and other contractual obligations.
Security incidents may also cause us to incur significant investigation, mitigation, remediation, notification and other expenses.
Furthermore, as a well-known provider of identity and security solutions, any such breach, including a breach of our customers’ systems, could compromise systems secured by our products, creating system disruptions or slowdowns and exploiting security vulnerabilities of our or our customers’ systems, and the information stored on our or our customers’ systems could be accessed, publicly disclosed, altered, lost or stolen, which could subject us to liability and cause us financial harm.
+Added: For example, the January 2022 compromise of one of our third-party service providers by a threat actor, even though not material and not a breach of our product or systems, nonetheless was widely publicized and focused attention on the security of our systems and the systems of our third-party service providers.
+Added: Our disclosures concerning security incidents also may become the subject of litigation, and our disclosures concerning the January 2022 compromise, for example, have become the subject of a lawsuit, as discussed in Item 1, “ Legal Proceedings ” above.
+Added: While we have taken a number of remediation steps, there is no guarantee that our preventative and mitigation actions with respect to this incident and others like it will fully eliminate the risk of a malicious compromise of our, our third-party service providers’ or our customers’ systems.
While we maintain cybersecurity insurance, our insurance may be insufficient to cover all liabilities incurred in these incidents, and any incidents may result in loss of, or increased costs of, our cybersecurity insurance.
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Any of these negative outcomes could adversely impact market acceptance of our products and could harm our business, results of operations and financial condition.
−Removed: Third parties may attempt to fraudulently induce employees, contractors, customers or our customers’ users into disclosing sensitive information such as user names, passwords or other information or otherwise compromise the security of our internal networks, electronic systems and/or physical facilities in order to gain access to our data or our customers’ data, which could result in significant legal and financial exposure, a loss of confidence in the security of our platform, interruptions or malfunctions in our operations, account lock outs, and, ultimately, harm to our future business prospects and revenue.
+Added: Third parties have induced and may continue to fraudulently induce employees, contractors, customers or our customers’ users into disclosing sensitive information such as user names, passwords or other information or otherwise compromise the security of our applications, internal networks, electronic systems and/or physical facilities in order to gain access to our data or our customers’ data, which could result in significant legal and financial exposure, a loss of confidence in the security of our platform, interruptions or malfunctions in our operations, account lock outs, and, ultimately, harm to our future business prospects and revenue.
We may be required to expend significant capital and financial resources to protect against such threats or to alleviate problems caused by breaches in security.
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In addition, we are subject to certain contractual obligations regarding the collection, use, storage, transfer, disclosure and/or processing of personal data.
−Removed: Although we are working to comply with those federal, state and foreign laws and regulations, industry standards, contractual obligations and other legal obligations that apply to us, those laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations, our practices or the features of our platform.
−Removed: In addition, some of our customers rely on our authorization under FedRAMP to help satisfy their own legal and regulatory compliance requirements which, in addition to state or international regulations, may require us to undertake additional actions and expense to ensure compliance.
−Removed: We also expect that there will continue to be new proposed laws, regulations, self-regulatory and industry standards concerning privacy, data protection and information security in the United States, China, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business.
+Added: Although we are working to comply with those federal, state and foreign laws and regulations, industry standards, contractual obligations and other legal obligations that apply to us, those laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations,
+Added: our practices or the features of our platform.
+Added: In addition, some of our customers rely on our authorization under the Federal Risk and Authorization Management Program (“FedRAMP”) to help satisfy their own legal and regulatory compliance requirements which, in addition to state or international regulations, may require us to undertake additional actions and expense to ensure compliance.
+Added: We also expect that there will continue to be new proposed laws, regulations, self-regulatory and industry standards concerning privacy, data protection and information security in the United States, China, the European Union, India and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business.
For example, the California Consumer Privacy Act (“CCPA”) took effect on January 1, 2020, which broadly defines personal information and gives California residents expanded privacy rights and protections and provides for civil penalties for violations and a private right of action for data breaches.
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If our platform is perceived to cause, or is otherwise unfavorably associated with, violations of privacy or data security requirements, it may subject us or our customers to public criticism and potential legal liability.
−Removed: Existing and potential privacy laws and regulations concerning privacy and data security and increasing sensitivity of consumers to unauthorized processing of personal data may create negative public reactions to technologies, products and services such as ours.
+Added: Existing and potential privacy laws and regulations concerning privacy and data security and increasing sensitivity of consumers to unauthorized processing of personal data may create negative public reactions to technologies, products and
+Added: services such as ours.
Public concerns regarding personal data processing, privacy and security may cause some of our customers’ end users to be less likely to visit their websites or otherwise interact with them.
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Use of the SCCs must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place.
−Removed: The European Commission has now issued new SCCs that account for the CJEU’s “Schrems II” decision.
−Removed: Although we believe we continue to satisfy regulatory requirements through our use of SCCs, these latest developments may require major changes to our data transfer policy, including the need to conduct legal, technical, and security assessments for each data transfer from the EEA to a country outside of the EEA.
−Removed: This means that we may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data from the EEA.
−Removed: addition to other impacts, experience additional costs associated with increased compliance burdens, and we and our customers face the potential for regulators in the EEA to apply different standards to the transfer of personal data from the EEA to the United States, and to block, or require ad hoc verification of measures taken with respect to, certain data flows from the EEA to the United States.
+Added: In June 2021, the European Commission issued new SCCs that account for the CJEU’s “Schrems II” decision.
+Added: The new SCCs must be used for relevant new data transfers, and existing SCCs arrangements must be migrated to the new SCCs by December 27, 2022.
+Added: These new SCCs only apply to the transfer of personal data outside the EEA, and not the United Kingdom.
+Added: The United Kingdom’s Information Commissioner’s Office released revised UK standard contractual clauses that can be used from March 21, 2022, with a two-year grace period.
+Added: and EU officials are actively seeking a solution to replace the Privacy Shield.
+Added: On March 25, 2022, the U.S.
+Added: and European Commission announced that they had agreed in principle to a new “Trans-Atlantic Data Privacy Framework” to enable trans-Atlantic data flows and address the concerns raised in the Schrems II decision.
+Added: There is no clear timeline for the enactment of this new framework.
+Added: Moreover, once enacted, the new framework is likely to be subject to legal challenges and may be struck down by the CJEU.
+Added: Although we believe we continue to satisfy regulatory requirements through our use of SCCs, these latest developments may require major changes to our data transfer policy, including the need to conduct legal, technical, and security assessments for each data transfer from the EEA and UK to a country outside of the EEA and UK.
+Added: This means that we may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data
+Added: from the EEA and UK.
+Added: We may, in addition to other impacts, experience additional costs associated with increased compliance burdens, and we and our customers face the potential for regulators in the EEA and UK to apply different standards to the transfer of personal data from the EEA and UK to the United States, and to block, or require ad hoc verification of measures taken with respect to, certain data flows from the EEA and UK to the United States.
We also anticipate being required to engage in new contract negotiations with third parties that aid in processing data on our behalf, and entering into the new SCCs.
−Removed: We may experience reluctance or refusal by current or prospective European customers to use our products, and we may find it necessary or desirable to make further changes to our handling of personal data of EEA residents.
+Added: We may experience reluctance or refusal by current or prospective European customers to use our products, and we may find it necessary or desirable to make further changes to our handling of personal data of EEA and UK residents.
There are few viable alternatives to the SCCs, and the law in this area remains dynamic.
These recent developments will require us to review and may require us to amend the legal mechanisms by which we make and/or receive personal data transfers to/in the United States.
−Removed: The regulatory environment applicable to the handling of EEA residents' personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs and could result in our business, operating results and financial condition being harmed.
−Removed: We and our customers may face a risk of enforcement actions by data protection authorities in the EEA relating to personal data transfers to us and by us from the EEA.
+Added: The regulatory environment applicable to the handling of EEA and UK residents' personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs and could result in our business, operating results and financial condition being harmed.
+Added: We and our customers may face a risk of enforcement actions by data protection authorities in the EEA and UK relating to personal data transfers to us and by us from the EEA and UK.
Any such enforcement actions could result in substantial costs and diversion of resources, distract management and technical personnel and negatively affect our business, operating results and financial condition.
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These regulations may deter customers from using cloud-based services such as ours, and may inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant additional costs.
−Removed: We and our customers are at risk of enforcement actions taken by certain EU data protection authorities until such point in time that we may be able to ensure that all transfers of personal data to us in the United States from the EU are conducted in compliance with all applicable regulatory obligations, the guidance of data protection authorities and evolving best practices.
−Removed: Any investigation or charges by EU data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new customers.
−Removed: We may find it necessary to establish systems to maintain EU personal data within the EU, which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business.
+Added: We and our customers are at risk of enforcement actions taken by certain EEA and UK data protection authorities until such point in time that we may be able to ensure that all transfers of personal data to us in the United States from the EEA and UK are conducted in compliance with all applicable regulatory obligations, the guidance of data protection authorities and evolving best practices.
+Added: Any investigation or charges by EEA and UK data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new customers.
+Added: We may find it necessary to establish systems to maintain EEA and UK personal data within the EEA and UK, which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business.
We function as a HIPAA Business Associate for certain of our customers and, as such, are subject to strict privacy and data security requirements.
If we fail to comply with any of these requirements, we could be subject to significant liability, all of which can adversely affect our business as well as our ability to attract and retain new customers.
−Removed: The Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and their respective implementing regulations under HIPAA, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information.
+Added: The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and their respective implementing regulations under HIPAA, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information.
Among other things, HITECH makes HIPAA’s security standards directly applicable to business associates.
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In addition, the U.S.
−Removed: Department of Health & Human Services recently proposed modifications to the HIPAA privacy regulations (“Privacy Rule”), including certain changes designed to strengthen individuals’ right to access their own health information, improve information sharing for care coordination and case management, and reduce administrative burdens on HIPAA covered entities, while continuing to protect individuals’ health information privacy
+Added: Department of Health & Human Services recently proposed modifications to the HIPAA privacy regulations (“Privacy Rule”), including certain changes designed to strengthen individuals’ right to access their own health information, improve information sharing for care coordination and case management, and reduce
+Added: administrative burdens on HIPAA covered entities, while continuing to protect individuals’ health information privacy interests.
The proposed rulemaking has not yet been finalized.
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Significant changes to HIPAA, including interpretation and application of HIPAA, could negatively impact our business.
+Added: If we fail to maintain our security attestations and certifications, our business, results of operations and financial condition may suffer.
+Added: Security is a mission-critical issue for Okta and for our customers.
+Added: We have attained multiple certifications, including SOC 2 Type II certifications, CSA Star Level 2 Attestation, ISO/IEC 27001:2013, ISO/IEC 27018:2019 certifications, and agency FedRAMP Moderate Authorities to Operate.
+Added: We also support FIPS 140-2 validated encryption in our Okta Verify MFA product.
+Added: If we fail to maintain our security attestations and certifications, we may fail to meet our contractual commitments and we may fail to retain our existing customers or attract new customers, and our business, results of operations and financial condition could suffer.
We provide service level commitments under our customer contracts.
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Interruptions or delays in the services provided by third-party data centers or internet service providers could impair the delivery of our platform and our business could suffer.
−Removed: We rely on a number of third-party service providers to operate our services, any of which, if it encountered interruptions or delays, could negatively affect our platform, damage our reputation, expose us to liability, cause us to lose customers or otherwise harm our business.
+Added: We rely on a number of third-party service providers to operate our services, any of which, if it encountered interruptions or delays, could negatively affect our platform, damage our reputation, expose us to liability, cause us
+Added: to lose customers or otherwise harm our business.
For example, we host our platform using AWS data centers and other third-party cloud infrastructure services.
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A prolonged third-party service disruption affecting our platform for any of the foregoing reasons could be detrimental to our business.
−Removed: incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the third-party services we use.
+Added: We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the third-party services we use.
Our cloud infrastructure services enable us to order and reserve server capacity in varying amounts and sizes distributed across multiple regions.
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In each case, we would be required to either seek licenses to software or services from other parties and redesign our products to function with such software or services or develop substitutes ourselves, which would result in increased costs and could result in delays in our product launches and the release of new product offerings until equivalent technology can be identified, licensed or developed, and integrated into our products.
−Removed: Furthermore, we might be forced to limit the features available in our current or future products.
+Added: Furthermore, we might be forced to limit
+Added: the features available in our current or future products.
These delays and feature limitations, if they occur, could harm our business, results of operations and financial condition.
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Our platform is often used in connection with large-scale computing environments with different operating systems, system management software, equipment and networking configurations, which may cause errors or failures of products, or other aspects of the computing environment into which our products are deployed.
−Removed: In addition, deployment of our products into complicated, large-scale computing environments may
−Removed: expose errors, failures, vulnerabilities or bugs in our products.
+Added: In addition, deployment of our products into complicated, large-scale computing environments may expose errors, failures, vulnerabilities or bugs in our products.
Any such errors, failures, vulnerabilities or bugs may not be found until after they are deployed to our customers.
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Our results of operations may be harmed if we are subject to an infringement claim or a claim that results in a significant damage award.
−Removed: There is considerable patent and other intellectual property development activity in our industry, and we expect that software companies will increasingly be subject to infringement claims as the number of products and competitors grows and the functionality of products in different industry segments overlaps.
+Added: There is considerable patent and other intellectual property development activity in our industry, and we expect that software companies will increasingly be subject to infringement claims as the number of products and
+Added: competitors grows and the functionality of products in different industry segments overlaps.
In addition, the patent portfolios of many of our competitors are larger than ours, and this disparity may increase the risk that our competitors may sue us for patent infringement and may limit our ability to counterclaim for patent infringement or settle through patent cross-licenses.
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As we continue to grow, the possibility of infringement claims and other intellectual property rights claims against us may increase.
−Removed: For any intellectual property rights indemnification claim against us or our customers, we will incur significant legal expenses and may have to pay damages, settlement fees, license fees and/or stop using technology found to be in violation of the third party’s rights.
+Added: For any intellectual
+Added: property rights indemnification claim against us or our customers, we will incur significant legal expenses and may have to pay damages, settlement fees, license fees and/or stop using technology found to be in violation of the third party’s rights.
Large indemnity payments could harm our business, results of operations and financial condition.
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Changes in tax laws or regulations in the various tax jurisdictions we are subject to that are applied adversely to us or our customers could increase the costs of our products and harm our business.
−Removed: New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time.
+Added: New income, sales, use, value-added or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time.
Those enactments could harm our domestic and international business operations, and our business and financial performance.
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Any or all of these events could harm our business and financial performance.
−Removed: For example, various legislative and regulatory actions and proposals, such as in the United States, the Organisation for Economic Co-operation and Development and the EU, have increasingly focused on future tax reform and contemplate changes to long-standing tax principles, which could adversely affect our effective tax rate.
−Removed: As a multinational organization, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain.
+Added: For example, various legislative and regulatory actions and proposals, such as in the United States, the Organisation for Economic Co-operation and Development and the EU, have increasingly focused on future tax reform and contemplate changes to long-standing tax principles, which could adversely affect our liquidity and results of operations.
+Added: As a multinational organization, we may be subject to taxation in certain jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain.
The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could harm our liquidity and results of operations.
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Any successful action by state, foreign or other authorities to collect additional or past sales tax could harm our business.
−Removed: States and some local taxing jurisdictions have differing rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that may change over time.
−Removed: In particular, the applicability of sales taxes to our platform in various jurisdictions is unclear.
−Removed: It is possible that we could face sales tax audits and that our liability for these taxes could exceed our estimates as state tax authorities could still assert that we are obligated to collect additional amounts as taxes from our customers and remit those taxes to those authorities.
+Added: State, foreign and local taxing jurisdictions have differing rules and regulations governing sales, use and other indirect taxes, and these rules and regulations are subject to varying interpretations that may change over time.
+Added: In particular, the applicability of sales and value-added taxes to our platform in various jurisdictions is unclear.
+Added: It is possible that we could face tax audits and that our liability for these taxes could exceed our estimates as tax authorities could still assert that we are obligated to collect additional amounts as taxes from our customers and remit those taxes to those authorities.
We could also be subject to audits in states and international jurisdictions for which we have not accrued tax liabilities.
−Removed: A successful assertion that we should be collecting additional sales or other taxes on our service in jurisdictions where we have not historically done so and do not accrue for sales taxes could result in substantial tax liabilities for past sales, discourage customers from purchasing our products or otherwise harm our business, results of operations and financial condition.
+Added: A successful assertion that we should be collecting additional sales or other taxes on our service in jurisdictions where we have not historically done so and do not accrue for such taxes could result in substantial tax liabilities for past sales, discourage customers from purchasing our products or otherwise harm our business, results of operations and financial condition.
We file sales tax returns in certain states within the United States as required by law and certain customer contracts for a portion of the products that we provide.
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Any successful action by state, foreign or other authorities to compel us to collect and remit sales tax, use tax or other taxes, either retroactively, prospectively or both, could harm our business, results of operations and financial condition.
−Removed: Our ability to use our net operating loss carry-forwards and certain other tax attributes may be limited.
−Removed: Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three year period, the corporation’s ability to use its pre-change net operating loss carry-forwards and other pre-change tax attributes, such as research tax credits and distributed interest deduction carryover, to offset its post-change
−Removed: income may be limited.
+Added: Our ability to use our U.S.
+Added: net operating loss carry-forwards and certain other tax attributes may be limited.
+Added: Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three year period, the corporation’s ability to use its pre-change net operating loss carry-forwards and other pre-change
+Added: tax attributes, such as research tax credits and distributed interest deduction carryover, to offset its post-change income may be limited.
We have experienced ownership changes in the past and any such ownership change in the future could result in increased future tax liability.
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Further, such changes could potentially affect our reporting of transactions completed before such changes are effective.
−Removed: Accounting principles generally accepted in the United States (“GAAP”) are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
−Removed: 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.
−Removed: Adoption of such new standards and any difficulties in implementation of changes in accounting
−Removed: principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.
+Added: Accounting principles generally accepted in the United States (“GAAP”) are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the Securities and Exchange Commission (“SEC”) and various bodies formed to promulgate and interpret appropriate accounting principles.
+Added: A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of
+Added: transactions completed before the announcement of a change.
+Added: Adoption of such new standards and any difficulties in implementation of changes in accounting principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
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We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
−Removed: Significant assumptions and estimates used in preparing our condensed consolidated financial statements include, but are not limited to those related to business combination and valuation of goodwill and purchased intangible assets, revenue recognition, period of benefit for deferred commissions, incremental borrowing rates for operating leases, effective interest rates for convertible notes, valuation of deferred income taxes and valuation of certain equity awards assumed.
+Added: Significant assumptions and estimates used in preparing our condensed consolidated financial statements include, but are not limited to those related to the valuation of goodwill and purchased intangible assets arising from business combinations, revenue recognition, period of benefit for deferred commissions, incremental borrowing rates for operating leases, effective interest rates for convertible notes, valuation of deferred income taxes and valuation of certain equity awards assumed.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.
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The market prices of the securities of other newly public companies have historically been highly volatile, and our stock price has been volatile since our IPO.
+Added: For example, from June 1, 2021 through May 31, 2022, the trading price of our Class A common stock has ranged from $77.01 per share to $276.30 per share.
The market price of our Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including, but not limited to:
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• significant security breaches, technical difficulties or interruptions of our service;
−Removed: • the economy as a whole and market conditions in our industry;
+Added: • the economy as a whole, the inflation and interest environment and market conditions in our industry;
• rumors and market speculation involving us or other companies in our industry;
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In the past, stockholders have instituted securities class action litigation following periods of market volatility.
−Removed: If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and harm our business.
−Removed: The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our IPO, including our directors, executive officers, and their affiliates, who held in the aggregate 42.8% of the voting power of our capital stock as of October 31, 2021.
+Added: Our involvement in securities litigation could subject us to substantial costs, divert resources and the attention of management from our business, and harm our business.
+Added: The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our IPO, including our directors, executive officers, and their affiliates, who held in the aggregate 42.4% of the voting power of our capital stock as of April 30, 2022.
This will limit or preclude your ability to influence corporate matters, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share.
−Removed: As of October 31, 2021, our directors, executive officers, and their affiliates, held in the aggregate 42.8% of the voting power of our capital stock.
+Added: As of April 30, 2022, our directors, executive officers, and their affiliates, held in the aggregate 42.4% of the voting power of our capital stock.
Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively could continue to control nearly a majority of the combined voting power of our common stock and be able to effectively control all matters submitted to our stockholders for approval until April 12, 2027, the date that is the ten year anniversary of the closing of our IPO.
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If industry analysts do not publish or cease publishing research on our company, the trading price for our Class A common stock would be negatively affected.
−Removed: one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price would likely decline.
+Added: If one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price would likely decline.
If one or more of these analysts cease coverage of us or fail to publish reports on us on a regular basis, demand for our Class A common stock could decrease, which might cause our Class A common stock price and trading volume to decline.
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If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive.
−Removed: Our ability to refinance any future indebtedness will depend on the capital markets and our financial condition at such time.
+Added: Our ability to refinance or raise any future indebtedness will depend on the capital markets and our financial condition at such time.
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.
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A default under the indenture governing the Notes or the fundamental change itself could also lead to a default under agreements governing our future indebtedness.
−Removed: If the repayment of the related indebtedness were to be accelerated
−Removed: after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions.
+Added: If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions.
In addition, our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences.
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If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A 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.
−Removed: As disclosed in Note 9 to our condensed consolidated financial statements, the conditional conversion features of the 2023 Notes were triggered as of October 31, 2021, and the 2023 Notes are currently convertible at the option of the holders, in whole or in part, between November 1, 2021 and January 31, 2022.
+Added: As disclosed in Note 9 to our condensed consolidated financial statements, the conditional conversion features of the 2023 Notes were triggered as of April 30, 2022, and the 2023 Notes are currently convertible at the option of the holders, in whole or in part, between May 1, 2022 and July 31, 2022.
Whether the 2023 Notes will be convertible following such fiscal quarter will depend on the continued satisfaction of this condition or another conversion condition in the future.
The conditional conversion features of the 2025 Notes were triggered as of January 31, 2021 and the 2025 Notes were convertible at the option of the holders between February 1, 2021 and April 30, 2021;
−Removed: however, as of October 31, 2021, the conditions allowing holders of the 2025 Notes to convert were not met.
−Removed: From the date of issuance through October 31, 2021, the conditions allowing holders of the 2026 Notes to convert were not met.
−Removed: In addition, even if holders 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.
−Removed: The 2023 Notes were classified as current liabilities on the condensed consolidated balance sheet as of October 31, 2021.
+Added: however, as of April 30, 2022, the conditions allowing holders of the 2025 Notes to convert were not met.
+Added: From the date of issuance through April 30, 2022, the conditions allowing holders of the 2026 Notes to convert were not met.
+Added: In addition, even if holders 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 and could limit our ability to raise future capital.
+Added: The 2023 Notes were classified as current liabilities on the condensed consolidated balance sheet as of April 30, 2022.
Transactions relating to our Notes may affect the value of our Class A common stock.
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The Note Hedges are expected generally to reduce the potential dilution to our Class A common stock upon any conversion or settlement of the 2023 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2023 Notes, as the case may be.
−Removed: The Warrant transactions could separately have a dilutive effect to the extent that the market price per share of our Class A common stock exceeds the strike price of any Warrants unless, subject to the terms of the Warrant transactions, we
−Removed: elect to cash settle the Warrants.
−Removed: Through October 31, 2021, Note Hedges corresponding to approximately 6.8 million shares have been terminated or settled.
−Removed: As of October 31, 2021, Note Hedges giving us the option to purchase approximately 0.4 million shares (subject to adjustment) remained outstanding.
−Removed: Through October 31, 2021, we have terminated Warrants corresponding to approximately 6.1 million shares.
−Removed: As of October 31, 2021, Warrants to acquire up to approximately 1.0 million shares (subject to adjustment) remained outstanding.
+Added: The Warrant transactions could separately have a dilutive effect to the extent that the market price per share of our Class A common stock exceeds the strike price of any Warrants unless, subject to the terms of the Warrant transactions, we elect to cash settle the Warrants.
+Added: Through April 30, 2022, Note Hedges corresponding to approximately 6.8 million shares have been terminated or settled.
+Added: As of April 30, 2022, Note Hedges giving us the option to purchase approximately 0.3 million shares (subject to adjustment) remained outstanding.
+Added: Through April 30, 2022, we have terminated Warrants corresponding to approximately 6.1 million shares.
+Added: As of April 30, 2022, Warrants to acquire up to approximately 1.0 million shares (subject to adjustment) remained outstanding.
In addition, in connection with the issuance of the 2025 Notes and 2026 Notes, we entered into capped call transactions (“Capped Calls”) with certain financial institutions (the 2025 Notes and 2026 Notes Capped Call Counterparties and together with the 2023 Notes Option Counterparties, the “Option Counterparties”).
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This activity could cause a decrease in the market price of our Class A common stock.
−Removed: 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.
−Removed: Under FASB Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC 470-20”), an entity must separately account for the liability and equity components of 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.
−Removed: ASC 470-20 requires the value of the conversion options of the Notes, representing the equity component, to be recorded as additional paid-in capital within stockholders’ equity in our condensed consolidated balance sheet and as a discount to the Notes, which reduces their initial carrying value.
−Removed: The carrying value of the Notes, net of the applicable discount recorded, will be accreted up to the principal amount of the Notes, as the case may be, from the issuance date until maturity, which will result in non-cash charges to interest expense in our condensed consolidated statements of operations.
−Removed: Accordingly, we will report lower net income or higher net loss in our financial results because ASC 470-20 requires interest to include both the current period’s accretion of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results, the trading price of our Class A common stock and the respective trading price of the Notes.
−Removed: Accounting standards in the future will result in changes to the current ASC 470-20 accounting model.
−Removed: The FASB issued an accounting standards update that eliminates the liability and equity component separation model for convertible debt instruments with a cash conversion feature.
−Removed: Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income or lower net loss and result in a reclassification of certain balance sheet amounts from stockholders' equity to liabilities as it relates to the Notes.
General Risk Factors
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From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives.
−Removed: For example, our former Chief Financial Officer stepped down from his role and an interim Chief Financial Officer was appointed effective June 1, 2021.
+Added: For example, our former Chief Financial Officer stepped down from his role in June 2021, and our current Chief Financial Officer served on an interim basis from June 2021 until his permanent appointment in January 2022.
Such changes in our executive management team may be disruptive to our business.
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Many of the companies with which we compete for experienced personnel have greater resources than we have.
−Removed: If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached their legal obligations, resulting in a diversion of our time and resources.
+Added: If we hire employees from competitors or other companies, their former employers may
+Added: attempt to assert that these employees or we have breached their legal obligations, resulting in a diversion of our time and resources.
In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment.
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Incorporated by Reference from
−Removed: 10.1 Third Amendment dated August 17, 2021 to Office Lease Agreement dated December 2, 2017 between Okta, Inc.
−Removed: and KR 100 First Street Owner, LLC.
−Removed: Filed herewith
31.1 Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
−Removed: December 1, 2021 /s/ Brett Tighe
−Removed: Interim Chief Financial Officer
−Removed: December 1, 2021 /s/ Christopher K.
+Added: June 2, 2022 /s/ Brett Tighe
+Added: Chief Financial Officer
+Added: June 2, 2022 /s/ Christopher K.
Christopher K.
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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.