What changed in this filing

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Item 1A. Risk Factors

2022-11-18 compared with 2022-05-20 · 135 added, 137 removed, 685 unchanged (28% of the section changed)

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RISK FACTOR SUMMARY

Our business is subject to numerous risks and uncertainties, including those highlighted in Part II, Item 1A titled “Risk Factors.” These risks include, but are not limited to, the following:

• The ongoing global COVID-19 pandemic could harm our business and results of operations.

Our business is subject to numerous risks and uncertainties.

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

• Our business and operations have experienced growth in recent periods, and if we do not effectively manage any future growth or are unable to improve our systems, processes, and controls, our operating results could be adversely affected.

• Our operating results may vary significantly from period to period and be unpredictable, which could cause the market price of our common stock to decline.

• Ongoing global economic uncertainty could have an adverse effect on our business and operating results.

• Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain geopolitical environment.

• The ongoing global COVID-19 pandemic could harm our business and results of operations.

• Our revenue growth rate in recent periods may not be indicative of our future performance.

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• We face intense competition in our market and we may lack sufficient financial or other resources to maintain or improve our competitive position.

• A security breach or incident may allow unauthorized access to our network or data, harm our reputation, create additional liability, and adversely impact our financial results.

• A network or data security incident may allow unauthorized access to our network or data, harm our reputation, create additional liability and adversely impact our financial results.

• Reliance on shipments at the end of the quarter could cause our revenue for the applicable period to fall below expected levels.

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• Our current research and development efforts may not produce successful products, subscriptions, or features that result in significant revenue, cost savings or other benefits in the near future, if at all.

• We may acquire other businesses, which could subject us to adverse claims or liabilities, require significant management attention, disrupt our business, and adversely affect our operating results, may not result in the expected benefits of such acquisitions and may dilute stockholder value.

• We may acquire other businesses, which could subject us to adverse claims or liabilities, require significant management attention, disrupt our business, adversely affect our operating results, may not result in the expected benefits of such acquisitions and may dilute stockholder value.

• Because we depend on manufacturing partners to build and ship our products, we are susceptible to manufacturing and logistics delays and pricing fluctuations that could prevent us from shipping customer orders on time, if at all, or on a cost-effective basis, which may result in the loss of sales and end-customers.

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Insufficient supply and inventory would result in lost sales opportunities or delayed revenue, while excess inventory would harm our gross margins.

• Because some of the key components in our products come from limited sources of supply, we are susceptible to supply shortages or supply changes, which has disrupted or delayed our scheduled product deliveries to our end-customers and could result in the loss of sales and end-customers.

• The sales prices of our products and subscriptions may decrease, which may reduce our gross profits and adversely impact our financial results.

• Because some of the key components in our products come from limited sources of supply, we are susceptible to supply shortages or supply changes, which has disrupted or delayed our scheduled product deliveries to our end-customers, increased our costs and may result in the loss of sales and end-customers.

• The sales prices of our products, subscriptions and support offerings may decrease, which may reduce our gross profits and adversely impact our financial results.

• We generate a significant amount of revenue from sales to distributors, resellers, and end-customers outside of the United States, and we are therefore subject to a number of risks associated with international sales and operations.

• We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and operating results.

• We are exposed to fluctuations in foreign currency exchange rates, which could negatively affect our financial condition and operating results.

• We are exposed to the credit and liquidity risk of some of our channel partners and end-customers, and to credit exposure in weakened markets, which could result in material losses.

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• Our ability to sell our products and subscriptions is dependent on the quality of our technical support services and those of our channel partners, and the failure to offer high-quality technical support services could have a material adverse effect on our end-customers’ satisfaction with our products and subscriptions, our sales, and our operating results.

• Claims by others that we infringe their proprietary technology or other rights could harm our business.

• Claims by others that we infringe their intellectual property rights could harm our business.

• Our proprietary rights may be difficult to enforce or protect, which could enable others to copy or use aspects of our products or subscriptions without compensating us.

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• We license technology from third parties, and our inability to maintain those licenses could harm our business.

• Our failure to adequately protect personal information could have a material adverse effect on our business.

• We face risks associated with having operations and employees located in Israel.

• We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.

• Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products and subscriptions could reduce our ability to compete and could harm our business.

• We have a corporate structure aligned with the international nature of our business activities, and if we do not achieve increased tax benefits as a result of our corporate structure, our financial condition and operating results could be adversely affected.

• We may not have the ability to raise the funds necessary to settle conversions of our convertible senior notes, repurchase our convertible senior notes upon a fundamental change, or repay our convertible senior notes in cash at their maturity, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of our convertible senior notes.

• Our charter documents and Delaware law, as well as certain provisions contained in the indentures governing our convertible senior notes, could discourage takeover attempts and lead to management entrenchment, which could also reduce the market price of our common stock.

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Risks Related to Our Business and Our Industry

The ongoing global COVID-19 pandemic could harm our business and results of operations.

The novel strain of COVID-19 identified in late 2019 has spread globally, including within the United States, and has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns.

This pandemic has negatively impacted and will likely continue to have a negative impact on, worldwide economic activity and financial markets and has impacted, and will further impact, our workforce and operations, the operations of our end-customers, and those of our respective channel partners, vendors and suppliers.

In light of the uncertain and rapidly evolving situation relating to the spread of this virus and various government restrictions and guidelines, we have taken measures intended to mitigate the spread of the virus and minimize the risk to our employees, channel partners, end-customers, and the communities in which we operate.

Through our FLEXWORK program, our employees may choose to work from home or in the office for a set number of days per week.

Although we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, including progress made through vaccinations, these precautionary measures that we have adopted could negatively affect our customer success efforts, sales and marketing efforts, delay and lengthen our sales cycles, and create operational or other challenges, any of which could harm our business and results of operations.

In addition, COVID-19 will likely continue to disrupt the operations of our end-customers and channel partners for an indefinite period of time, including as a result of travel restrictions and/or business shutdowns, all of which could negatively impact our business and results of operations, including cash flows.

The ongoing impact of COVID-19 is fluid and uncertain, but it has caused and may continue to cause various negative effects, including an inability to meet with our existing or potential end-customers;

our end-customers deciding to delay or abandon their planned purchases;

increased requests for delayed payment terms or product discounts by our end-customers and channel partners;

us delaying, canceling, or withdrawing from user and industry conferences and other marketing events, including some of our own;

and changes in the demand for our products, which has caused us to reprioritize our engineering and research and development efforts and make changes to our original offering roadmap.

We have also seen supply chain challenges increase significantly, including chip and component shortages (in some cases, attributable to labor shortages), and we do not have sufficient inventory of certain of our products to promptly meet customer demand.

As a result, we have experienced extended sales cycles and increased costs for chips and components compared to historic levels;

our demand generation activities, and our ability to close transactions with end-customers and partners may be negatively impacted;

our ability to provide 24x7 worldwide support and/or replacement parts to our end-customers may be adversely affected;

and it has been and, until the COVID-19 outbreak is contained and global economic activity stabilizes, will continue to be more difficult for us to forecast our operating results.

More generally, the outbreak has not only significantly and adversely increased economic and demand uncertainty, but it has caused a global economic slowdown, and continuing global economic uncertainty which could decrease technology spending and adversely affect demand for our offerings and harm our business and results of operations.

Our business and operations have experienced growth in recent periods, and if we do not effectively manage any future growth or are unable to improve our systems, processes, and controls, our operating results could be adversely affected.

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As a result, our employee headcount has increased significantly, and we expect it to continue to grow over the next year.

For example, from the end of fiscal 2021 to the end of the third quarter of fiscal 2022, our headcount increased from 10,473 to 11,870 employees.

For example, from the end of fiscal 2022 to the end of the first quarter of fiscal 2023, our headcount increased from 12,561 to 13,513 employees.

In addition, as we have grown, our number of end-customers has also increased significantly, and we have increasingly managed more complex deployments of our products and subscriptions with larger end-customers.

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Failure to manage any future growth effectively could result in increased costs, disrupt our existing end-customer relationships, reduce demand for or limit us to smaller deployments of our products, or harm our business performance and operating results.

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Our operating results may vary significantly from period to period and be unpredictable, which could cause the market price of our common stock to decline.

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• our ability to attract and retain new end-customers or sell additional products and subscriptions to our existing end-customers;

• the budgeting cycles, seasonal buying patterns, and purchasing practices of our end-customers ;

• the budgeting cycles, seasonal buying patterns, and purchasing practices (including changes thereto and the timing thereof) of our end-customers ;

• changes in end-customer, distributor or reseller requirements, or market needs;

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• the timing and success of new product and service introductions by us or our competitors or any other change in the competitive landscape of our industry, including consolidation among our competitors or end-customers and strategic partnerships entered into by and between our competitors;

• general macroeconomic conditions, both domestically and in our foreign markets, that could impact some or all regions where we operate, including inflation, and global economic uncertainty due to the continuing effects of COVID-19;

• changes in the mix of our products, subscriptions, and support, including changes in multi-year subscriptions and support;

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• our obligation to repay the aggregate principal amount of the Notes as holders exercise their conversion rights under the Notes;

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• decisions by potential end-customers to purchase security solutions from larger, more established security vendors or from their primary network equipment vendors;

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• timing of revenue recognition and revenue deferrals;

• our ability to manage production and manufacturing related costs, global customer service organization costs, inventory excess and obsolescence costs, and warranty costs, especially due to disruptions in our supply chain as a result of COVID-19 and the global semiconductor chip and component shortage;

• our ability to manage cloud hosting service costs and scale the cloud-based subscription offerings;

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• any disruption in our channel or termination of our relationships with important channel partners, including as a result of consolidation among distributors and resellers of security solutions;

• our inability to timely fulfill our end-customers’ orders due to supply chain delays or events that impact our manufacturers or their suppliers, including due to the effects of COVID-19 and the global semiconductor shortage;

• the cost and potential outcomes of litigation, which could have a material adverse effect on our business;

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• future accounting pronouncements or changes in our accounting policies;

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• increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates, as an increasing amount of our expenses is incurred and paid in currencies other than the U.S.

• political, economic and social instability caused by the United Kingdom’s exit from the European Union (“Brexit”), Russia’s invasion of Ukraine, continued hostilities in the Middle East, terrorist activities, any disruptions from COVID-19 and any disruption these events may cause to the broader global industrial economy.

• general macroeconomic conditions, both domestically and in our foreign markets, that could impact some or all regions where we operate, including the increased risk of inflation and global economic uncertainty due to the continuing effects of COVID-19.

Any one of the factors above, or the cumulative effect of some of the factors referred to above, may result in significant fluctuations in our financial and other operating results.

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If we fail to meet or exceed such expectations for these or any other reasons, the market price of our common stock could fall substantially, and we could face costly lawsuits, including securities class action suits.

Ongoing global economic uncertainty could have an adverse effect on our business and operating results.

We operate globally and as a result our business and revenues are impacted by global macroeconomic conditions.

The multinational efforts to contain the spread of COVID-19 have had a significant adverse effect on the global macroeconomic environment that continues to cause economic uncertainty.

In addition, the instability in the global credit markets, shortages and delays related to the global supply chain challenges, uncertainties related to the timing of the lifting of governmental restrictions to mitigate the spread of COVID-19, changes in public policies, such as domestic and international regulations, taxes, or international trade agreements, international trade disputes, government shutdowns, geopolitical turmoil and other disruptions to global and regional economies and markets continue to add uncertainty to global economic conditions.

Military actions or armed conflict, including Russia’s invasion of Ukraine and any related political or economic responses and counter-responses, and uncertainty about or changes in government and trade relationships, policies, and treaties could also adversely affect our business.

Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain geopolitical environment.

We operate globally, and as a result, our business and revenues are impacted by global economic and geopolitical conditions.

The instability in the global credit markets, inflation, shortages and delays related to the global supply chain challenges, uncertainties related to the timing of the lifting of governmental restrictions to mitigate the spread of COVID-19, the current economic challenges in China, changes in public policies such as domestic and international regulations, taxes, increase in interest rates, fluctuations in foreign currency exchange rates, or international trade agreements, international trade disputes, government shutdowns, geopolitical turmoil and other disruptions to global and regional economies and markets continue to add uncertainty to global economic conditions.

Military actions or armed conflict, including Russia’s invasion of Ukraine and any related political or economic responses and counter-responses, and uncertainty about or changes in government and trade relationships, policies and treaties could also lead to worsening economic and market conditions and the geopolitical environment.

In response to Russia’s invasion of Ukraine, the United States, along with the European Union, has imposed restrictive sanctions on Russia, Russian entities, and Russian citizens (“Sanctions on Russia”).

We are subject to these governmental sanctions and export controls, which may subject us to liability if we are not in full compliance with applicable laws.

These adverse conditions could result in reductions in sales of our products and subscriptions, longer sales cycles, reductions in subscription or contract duration and value, slower adoption of new technologies, increased costs for the chips and components to manufacture our products, and increased price competition.

As a result, any continued or further uncertainty, weakness or deterioration in global macroeconomic and market conditions may cause our end-customers to modify spending priorities or delay purchasing decisions, and result in lengthened sales cycles, any of which could harm our business and operating results.

Any continued or further uncertainty, weakness or deterioration in economic and market conditions or the geopolitical environment could have a material and adverse impact on our business, financial condition and results of operations, including reductions in sales of our products and subscriptions, longer sales cycles, reductions in subscription or contract duration and value, slower adoption of new technologies, alterations in the spending patterns or priorities of current and prospective customers (including delaying purchasing decisions), increased costs for the chips and components to manufacture our products and increased price competition.

For example, in the first quarter of fiscal 2023, some of our customers delayed their hardware re-fresh plans, and some of our larger sales transactions required additional internal customer approvals, which can have the affect of extending sales cycles.

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The ongoing global COVID-19 pandemic could harm our business and results of operations.

Through our FLEXWORK program, our employees may choose to work from home or in the office for a set number of days per week.

Although we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, including relating to new COVID-19 variants, these precautionary measures that we have adopted could negatively affect our customer success efforts, sales and marketing efforts, delay and lengthen our sales cycles, and create operational or other challenges, any of which could harm our business and results of operations.

our end-customers deciding to delay or abandon their planned purchases;

increased requests for delayed payment terms or product discounts by our end-customers and channel partners;

us delaying, canceling, or withdrawing from user and industry conferences and other marketing events, including some of our own;

and changes in the demand for our products, which has caused us to reprioritize our engineering and research and development efforts and make changes to our original offering roadmap.

We have also experienced supply chain challenges, including chip and component shortages (in some cases, attributable to labor shortages), and at times we may not have sufficient inventory of certain of our products to promptly meet customer demand.

As a result, we have experienced at times extended delivery times and increased costs for chips and components compared to historic levels;

our demand generation activities, and our ability to close transactions with end-customers and partners may be negatively impacted;

our ability to provide 24x7 worldwide support and/or replacement parts to our end-customers may be adversely affected;

and it has been and, until the COVID-19 outbreak subsides globally and global economic conditions improve, will continue to be more difficult for us to forecast our operating results.

More generally, the pandemic has not only significantly and adversely increased economic and demand uncertainty, but it has caused or contributed to a global economic slowdown, and continuing global economic uncertainty which could decrease technology spending and adversely affect demand for our offerings and harm our business and results of operations.

Our revenue growth rate in recent periods may not be indicative of our future performance.

We experienced revenue growth rates of 30.1% and 23.5% in the nine months ended April 30, 2022 and the nine months ended April 30, 2021, respectively.

We have experienced revenue growth rates of 25.3% and 31.9% in the three months ended October 31, 2022 and 2021, respectively.

Our revenue for any prior quarterly or annual period should not be relied upon as an indication of our future revenue or revenue growth for any future period.

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Other than fiscal 2012, we have incurred losses in all fiscal years since our inception.

As a result, we had an accumulated deficit of $1.7 billion as of April 30, 2022.

As a result, we had an accumulated deficit of $1.6 billion as of October 31, 2022.

We anticipate that our operating expenses will continue to increase in the foreseeable future as we continue to grow our business.

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Any failure to increase our revenue as we grow our business could prevent us from achieving or maintaining profitability or maintaining or increasing cash flow on a consistent basis or satisfying our capital commitments.

In addition, we may have difficulty achieving profitability under U.S.

In addition, we may have difficulty achieving and maintaining profitability under U.S.

GAAP due to share-based compensation expense and other non-cash charges.

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• public cloud vendors and startups that offer solutions for cloud security (private, public and hybrid cloud);

• large and small companies, such as Crowdstrike, Inc (“Crowdstrike”) that offer solutions for security operations and endpoint security.

• large and small companies, such as Crowdstrike, Inc.

(“Crowdstrike”), that offer solutions for security operations and endpoint security.

Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages, such as:

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In addition to traditional computer “hackers,” malicious code (such as viruses and worms), phishing attempts, employee theft or misuse, and denial of service attacks, sophisticated nation-state and nation-state supported actors engage in intrusions and attacks (including advanced persistent threat intrusions and supply chain attacks) and add to the risks to our internal networks, cloud-deployed enterprise and customer-facing environments and the information they store and process.

Incidences of cyberattacks and other sources of cybersecurity breaches and incidents have increased and are likely to continue to increase.

Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks.

We and our third-party service providers may face security threats and attacks from a variety of sources.

Our data, corporate systems, third-party systems and security measures may be breached or otherwise compromised due to the actions of outside parties, employee error, malfeasance, a combination of these, or otherwise, and, as a result, an unauthorized party may obtain access to our or our third-party service providers’ systems, networks, and data.

Incidences of cyberattacks and other cybersecurity breaches and incidents have increased and are likely to continue to increase.

We and our third-party service providers face security threats and attacks from a variety of sources.

Despite our efforts and processes to prevent breaches of our internal networks, systems and websites, our data, corporate systems and security measures, as well as those of our third-party service providers, are still vulnerable to computer viruses, break-ins, phishing attacks, ransomware attacks, or other types of attacks from outside parties, or breaches due to employee error, malfeasance, a combination of these, or otherwise.

We cannot guarantee that the measures we have taken to protect our networks, systems and websites will provide adequate security.

Furthermore, as a well-known provider of security solutions, we may be a more attractive target for such attacks.

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A security breach or incident or an attack against our service availability suffered by us, or our third-party service providers, could impact our networks or networks secured by our products and subscriptions, creating system disruptions or slowdowns and exploiting security vulnerabilities of our products, and the information stored or otherwise processed on our networks or those of our third-party service providers could be accessed, publicly disclosed, altered, lost, stolen, rendered unavailable, or otherwise used or processed without authorization, which could subject us to liability and cause us financial harm.

Although we have not yet experienced significant damages from unauthorized access by a third party of our internal network, any actual or perceived breach of security in our systems or networks, or any other actual or perceived data security incident we or our third-party service providers suffer, could result in significant damage to our reputation, negative publicity, loss of channel partners, end-customers and sales, loss of competitive advantages over our competitors, increased costs to remedy any problems and otherwise respond to any incident, regulatory investigations and enforcement actions, demands, costly litigation, and other liability.

Any actual or perceived breach of security in our systems or networks, or any other actual or perceived data security incident we or our third-party service providers suffer, could result in significant damage to our reputation, negative publicity, loss of channel partners, end-customers and sales, loss of competitive advantages over our competitors, increased costs to remedy any problems and otherwise respond to any incident, regulatory investigations and enforcement actions, demands, costly litigation, and other liability.

In addition, we may incur significant costs and operational consequences of investigating, remediating, eliminating and putting in place additional tools, devices, and other measures designed to prevent actual or perceived security breaches and other security incidents, as well as the costs to comply with any notification obligations resulting from any security incidents.

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We rely on revenue from subscription and support offerings, and because we recognize revenue from subscription and support over the term of the relevant service period, downturns or upturns in sales of these subscription and support offerings are not immediately reflected in full in our operating results.

Subscription and support revenue accounts for a significant portion of our revenue, comprising 75.8% of total revenue in the nine months ended April 30, 2022 and 74.3% of total revenue in the nine months ended April 30, 2021.

Subscription and support revenue accounts for a significant portion of our revenue, comprising 78.9% of total revenue in the three months ended October 31, 2022 and 76.3% of total revenue in the three months ended October 31, 2021.

Sales of new or renewal subscription and support contracts may decline and fluctuate as a result of a number of factors, including end-customers’ level of satisfaction with our products and subscriptions (including newly integrated products and services), the prices of our products and subscriptions, the prices of products and services offered by our competitors, and reductions in our end-customers’ spending levels.

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Because the techniques used by computer hackers to access or sabotage networks change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques and provide a solution in time to protect our end-customers’ networks.

In addition, due to the Russian invasion there could be a significant increase in Russian cyberattacks against our customers, resulting in an increased risk of a security breach of our end-customers’ systems.

In addition, due to the Russian invasion of Ukraine there could be a significant increase in Russian cyberattacks against our customers, resulting in an increased risk of a security breach of our end-customers’ systems.

Furthermore, as a well-known provider of security solutions, our networks, products, including cloud-based technology, and subscriptions could be targeted by attacks specifically designed to disrupt our business and harm our reputation.

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However, we may not receive significant revenue from these investments in the near future, if at all, or these investments may not yield the expected benefits, either of which could adversely affect our business and operating results.

We acquire other businesses, which could subject us to adverse claims or liabilities, require significant management attention, disrupt our business, adversely affect our operating results, may not result in the expected benefits of such acquisitions and may dilute stockholder value.

We may acquire other businesses, which could subject us to adverse claims or liabilities, require significant management attention, disrupt our business, adversely affect our operating results, may not result in the expected benefits of such acquisitions and may dilute stockholder value.

As part of our business strategy, we acquire and make investments in complementary companies, products, or technologies.

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Any integration process may require significant time and resources, which may disrupt our ongoing business and divert management’s attention, and we may not be able to manage the integration process successfully or in a timely manner.

We may not successfully evaluate or utilize the acquired technology or personnel, realize anticipated synergies from the acquisition, or accurately forecast the financial impact of

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an acquisition transaction and integration of such acquisition, including accounting charges and any potential impairment of goodwill and intangible assets recognized in connection with such acquisitions.

We may not successfully evaluate or utilize the acquired technology or personnel, realize anticipated synergies from the acquisition, or accurately forecast the financial impact of an acquisition transaction and integration of such acquisition, including accounting charges and any potential impairment of goodwill and intangible assets recognized in connection with such acquisitions.

Our completed or future acquisitions may not ultimately strengthen our competitive position or achieve our goals and business strategy.

We may find that the acquired businesses, products, or technologies do not further our business strategy as we expected.

Our acquisitions may be viewed negatively by our customers, financial markets, or investors.

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acquisitions may be viewed negatively by our customers, financial markets, or investors.

We may experience difficulty integrating the operations and personnel of the acquired business, and we may have difficulty retaining the key personnel of the acquired business.

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Because we depend on manufacturing partners to build and ship our products, we are susceptible to manufacturing and logistics delays and pricing fluctuations that could prevent us from shipping customer orders on time, if at all, or on a cost-effective basis, which may result in the loss of sales and end-customers.

We depend on manufacturing partners, primarily our electronics manufacturing service provider (“EMS provider”) Flex, as our sole source manufacturers for our hardware product lines.

We depend on manufacturing partners, primarily our electronics manufacturing service provider (“EMS provider”) Flex, to manufacture our hardware product lines.

Our reliance on these manufacturing partners reduces our control over the manufacturing process and exposes us to risks, including reduced control over quality assurance, product costs, product supply, timing and transportation risk.

Our products are manufactured by our manufacturing partners at facilities located in the United States.

Our products are manufactured by our manufacturing partners at facilities located primarily in the United States.

Some of the components in our products are sourced either through Flex or directly by us from component suppliers outside the United States.

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These tariffs, depending on their ultimate scope and how they are implemented, could negatively impact our business by increasing our costs.

For example, some components that we import for final manufacturing in the United States have been impacted by these recent tariffs.

For example, some components that we import for final manufacturing in the United States have been impacted by these tariffs.

As a result, our costs have increased and we have raised, and may be required to further raise, prices on our hardware products.

Each of these factors could severely impair our ability to fulfill orders.

In addition, we are subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) to diligence, disclose, and report whether or not our products contain minerals originating from the Democratic Republic of the Congo and adjoining countries, or conflict minerals.

In addition, we are subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) to conduct due diligence, disclose, and report whether or not our products contain minerals originating from the Democratic Republic of the Congo and adjoining countries, or conflict minerals.

Although the SEC has provided guidance with respect to a portion of the conflict minerals filing requirements that may somewhat reduce our reporting practices, we have incurred and expect to incur additional costs to comply with these disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals used in our products.

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Any production interruptions for any reason, such as a natural disaster, epidemic or pandemic such as COVID-19, capacity shortages, or quality problems at one of our manufacturing partners would negatively affect sales of our product lines manufactured by that manufacturing partner and adversely affect our business and operating results.

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Managing the supply of our products and product components is complex.

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These forecasts are based on estimates of future demand for our products, which are in turn based on historical trends and analyses from our sales and product management organizations, adjusted for overall market conditions.

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COVID-19 has made forecasting more difficult and we may experience increased challenges to our supply chain due to the unpredictability of the impacts of COVID-19.

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If we are unable to effectively manage our supply and inventory, our operating results could be adversely affected.

Because some of the key components in our products come from limited sources of supply, we are susceptible to supply shortages or supply changes, which has disrupted or delayed our scheduled product deliveries to our end-customers and could result in the loss of sales and end-customers.

Because some of the key components in our products come from limited sources of supply, we are susceptible to supply shortages or supply changes, which has disrupted or delayed our scheduled product deliveries to our end-customers, increased our costs and may result in the loss of sales and end-customers.

Our products rely on key components, including integrated circuit components, which our manufacturing partners purchase on our behalf from a limited number of component suppliers, including sole source providers.

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If we are unable to obtain a sufficient quantity of these components in a timely manner for any reason, sales of our products could be delayed or halted, or we could be forced to expedite shipment of such components or our products at dramatically increased costs.

Our component suppliers also change their selling prices frequently in response to market trends, including industry-wide increases in demand, and because we do not have, for the most part, volume purchase contracts with our component suppliers, we are susceptible to price fluctuations related to raw materials and components and may not be able to adjust our prices accordingly.

Our component suppliers also change their selling prices frequently in response to market trends, including industry-wide increases in demand.

Because we do not have, for the most part, volume purchase contracts with our component suppliers, we are susceptible to price fluctuations related to raw materials and components and may not be able to adjust our prices accordingly.

Additionally, poor quality in any of the sole-sourced components in our products could result in lost sales or sales opportunities.

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We cannot guarantee that we will be successful in developing and introducing new offerings with enhanced functionality on a timely basis, or that our products, subscriptions and support offerings, if introduced, will enable us to maintain our prices and gross profits at levels that will allow us to achieve and maintain profitability.

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We generate a significant amount of revenue from sales to distributors, resellers, and end-customers outside of the United States, and we are therefore subject to a number of risks associated with international sales and operations.

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We may experience difficulties in recruiting, training, managing, and retaining an international staff, and specifically staff related to sales management and sales personnel.

We also may not be able to maintain successful strategic distributor relationships internationally or recruit additional companies to enter into strategic distributor relationships.

We also may not be able to maintain successful strategic distributor

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relationships internationally or recruit additional companies to enter into strategic distributor relationships.

Business practices in the international markets that we serve may differ from those in the United States and may require us in the future to include terms other than our standard terms related to payment, warranties, or performance obligations in end-customer contracts.

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and the EU/UK Trade and Cooperation Agreement came into force on January 1, 2021.

At this time, we cannot predict the impact that the Brexit deal and any future agreements will have on our business.

Our financial condition and operating results may be impacted by such uncertainty with potential disruptions to our relationships with existing and future customers, suppliers and employees all possibly having a material adverse impact on our business, prospects, financial condition and/or operating results.

We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and operating results.

We are exposed to fluctuations in foreign currency exchange rates, which could negatively affect our financial condition and operating results.

Our sales contracts are primarily denominated in U.S.

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In addition, increased international sales in the future, including through our channel partners and other partnerships, may result in greater foreign currency denominated sales, increasing our foreign currency risk.

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Our operating expenses incurred outside the United States and denominated in foreign currencies are increasing and are subject to fluctuations due to changes in foreign currency exchange rates.

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We have entered into forward contracts in an effort to reduce our foreign currency exchange exposure related to our foreign currency denominated expenditures.

As of April 30, 2022, the total notional amount of our outstanding foreign currency forward contracts was $886.7 million.

As of October 31, 2022, the total notional amount of our outstanding foreign currency forward contracts was $1.3 billion.

For more information on our hedging transactions, refer to Note 6.

Derivative Instruments in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The effectiveness of our existing hedging transactions and the availability and effectiveness of any hedging transactions we may decide to enter into in the future may be limited and we may not be able to successfully hedge our exposure, which could adversely affect our financial condition and operating results.

The effectiveness of our existing hedging transactions and the availability and effectiveness of any

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hedging transactions we may decide to enter into in the future may be limited and we may not be able to successfully hedge our exposure, which could adversely affect our financial condition and operating results.

We are exposed to the credit and liquidity risk of some of our channel partners and end-customers, and to credit exposure in weakened markets, which could result in material losses.

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A material portion of our sales is derived through our distributors.

For the nine months ended April 30, 2022, three distributors individually represented 10% or more of our total revenue, and in the aggregate represented 53.9% of our total revenue.

As of April 30, 2022, four distrib utors individually represented 10% or more of our gross accounts receivable, and in the aggregate represented 57.1% of our gross accounts receivable.

For the three months ended October 31, 2022, three distributors individually represented 10% or more of our total revenue, and in the aggregate represented 50.9% of our total revenue.

As of October 31, 2022, three distrib utors individually represented 10% or more of our gross accounts receivable, and in the aggregate represented 47.0% of our gross accounts receivable.

Additionally, to the degree that turmoil in the credit markets makes it more difficult for some customers to obtain financing, those customers’ ability to pay could be adversely impacted, which in turn could have a material adverse impact on our business, operating results, and financial condition.

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government may require certain of the products that it purchases to be manufactured in the United States and other relatively high cost manufacturing locations, and we may not manufacture all products in locations that meet such requirements, affecting our ability to sell these products, subscriptions and support offerings to the U.S.

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Our ability to sell our products and subscriptions is dependent on the quality of our technical support services and those of our channel partners, and the failure to offer high-quality technical support services could have a material adverse effect on our end-customers’ satisfaction with our products and subscriptions, our sales, and our operating results.

After our products and subscriptions are deployed within our end-customers’ networks, our end-customers depend on our technical support services, as well as the support of our channel partners, to resolve any issues relating to our products.

Our channel partners often provide similar technical support for third parties’ products and may therefore have fewer resources to dedicate to the support of our products and subscriptions.

Our channel partners often provide similar technical support for third parties’ products and may therefore have fewer resources to dedicate to the

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support of our products and subscriptions.

If we or our channel partners do not effectively assist our end-customers in deploying our products and subscriptions, succeed in helping our end-customers quickly resolve post-deployment issues, or provide effective ongoing support, our ability to sell additional products and subscriptions to existing end-customers would be adversely affected and our reputation with potential end-customers could be damaged.

While we have been able to meet increased demand for support services in the nine months ended April 30, 2022, failure to do so in the future could have a material adverse effect on our business.

While we have been able to meet increased demand for support services in the three months ended October 31, 2022, failure to do so in the future could have a material adverse effect on our business.

Many larger enterprise, service provider, and government entity end-customers have more complex networks and require higher levels of support than smaller end-customers.

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Risks Related to Intellectual Property and Technology Licensing

Claims by others that we infringe their proprietary technology or other rights could harm our business.

Companies in the enterprise security industry own large numbers of patents, copyrights, trademarks, domain names, and trade secrets and frequently enter into litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights.

Third parties are currently asserting, have asserted and may in the future assert claims of infringement of intellectual property rights against us.

For example, in December 2011, Juniper, one of our competitors, filed a lawsuit against us alleging patent infringement.

In September 2013, we filed a lawsuit against Juniper alleging patent infringement.

In May 2014, we entered into a Settlement, Release and Cross-License Agreement with Juniper to resolve all pending disputes between Juniper and us, including dismissal of all pending litigation.

Claims by others that we infringe their intellectual property rights could harm our business.

In addition, non-practicing entities also frequently bring claims of infringement of intellectual property rights.

Third parties are asserting, have asserted and may in the future assert claims of infringement of intellectual property rights against us.

Third parties may also assert such claims against our end-customers or channel partners, whom our standard license and other agreements obligate us to indemnify against claims that our products and subscriptions infringe the intellectual property rights of third parties.

In addition, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited, that they have divulged proprietary or other confidential information, or that their former employers own their inventions or other work product.

Furthermore, we may be unaware of the intellectual property rights of others that may cover some or all of our technology or products and subscriptions.

As the number of products and competitors in our market increases and overlaps occur, infringement claims may increase.

While we intend to increase the size of our patent portfolio, our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have.

Furthermore, we may be unaware of the intellectual property rights of others that may cover some or all of our technology, products, subscriptions and services.

As we expand our footprint, both in our platforms, products, subscriptions and services and geographically, more overlaps occur and we may face more infringement claims both in the United States and abroad.

While we have been increasing the size of our patent portfolio, our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have.

In addition, litigation has involved and will likely continue to involve patent holding companies or other adverse patent owners who have no relevant product revenue and against whom our own patents may therefore provide little or no deterrence or protection.

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Valid patents may not issue from our pending applications, and the claims eventually allowed on any patents may not be sufficiently broad to protect our technology or products and subscriptions.

We cannot be certain that we were the first to make the inventions claimed in our

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pending patent applications or that we were the first to file for patent protection, which could prevent our patent applications from issuing as patents or invalidate our patents following issuance.

We cannot be certain that we were the first to make the inventions claimed in our pending patent applications or that we were the first to file for patent protection, which could prevent our patent applications from issuing as patents or invalidate our patents following issuance.

Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually provide adequate defensive protection or competitive advantages to us.

Additional uncertainty may result from changes to patent-related laws and court rulings in the United States and other jurisdictions.

Additional uncertainty may result from changes to

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patent-related laws and court rulings in the United States and other jurisdictions.

As a result, we may not be able to obtain adequate patent protection or effectively enforce any issued patents.

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In addition, some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us.

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Some of our agreements with our licensors may be terminated for convenience by them.

We may also be subject to additional fees or be required to obtain new licenses if any of our licensors allege that we have not properly paid for such licenses or that we have improperly used the technologies under such licenses, and such licenses may not be available on terms acceptable to us or at all.

If we are unable to continue to license any of this technology because of intellectual property infringement claims brought by third parties against our licensors or against us, or claims against us by our licensors, or if we are unable to continue our license agreements or enter into new licenses on commercially reasonable terms, our ability to develop and sell products and subscriptions containing such technology would be severely limited, and our business could be harmed.

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into new licenses on commercially reasonable terms, our ability to develop and sell products and subscriptions containing such technology would be severely limited, and our business could be harmed.

Additionally, if we are unable to license necessary technology from third parties, we may be forced to acquire or develop alternative technology, which we may be unable to do in a commercially feasible manner or at all, and we may be required to use alternative technology of lower quality or performance standards.

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Risks Related to Privacy and Data Protection

Our failure to adequately protect personal information could have a material adverse effect on our business.

Our actual or perceived failure to adequately protect personal information could have a material adverse effect on our business.

A wide variety of provincial, state, national, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data.

These data protection and privacy-related laws and regulations are evolving and being tested in courts and may result in ever-increasing regulatory and public scrutiny, as well as escalating levels of enforcement and sanctions.

Compliance with these laws and regulations is difficult and costly.

These laws and regulations relating to privacy, data protection and security are evolving and being tested in courts and may result in ever-increasing regulatory and public scrutiny, as well as escalating levels of enforcement and sanctions.

Further, the interpretation and application of foreign laws and regulations in many cases is uncertain, and our legal and regulatory obligations in foreign jurisdictions are subject to frequent and unexpected changes, including the potential for various regulatory or other governmental bodies to enact new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations, or to increase penalties significantly.

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General Data Protection Regulation (“E.U.

GDPR”), which became effective in May 2018, imposes more stringent data protection requirements, provides for greater penalties for noncompliance than E.U.

laws that previously applied (up to the greater of €20 million or 4% of the total worldwide annual turnover), and confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the E.U.

GDPR”) imposes stringent data protection requirements, provides for costly penalties for noncompliance (up to the greater of €20 million or 4% of the total worldwide annual turnover), and confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the E.U.

GDPR requires, among other things, that personal data only be transferred outside of the E.U.

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and imposed a requirement for companies to carry out an assessment of the laws and practices governing access to personal data in the third country to ensure an essentially equivalent level of data protection to that afforded in the E.U.

We are dealing with the “Schrems II” decision by the Court of Justice of the European Union and its impact on our data transfer mechanisms.

The effects of this decision are highly uncertain and difficult to predict.

Though we no longer rely on the Privacy Shield programs and instead employ model contractual clauses for personal data transfers, the Schrems II decision raises questions as to implications under European and UK law and adequate data protection in the United States.

Among other effects, we may experience additional costs associated with increased compliance burdens, putting in place any additional data transfer mechanisms and new contract negotiations with third parties that aid in processing data on our behalf.

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(collectively, “Europe”) to use our products, and we may find it necessary or desirable to make further changes to our handling of personal data of residents of Europe.

Further, in June 2021, the European Commission issued new standard contractual clauses under the E.U.

GDPR, and the U.K.

adopted new standard contractual clauses that became effective in March 2022.

We will need to enter into both sets of these standard contractual clauses with our customers and other third parties, as applicable, which will result in additional contractual negotiations and increased costs and resources to manage the process.

The regulatory environment applicable to the handling of European 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.

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The enforcement of the CCPA by the California Attorney General commenced on July 1, 2020.

The CCPA has been amended on multiple occasions and the California Attorney General has issued initial and

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revised regulations that also govern the CCPA.

The CCPA has been amended on multiple occasions and the California Attorney General has issued initial and revised regulations that also govern the CCPA.

It remains unclear how this legislation will be interpreted and enforced.

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This includes the California Privacy Rights Act (“CPRA”) which was approved by California voters, and significantly modifies the CCPA.

federal government is also contemplating privacy legislation.

We may also from time to time be subject to, or face assertions that we are subject to, additional obligations relating to personal data by contract or due to assertions that self-regulatory obligations or industry standards apply to our practices.

Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data.

Additionally, the

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Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data.

Further, we may be or become subject to data localization laws mandating that data collected in a foreign country be processed and stored within that country.

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We face risks associated with having operations and employees located in Israel.

As a result of various of our acquisitions, including Secdo, PureSec and Twistlock, we have offices and employees located in Israel.

As a result of various of our acquisitions, including Cyber Secdo Ltd.

(“Secdo”), PureSec Ltd.

(“PureSec”) and Twistlock Ltd.

(“Twistlock”), we have offices and employees located in Israel.

Accordingly, political, economic, and military conditions in Israel directly affect our operations.

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Changes in our products or changes in export and import regulations may create delays in the introduction of our products into international markets, prevent our end-customers with international operations from deploying our products globally or, in some cases, prevent or delay the export or import of our products to certain countries, governments, or persons altogether.

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targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential end-customers with international operations.

Any change in export or import regulations, economic sanctions, such as the Sanctions on Russia, or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential end-customers with international operations.

Any decreased use of our products or limitation on our ability to export to or sell our products in international markets would likely adversely affect our business, financial condition, and operating results.

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Tax, Accounting, Compliance and Regulatory Risks

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If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported on our condensed consolidated financial statements and accompanying notes.

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported on our condensed consolidated financial statements and accompanying notes.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue, and expenses that are not readily apparent from other sources.

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In general, if our estimates, judgments or assumptions relating to our critical accounting policies change or if actual circumstances differ from our estimates, judgments or assumptions, including uncertainty in the current economic environment due to COVID-19, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters.

There is an increasing focus from regulators, certain investors, and other stakeholders concerning environmental, social, and governance (“ESG”) matters, both in the United States and internationally.

We communicate certain ESG-related initiatives, goals, and/or commitments regarding environmental matters, diversity, responsible sourcing and social investments, and other matters in our annual ESG Report , on our website, in our filings with the SEC, and elsewhere.

These initiatives, goals, or commitments could be difficult to achieve and costly to implement.

We could fail to achieve, or be perceived to fail to achieve, our ESG-related initiatives, goals, or commitments.

In addition, we could be criticized for the timing, scope or nature of these initiatives, goals, or commitments, or for any revisions to them.

To the extent that our required and voluntary disclosures about ESG matters increase, we could be criticized for the accuracy, adequacy, or completeness of such disclosures.

Our actual or perceived failure to achieve our ESG-related initiatives, goals, or commitments could negatively impact our reputation, result in ESG-focused investors not purchasing and holding our stock, or otherwise materially harm our business.

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Failure to comply with governmental laws and regulations could harm our business.

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If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation resulting from any alleged noncompliance, our business, operating results, and financial condition could be materially adversely affected.

In addition, responding to any action will likely result in a significant diversion of

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management’s attention and resources and an increase in professional fees.

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

Enforcement actions, litigation, and sanctions could harm our business, operating results, and financial condition.

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In July 2018 we issued our 2023 Notes (the “2023 Notes”) and in June 2020 we issued our 2025 Notes (the “2025 Notes,” together with the “2023 Notes,” the “Notes”).

We will need to make cash payments (1) if holders of our Notes require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (e.g.

a change of control of Palo Alto Networks, Inc.) before the maturity date, (2) upon conversion of our Notes, or (3) to repay our Notes in cash at their maturity, unless earlier converted or repurchased.

Effective May 1, 2022 through July 31, 2022, all of the 2023 Notes and 2025 Notes are convertible.

If all of the Noteholders decided to convert their notes, we would be obligated to pay $3.7 billion to the Noteholders.

Under the terms of the Notes, we would also be required to issue shares of common stock, which would be covered by the Note Hedges.

We will need to make cash payments (1) if holders of our Notes require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (e.g., a change of control of Palo Alto Networks, Inc.) before the maturity date, (2) upon conversion of our Notes, or (3) to repay our Notes in cash at their maturity, unless earlier converted or repurchased.

Effective November 1, 2022 through January 31, 2023, all of the 2023 Notes and 2025 Notes are convertible.

If all of the Noteholders decided to convert their Notes, we would be obligated to pay the $3.7 billion principal amount of the Notes in cash.

Under the terms of the Notes, we also have the option to settle the amount of our conversion obligation in excess of the aggregate principal amount of the Notes in cash or shares of our common stock.

If our cash provided by operating activities, together with our existing cash, cash equivalents and investments, and existing sources of financing, are inadequate to satisfy these obligations, we will need to obtain third-party financing, which may not be available to us on commercially reasonable terms or at all, to meet these payment obligations.

In addition, our ability to repurchase or to pay cash upon conversion of our Notes may be limited by law, regulatory authority or agreements governing our future indebtedness.

Our failure to repurchase our Notes at a time when the repurchase is required by the applicable indenture governing such Notes or to pay cash upon conversion of such Notes as required by the applicable indenture would constitute a default under the indenture.

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would constitute a default under the indenture.

A default under the applicable indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness.

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We are not restricted under the terms of the indenture governing our Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of such indenture governing our Notes that could have the effect of diminishing our ability to make payments on our Notes when due.

While the terms of any future indebtedness we may incur could restrict our ability to incur additional

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indebtedness, any such restrictions will indirectly benefit holders of our Notes only to the extent any such indebtedness or credit facility is not repaid or does not mature while our Notes are outstanding.

While the terms of any future indebtedness we may incur could restrict our ability to incur additional indebtedness, any such restrictions will indirectly benefit holders of our Notes only to the extent any such indebtedness or credit facility is not repaid or does not mature while our Notes are outstanding.

Risks Related to Our Common Stock

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The market price of our common stock has been volatile since our initial public offering (“IPO”) in July 2012.

The reported high and low sales prices of our common stock during the last 12 months have ranged from $322.23 to $640.90, as measured through May 12, 2022.

The reported high and low sales prices of our common stock during the last 12 months have ranged from $140.07 to $213.63 per share, as measured through November 10, 2022 and adjusted to give effect to the Stock Split.

The market price of our common stock may fluctuate widely in response to various factors, some of which are beyond our control.

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• whether our operating results meet the expectations of securities analysts or investors;

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• actual or anticipated changes in the expectations of securities analysts or investors, whether as a result of our forward-looking statements, our failure to meet such expectations or otherwise;

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• sales or repurchases of large blocks of our common stock or substantial future sales by our directors, executive officers, employees and significant stockholders;

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• sales of our common stock by investors who view our Notes as a more attractive means of equity participation in us;

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We cannot guarantee that our share repurchase program will be fully consummated, or that it will enhance shareholder value, and share repurchases could affect the price of our common stock.

As of April 30, 2022, we had $450.0 million available under our share repurchase program, which will expire on December 31, 2022.

As of October 31, 2022, we had $1.0 billion available under our share repurchase program, which will expire on December 31, 2023.

Such share repurchase program may be suspended or discontinued by the Company at any time without prior notice.

Although our board of directors has authorized a share repurchase program, we are not obligated to repurchase any specific dollar amount or to acquire any specific number of shares under the program.

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our board of directors has authorized a share repurchase program, we are not obligated to repurchase any specific dollar amount or to acquire any specific number of shares under the program.

The share repurchase program could affect the price of our common stock, increase volatility and diminish our cash reserves.

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As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases.

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Our charter documents and Delaware law, as well as certain provisions contained in the indentures governing our Notes, could discourage takeover attempts and lead to management entrenchment, which could also reduce the market price of our common stock.

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To the extent that any of the above should result in delays or cancellations of customer orders, the loss of customers, or the delay in the manufacture, deployment, or shipment of our products, our business, financial condition, and operating results would be adversely affected.

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Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products and subscriptions could reduce our ability to compete and could harm our business.

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See the risk factor entitled “ The issuance of additional stock in connection with financings, acquisitions, investments, our stock incentive plans, the conversion of our Notes or exercise of the related Warrants, or otherwise will dilute all other stockholders .” The holders of our Notes have priority over holders of our common stock, and if we engage in future debt financings, the holders of such additional debt would also have priority over the holders of our common stock.

Current and future indebtedness may also contain terms that,

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among other things, restrict our ability to incur additional indebtedness.

Current and future indebtedness may also contain terms that, among other things, restrict our ability to incur additional indebtedness.

We may also be required to take other actions that would otherwise be in the interests of the debt holders and would require us to maintain specified liquidity or other ratios, any of which could harm our business, operating results, and financial condition.

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

What changed 10-Q

Item 1A. Risk Factors