What changed in this filing

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Item 1A. Risk Factors

2022-09-01 compared with 2022-06-03 · 77 added, 97 removed, 832 unchanged (17% of the section changed)

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A summary of our risks includes, but is not limited to, the following:

• 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.

• 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, market and industry 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.

• 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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As our costs increase, we may not be able to generate sufficient revenue to achieve and, if achieved, maintain profitability.

• We have a history of losses, and we expect to incur losses for the foreseeable future.

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• 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.

• 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.

• 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 41.9% of the voting power of our capital stock as of July 31, 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

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.

Adverse general economic, market and industry 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.

Our revenue, results of operations and cash flows depend on the overall demand for our products.

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.

Concerns about the inflation and interest rate 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.

economy and abroad, which in turn could result in reductions in workforce identity and customer identity spending by our existing and prospective customers.

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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.

For example, rising interest rates in the United States have begun to affect businesses across many industries, including ours, by increasing the costs of labor, employee healthcare and other components, which may further constrain our customers’ or prospective customers’ budgets.

To the extent there is a sustained general economic downturn and our platforms and services are perceived by customers or potential customers as costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in spending.

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.

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In addition, we may determine that the cost of pursuing any claim may outweigh the recovery potential of such claim.

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.

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.

The extent of the impact of COVID-19 on our future operational and financial performance remains uncertain and will depend on certain developments, including the duration and spread of COVID-19 and variants of concern, the manufacture, distribution, efficacy and public acceptance of COVID-19 treatments and vaccines, related public health measures, including vaccine mandates, and their impact on the global economy, our customers, employees and vendors.

While some governments around the world have lifted restrictions and distributed vaccines, there remains significant uncertainty around the recovery due to the challenging logistics of distributing the vaccines globally, as well as the unknown impact of emerging variants of COVID-19.

This pandemic has resulted in a widespread health crisis that is adversely affecting broader economies and financial markets.

As a result of the COVID-19 pandemic, for most of fiscal 2021, we temporarily closed our offices, required our employees to work from home and implemented significant travel restrictions.

We shifted our customer, employee and industry events, including our annual user conferences Oktane20 Live and Oktane21 Live, to virtual-only formats.

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.

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.

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.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the efficacy, global availability and acceptance of COVID-19 vaccines, the severity and transmission rate of the virus and emerging variants of concern, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, customers, partners and vendors as well as the global economy.

Despite our best efforts to manage the impact of such events effectively, our business still may be harmed.

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.

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:

We believe our revenue growth depends on a number of factors, such as macroeconomic conditions including the inflation and interest rate 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.

For example, our headcount has grown from 3,056 employees as of April 30, 2021 to 5,342 employees as of April 30, 2022.

For example, our headcount has grown from 4,176 employees as of July 31, 2021 to 5,776 employees as of July 31, 2022.

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.

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.

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.

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.

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If we are not able to continue to provide high levels of customer service, our reputation, as well as our business, results of operations and financial condition, could be harmed.

This pandemic has resulted in a widespread health crisis that is adversely affecting broader economies and financial markets.

As a result of the COVID-19 pandemic, for most of fiscal 2021, we temporarily closed our offices, required our employees to work from home and implemented significant travel restrictions.

We shifted our customer, employee and industry events, including our annual user conferences Oktane20 Live and Oktane21 Live, to virtual-only formats.

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.

Although global economic conditions have generally improved with the rollout of COVID-19 vaccines, business activity may not recover as quickly as anticipated, including as a result of inflationary pressures and the responses by central banking authorities to control such inflation, rising interest rates, debt and equity market fluctuations, diminished liquidity and credit availability, increased unemployment rates, decreased investor and consumer confidence, political turmoil and supply chain challenges.

Despite our best efforts to manage the impact of such events effectively, our business still may be harmed.

We face intense competition, especially from larger, well-established companies, and we may lack sufficient financial or other resources to maintain or improve our competitive position.

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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.

Conditions in our market could change rapidly and

significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation.

Conditions in our market could change rapidly and 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.

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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.

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.

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 rate 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.

Furthermore, if our contractual subscription terms were to shorten it

could lead to increased volatility of, and diminished visibility into, future recurring revenue.

Furthermore, if our contractual subscription terms were to shorten it 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;

• pricing pressure as a result of competition, the inflation and interest environment and increased costs, COVID-19 or otherwise;

• pricing pressure as a result of competition, the inflation and interest rate 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;

• general economic conditions in either domestic or international markets, including the inflation and interest environment, geopolitical uncertainty and instability.

• general economic conditions in either domestic or international markets, including the inflation and interest rate 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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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.

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.

We also have added several offices outside the United States through our acquisition of Auth0.

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 continue to expand our international operations.

Our international revenue was 16% and 20% of our total revenue in fiscal 2021 and fiscal 2022, respectively.

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• health epidemics, such as COVID-19, influenza and other highly communicable diseases or viruses;

• macroeconomic conditions, including the inflation and interest environment and the economic impact of the COVID-19 pandemic;

• macroeconomic conditions, including the inflation and interest rate environment and the economic impact of the COVID-19 pandemic;

• unexpected costs and errors in the localization of our products, including translation into foreign languages and adaptation for local practices and regulatory requirements;

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These assumptions are based upon historical trends for sales cycles and conversion rates associated with our existing customers.

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.

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.

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.

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.

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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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.

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.

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 rate 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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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.

For example, our business was impacted by short-term execution challenges related to the integration of our Auth0 and Okta sales organization earlier this year.

While we are refining the go-to-market strategy for the combined Auth0 and Okta sales organization, we may not achieve expected synergies and growth projections.

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.

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Moreover, we depend on services from various third parties to maintain our infrastructure and distribute our products via the internet.

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.

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.

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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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.

Security breaches could also

damage our relationships with and ability to attract customers and partners, and trigger service availability, indemnification and other contractual obligations.

Security breaches could also 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.

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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.

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.

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.

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.

In addition, on November 3, 2020, California voters passed the California Privacy Rights Act (“CPRA”) into law.

The CPRA will take substantial effect on January 1, 2023 with enforcement scheduled for July 1, 2023 and will significantly modify the CCPA and create a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA.

Since the CPRA passed, in March 2021, Virginia enacted the Virginia Consumer Data Protection Act (“CDPA”) and, in June 2021, Colorado enacted the Colorado Privacy Act (“CPA”), both of which are comprehensive privacy statutes that share similarities with the CCPA and CPRA.

Some observers have noted the CCPA, CPRA, CDPA and CPA mark the beginning of a trend toward more stringent privacy legislation in the United States, including a potential federal privacy law, all of which could increase our potential liability and adversely affect our business.

Additionally, in August 2021, the National People’s Congress of the People's Republic of China adopted the Personal Information Protection Law (“PIPL”), which took effect on November 1, 2021.

The PIPL, which introduces a legal framework similar to the GDPR (as defined and further described below), marks the introduction of a comprehensive system for the protection of personal information in China.

We cannot yet determine the impact that the PIPL may have on our business;

however, we may incur substantial expense in complying with any new obligations, we could be subject to significant fines if we are found to not comply with the PIPL, and we may be required to make significant changes in our business operations and product and services development, all of which may adversely affect our revenues and our business overall.

For example, the California Consumer Privacy Act (“CCPA”), which took effect on January 1, 2020, and soon the California Privacy Rights Act (“CPRA”), which will take effect on January 1, 2023 and will significantly modify the CCPA, broadly define personal information and give California residents expanded privacy rights and protections and provide for civil penalties for violations and a private right of action for data breaches.

The CPRA will also create a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA.

Since the CPRA passed, Virginia, Colorado, Utah and Connecticut have each passed their own comprehensive privacy statutes that share similarities with the CCPA and CPRA and will take effect in 2023.

Some observers see this influx of state privacy regimes as a trend toward more stringent privacy legislation in the United States, including a potential federal privacy law, all of which could increase our potential liability and adversely affect our business.

Future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could impair our or our customers’ ability to collect, use or disclose information relating to consumers, which could decrease demand for our applications, restrict our business operations, or increase our costs and impair our ability to maintain and grow our customer base and increase our revenue.

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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.

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.

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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This, in turn, may reduce the value of our service, and slow or eliminate the growth of our business, or cause our business to contract.

Privacy is a mission-critical issue for Okta and for our customers.

We have attained multiple privacy certifications, such as the Asia-Pacific Economic Cooperation Privacy Recognition for Processors, and the European Union Cloud Code of Conduct, Level 2.

If we fail to maintain our privacy 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 may face particular privacy, data security and data protection risks in Europe due to stringent data protection and privacy laws, including the European General Data Protection Regulation, and increased scrutiny over EU-U.S.

data transfers.

We are subject to the EU General Data Protection Regulation 2016/679 (“GDPR”) that took effect on May 25, 2018, and, as a result of the United Kingdom’s exit from the European Union, as of January 1, 2021, the UK General Data Protection Regulation and Data Protection Act 2018 (“UK Data Protection Laws”).

We are subject to the EU General Data Protection Regulation 2016/679 (“GDPR”) and the UK General Data Protection Regulation and Data Protection Act 2018 (“UK Data Protection Laws”).

The GDPR and UK Data Protection Laws have enhanced data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal data is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on services providers.

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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.

This means that we may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data

from the EEA and UK.

This means that we may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data from the EEA and UK.

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.

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In addition, the U.S.

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 interests.

The proposed rulemaking has not yet been finalized.

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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.

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.

For example, we host our platform using AWS data centers and other third-party cloud infrastructure services.

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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.

Furthermore, we might be forced to limit

the features available in our current or future products.

Furthermore, we might be forced to limit 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 results of operations may be harmed if we are subject to an infringement claim or a claim that results in a significant damage award.

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.

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.

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.

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.

Large indemnity payments could harm our business, results of operations and financial condition.

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The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions, which are generally required to be computed on an arm’s-length basis pursuant to intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions.

If such a challenge or disagreement were to occur, and our position was not sustained, we could be

required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.

If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.

Our financial statements could fail to reflect adequate reserves to cover such a contingency.

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net operating loss carry-forwards and certain other tax attributes may be limited.

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 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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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.

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.

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.

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.

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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.

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.

For example, from August 1, 2021 through July 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:

• overall performance of the equity markets and/or publicly-listed technology companies;

• volatility in the market prices and trading volumes of technology and high-growth companies generally, or those in our industry in particular;

• actual or anticipated fluctuations in our revenue or other financial or operating metrics;

• changes in the financial projections we provide to the public or our failure to meet these projections;

• our ability to meet or exceed forward-looking guidance we have given, our ability to give forward-looking guidance consistent with past practices, and changes to or withdrawal of previous guidance or long-range targets;

• failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates and/or recommendations by any securities analysts who follow our company;

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• significant security breaches, technical difficulties or interruptions of our service;

• the economy as a whole, the inflation and interest environment and market conditions in our industry;

• the economy as a whole, the inflation and interest rate environment and market and industry conditions;

• rumors and market speculation involving us or other companies in our industry;

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In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.

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

Stock prices of many companies, including technology companies and high-growth, unprofitable companies in particular, have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies.

In the past, stockholders have instituted securities class action litigation following periods of market volatility.

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.

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.

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 41.9% of the voting power of our capital stock as of July 31, 2022.

Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share.

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.

As of July 31, 2022, our directors, executive officers, and their affiliates, held in the aggregate 41.9% 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 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.

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.

As disclosed in Note 9 to our condensed consolidated financial statements, the conditional conversion features of the 2023 Notes were triggered as of July 31, 2022, and the 2023 Notes are currently convertible at the option of the holders, in whole or in part, between August 1, 2022 and October 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;

however, as of April 30, 2022, the conditions allowing holders of the 2025 Notes to convert were not met.

From the date of issuance through April 30, 2022, the conditions allowing holders of the 2026 Notes to convert were not met.

however, as of July 31, 2022, the conditions allowing holders of the 2025 Notes to convert were not met.

From the date of issuance through July 31, 2022, the conditions allowing holders of the 2026 Notes to convert were not met.

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.

The 2023 Notes were classified as current liabilities on the condensed consolidated balance sheet as of April 30, 2022.

The 2023 Notes were classified as current liabilities on the condensed consolidated balance sheet as of July 31, 2022.

Transactions relating to our Notes may affect the value of our Class A common stock.

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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.

Through April 30, 2022, Note Hedges corresponding to approximately 6.8 million shares have been terminated or settled.

As of April 30, 2022, Note Hedges giving us the option to purchase approximately 0.3 million shares (subject to adjustment) remained outstanding.

Through April 30, 2022, we have terminated Warrants corresponding to approximately 6.1 million shares.

As of April 30, 2022, Warrants to acquire up to approximately 1.0 million shares (subject to adjustment) remained outstanding.

Through July 31, 2022, Note Hedges corresponding to approximately 7.0 million shares have been terminated or settled.

As of July 31, 2022, Note Hedges giving us the option to purchase approximately 0.1 million shares (subject to adjustment) remained outstanding.

Through July 31, 2022, we have terminated Warrants corresponding to approximately 6.1 million shares.

As of July 31, 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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From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives.

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.

For example, we appointed a new Chief Accounting Officer effective in August 2022 and our Executive Vice Chairman, Chief Operating Officer and co-founder intends to take a sabbatical from November 2022 through October 2023.

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.

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.

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.

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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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.

June 2, 2022 /s/ Brett Tighe

August 31, 2022 /s/ Brett Tighe

Chief Financial Officer

June 2, 2022 /s/ Christopher K.

Christopher K.

Chief Accounting Officer

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

What changed 10-Q

Item 1A. Risk Factors