What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-03-16 compared with 2022-03-01 · 41 added, 84 removed, 713 unchanged (15% of the section changed)

6 unchanged sentences

• our ability to successfully execute our strategies and adapt to evolving customer demands, including the trend to lower-gross margin offerings;

• risk associated with impairment of goodwill, intangible assets or other long-lived assets;

• risks associated with our substantial indebtedness and our obligations to repay such indebtedness;

14 unchanged sentences

• the inability of customers to differentiate our services from those of our competitors or our inability to effectively communicate such distinctions;

• the decision of customers to host internally or in colocation facilities as an alternative to the use of our services;

• the decision of customers to host internally, in third-party cloud infrastructure, or in third-party colocation facilities as an alternative to the use of our services;

• the decision of customers to use internal or other third-party resources to manage their platforms and applications;

16 unchanged sentences

These economic conditions can arise suddenly and the full impact of such conditions can remain uncertain.

In addition, geopolitical developments, such as existing and potential trade wars and other events beyond our control, such as the COVID-19 pandemic, which has resulted in the imposition of related public health measures and travel restrictions, and civil unrest can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.

In addition, geopolitical developments, such as existing and potential trade wars and other events beyond our control, such as the COVID-19 pandemic, which resulted in the imposition of related public health measures and travel restrictions, and civil unrest can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.

Any of these effects could have a material and adverse impact on our business, financial condition and results of operations.

The outbreak of a novel strain of coronavirus, referred to as COVID-19, has spread globally, including within the U.S., and resulted in the World Health Organization declaring the outbreak a “pandemic” in March 2020, with variant strains of the virus continuing to be identified globally.

Currently, COVID-19 has not had a significant impact on our operations or financial performance;

however, the ultimate extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, changes in governmental regulation in response to the virus, the pace of economic recovery, the possible resurgence in the spread of the virus or any variant strain(s) of the virus, advances in testing, treatment, and prevention, including the efficacy and availability of vaccines, its impact on our customers, vendors and employees and its impact on our sales cycles as well as industry events, all of which are uncertain and cannot be predicted.

For example, in response to the COVID-19 pandemic, many of our facilities have shifted to a work from home environment for employees whose presence in the office is nonessential and if we continue to do so for extended periods of time, we may not meet our on-going employment commitments under certain economic incentive agreements which may result in our losing future tax benefits and having to repay certain tax benefits already received.

In addition, we have and may in the future continue to postpone or cancel customer, employee or industry events, which could impact our brand visibility and our ability to obtain new customers.

Moreover, any deterioration in economic conditions resulting from the COVID-19 pandemic can affect the rate of IT spending, and any reductions may fall disproportionately on outsourced and cloud-based solutions like ours.

In addition, impacts of the COVID-19 pandemic may be exacerbated by the disproportionate impact it is having on small and medium businesses that make a large portion of our customer base, many of which may be forced to shut down or limit operations for an indefinite period of time.

Economic weakness, customer financial difficulties and constrained spending on IT operations could adversely affect our customers’ ability or willingness to purchase our service offerings, delay purchasing decisions and lengthen our sales cycles, reduce the value or duration of their subscription contracts, or increase churn, all of which could have a material and adverse effect on our sales and operating

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our high level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with the covenants contained in the agreements that govern our indebtedness.

The effects of COVID-19 and its variants continue to evolve, and the full impact and duration are unknown.

To date, COVID-19 and its variant have not adversely affected our results of operations or financial condition in any material respect.

However, there are remaining uncertainties as a result of COVID 19, particularly the possibility of new variant strain(s) of the virus, the potential resurgence in the spread of the virus and the pace of economic recovery.

The full extent to which COVID-19 and its variants may impact our financial condition or results of operations over the medium term, therefore, remains uncertain.

Political and economic uncertainty surrounding the Conflict between Russia and Ukraine could have a material adverse effect on our business.

Currently, the conflict has not had a significant impact on our operations or financial performance.

However, our overall performance depends in part on worldwide economic and geopolitical conditions.

We are monitoring the situation and the potential for the conflict to spread to other countries, which could adversely impact our customers and operations, and we may take actions that modify our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders.

If we are unable to successfully execute our strategies and continue to develop and sell the services and solutions our customers demand, our business, financial condition and results of operations may suffer.

2 unchanged sentences

Any failure to successfully execute our strategies, including any failure to invest in strategic growth areas, could adversely affect our business, financial condition and results of operations.

We may not realize any or all of our estimated cost savings, which would have a negative effect on our results of operations.

On July 21, 2021, we committed to the July 2021 Restructuring Plan which will drive a change in the type and location of certain positions and is expected to result in the termination of approximately 10% of our workforce.

Any cost savings that we realize from such efforts may differ materially from our estimates.

The estimates contained herein are our current estimates, but they involve risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such estimates.

In addition, any cost savings that we realize may be offset, in whole or in part, by reductions in revenues, or through increases in other expenses.

Our cost savings plans are subject to numerous risks and uncertainties that may change at any time.

We cannot assure you that cost-savings initiatives will be completed as anticipated or that the benefits we expect will be achieved on a timely basis or at all.

Our strategies require significant investments that may adversely affect our near-term revenue growth and results of operations.

10 unchanged sentences

Any failure to increase our revenue or manage our expenses could prevent us from achieving profitability at all or on a consistent basis, which would cause our business, financial condition and results of operations to suffer.

We may be required to recognize goodwill, intangible assets or other long-lived asset impairment charges.

Goodwill and indefinite-lived intangible assets are not amortized and are subject to impairment testing at least annually.

Future events may cause impairments of our goodwill or long-lived assets based on factors such as the price of our common stock, projected cash flows, assumptions used or other variables.

In addition, if we divest long-lived assets at prices below their asset value, we must write them down to fair value resulting in long-lived asset impairment charges, which could adversely affect our financial position or results of operations.

We cannot accurately predict the amount and timing of any impairment of assets, and we may be required to recognize goodwill or other asset impairment charges which could materially and adversely affect our results of operations.

See Item 8 of Part II, Financial Statements and Supplementary Data, for further discussion.

Our results of operations have historically varied and may fluctuate significantly, which could make our future results difficult to predict and could cause our results of operations to fall below investor or analyst expectations.

2 unchanged sentences

Our period-to-period results of operations are not necessarily an indication of our future operating performance.

Similarly, our Bookings and ARR metrics may not provide an accurate indication of our future or expected results of operations.

For instance, we expect that Bookings could fluctuate significantly on a quarterly basis based on the timing of one or more customer purchase decisions, which we cannot control, and which makes it difficult for us to accurately predict Bookings for any future period.

In addition, in calculating Non-GAAP Net Income (Loss), we utilize estimates of our net effective tax rate, which may fluctuate based on a number of factors, including tax law changes and the geographic distribution of our profits and losses.

7 unchanged sentences

If our revenue or operating results do not meet or exceed the expectations of investors or securities analysts, the price of our common stock may decline.

Our key operating metrics are subject to assumptions and limitations and may not provide an accurate indication of our future or expected results.

Our key operating metrics, including Bookings and ARR, are based on numerous assumptions and limitations, are calculated using our internal data that have not been independently verified by third parties and may not provide an accurate indication of our future or expected results.

For instance, our Bookings metric is calculated by annualizing the monthly value of recurring customer contracts entered into during a period and adding the actual (not annualized) estimated value of professional services consulting, advisory or project-based orders received during the period, but does not reflect actual or anticipated contract non-renewals or service cancellations (which we do not report), and to the extent we experience such contract non-renewals or service cancellations, will not result in revenue in future periods.

Bookings also does not differentiate between recurring and non-recurring revenue, may not correlate to the time period in which revenue is recognized or anticipated to be recognized and is increased by a customer moving from one workload to another workload (which would not be an increase if a customer had a net zero revenue impact in a single workload from a new contract and cancellation).

As a result, the assumptions used in calculating Bookings are subject to several limitations.

ARR is a historical measure that annualizes our revenue for a previously completed fiscal quarter and therefore is not a reliable indicator of our future or expected results, and ARR also does not reflect any actual or anticipated reductions in revenue due to contract non-renewals or service cancellations.

As a result, our key operating metrics may not reflect our actual performance, and investors should consider each one of our key operating metrics in light of the assumptions used in calculating the metric and limitations as a result thereof.

In addition, investors should not place undue reliance on our key operating metrics as indicators of our future or expected results.

Moreover, our key operating metrics may differ from similarly titled metrics presented by other companies and may not be comparable to such other metrics.

See Item 7 of Part II, Management’s Discussion and Analysis of Financial Condition And Results of Operations - "Key Operating Metrics" for more information regarding our key operating metrics.

We may not be able to compete successfully against current and future competitors.

67 unchanged sentences

There is no assurance that we will be able to recruit or retain qualified personnel or successfully transition knowledge from departing employees, and this failure could cause a dilution of our service-oriented culture and our inability to develop and deliver existing or new operations and services, which could cause our business to be negatively impacted.

Security breaches, cyber-attacks and other interruptions to our or our third-party service providers’ infrastructure may disrupt our internal operations and we may be exposed to claims and liability, lose customers, suffer harm to our reputation, lose business-critical compliance certifications and incur additional costs.

Security breaches, cyber-attacks and other interruptions to our or our third-party service providers’ infrastructure have disrupted and may continue to disrupt our internal operations and we may be exposed to claims and liability, lose customers, suffer harm to our reputation, lose business-critical compliance certifications and incur additional costs.

We are materially dependent upon our networks, information technology infrastructure and related technology systems to provide services to our customers and to manage our internal operations.

2 unchanged sentences

We also process, store and transmit our own data as part of our business and operations, which may include personally identifiable, confidential or proprietary information.

Cyber-attacks have become more prevalent in our industry, and the techniques used to sabotage or obtain unauthorized access to systems are constantly expanding and evolving and may not be recognized until they are successfully launched against a target.

Without the proper tools, software, services and processes in place that are necessary to protect against and mitigate harm, we could be continuously susceptible to unauthorized access, infrastructure attacks, malicious file attacks, ransomware, bugs, worms, malicious software programs, remnant data exposure, computer viruses, denial-of-service attacks, accidents, employee error or malfeasance, intentional misconduct by computer “hackers,” state-sponsored cyber-attacks and attempts by outside parties to fraudulently induce our employees or customers to disclose or grant access to our data or our customers’ data.

Our current security measures may fail or be inadequate to defeat or mitigate these attacks, and we may be unable to implement additional security measures in a timely manner.

Even if implemented, these measures could be circumvented as a result of accidental or intentional actions by parties within or outside of our organization.

Cyber-attacks have become more prevalent in our industry, and the techniques used to sabotage or obtain unauthorized access to systems are constantly expanding and evolving.

Malicious actors are increasingly sophisticated in their methods, tactics, techniques and procedures, seeking to steal money, gain unauthorized access to, destroy or manipulate data, and disrupt operations, and some of their attacks may not be recognized or discovered until launched or after initial entry into the environment, such as novel or zero-day attacks that are launched before patches are available and defenses can be readied.

Malicious actors are also increasingly developing methods to avoid prevention, detection and alerting capabilities, including employing counter-forensic tactics, making response activities more difficult.

Like many companies, we have experienced these attacks, including a ransomware incident that caused service disruptions for our Hosted Exchange customers, as announced on December 6, 2022 and again on December 9, 2022.

When these cyber-attacks occur, we respond to these incidents pursuant to our Cybersecurity Policies and Procedures and in accordance with the law.

Our Cybersecurity Policies and Procedures are designed to protect against and mitigate harm from unauthorized access, infrastructure attacks, malicious file attacks, ransomware, data theft, bugs, worms, malicious software programs, remnant data exposure, computer viruses, denial-of-service attacks, accidents, employee error or malfeasance, intentional misconduct by computer “hackers,” state-sponsored cyber-attacks and attempts by outside parties to fraudulently induce our employees or customers to disclose or

grant access to our data or our customers’ data.

Our current cybersecurity framework is governed and overseen by the Chief Security Officer.

Cybersecurity risks and security measures are reported to our board of directors, who collectively have years of cybersecurity experience, at least on an annual basis.

When necessary, our internal incident response team engages with external advisors, including outside counsel or outside cybersecurity firms to investigate and remediate.

Our current security measures are being monitored and periodically reviewed.

Nevertheless, our security measures have in the past and may continue to be circumvented or fail to defeat or mitigate these attacks.

Additionally, other disruptions can occur, such as infrastructure gaps, hardware and software vulnerabilities, inadequate or missing security controls, exposed or unprotected customer data and the accidental or intentional disclosure of source code or other confidential information by former or current employees.

2 unchanged sentences

Some of our systems or vendors’ systems have experienced past security breaches, and, although they did not have a material adverse effect on our operating results, there can be no assurance of a similar result in the future.

If a breach or other security incident were to occur, it could expose us to increased risk of claims and liability, including litigation, regulatory enforcement, notification obligations and indemnity obligations, as well as loss of existing or potential customers, harm to our reputation, increases in

our security costs (including spending material resources to investigate or correct the breach or incident and to prevent future security breaches and incidents), disruption of normal business operations, the impairment or loss of industry certifications and government sanctions (including debarment), all of which could have a material and adverse effect on our business, financial condition and results of operations.

Cyber breaches and other security incidents may expose us to increased risk of claims and liability, including litigation, regulatory enforcement, notification obligations and indemnity obligations, as well as loss of existing or potential customers, harm to our reputation, increases in our security costs (including spending material resources to investigate or correct the breach or incident and to prevent future security breaches and incidents), disruption of normal business operations, the impairment or loss of industry certifications and government sanctions (including debarment), all of which could have a material and adverse effect on our business, financial condition and results of operations.

The security of our services is important in our customers’ decisions to purchase or use our services.

10 unchanged sentences

Similar security risks exist with respect to our business partners and the third-party vendors that we rely on for aspects of our IT support services and administrative functions, including the systems owned, operated or controlled by other unaffiliated operators to the extent we rely on such other systems to deliver services to our customers.

Our ability to monitor our third-party service providers’ data security is limited.

Our Cybersecurity Policies and Procedures are designed to vet third-party providers and provide for adequate oversight and cooperation regarding cybersecurity incidents with respect to our third-party vendors, but our ability to monitor our third-party service providers’ data security is limited.

As a result, we are subject to the risk that cyber-attacks on, or other security incidents affecting, our business partners and third-party vendors may adversely affect our business even if an attack or breach does not directly impact our systems.

99 unchanged sentences

A key element of our strategy is to further expand our customer base internationally and successfully operate data centers in foreign markets.

We have limited experience operating in foreign jurisdictions other than the U.K., Australia and Hong Kong and expect to continue to grow our international operations.

Managing a global organization is difficult, time consuming and expensive.

19 unchanged sentences

The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability.

Legal, political and economic uncertainty surrounding the exit of the U.K.

from the E.U., or Brexit, could have a material and adverse effect on our business.

In June 2016, U.K.

voters approved a referendum to withdraw the U.K.’s membership from the E.U., which is commonly referred to as “Brexit.” The U.K.’s withdrawal from the E.U.

occurred on January 31, 2020, but the U.K.

remained in the E.U.’s customs union and single market until December 31, 2020.

In late December 2020, the U.K.

agreed to a new trade agreement (the EU-UK Trade and Cooperation Agreement, or the “Trade Agreement”) to govern their relationship.

We have operations in the U.K.

and, as a result, we face risks associated with the uncertainty and disruptions as a consequence of Brexit that naturally arise from the Trade Agreement.

These include increased cross-border checks and required customs documentation with respect to the movement of goods between the U.K and the E.U., disruption to the labor supply between the U.K.

and the E.U., the potential divergence of the regulatory regimes applicable to our operations between the U.K and the E.U., and importantly, the absence of adequate trade provisions dealing with the services sector (especially for financial services) in the Trade Agreement.

Consequently, the continuing uncertainty concerning the U.K.’s legal, political and economic relationship with the E.U.

could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets.

These developments, or the perception that any of them could occur, have had and may continue to have a significant adverse effect on global economic conditions and the stability of global financial markets and could significantly reduce global market liquidity and limit the ability of key market participants to operate in certain financial markets.

In particular, it could also lead to a period of considerable uncertainty in relation to the U.K.

financial and banking markets, as well as on the regulatory process in Europe.

Asset valuations, currency exchange rates and credit ratings may also be subject to increased market volatility.

The long-term effects of Brexit will depend on any further agreements (or lack thereof) between the U.K.

and, in particular, any arrangements for the U.K.

to retain access to E.U.

markets in the service sector.

We may also face new regulatory costs and challenges as a result of Brexit that could have an adverse effect on our operations.

For example, the U.K.

has lost the benefits of global trade agreements negotiated by the E.U.

on behalf of its members, and therefore has had and will have to negotiate separate trade agreements with other nations (e.g.

the U.S.) which is likely to result in greater complexity and uncertainty that could make our doing business globally more difficult.

There may continue to be economic uncertainty surrounding the consequences of Brexit that adversely impact customer confidence resulting in customers reducing their spending budgets on our solutions, which could harm our business.

The ongoing instability and uncertainty in the aftermath of the Trade Agreement could require us to restructure our business operations in the U.K.

and could have an adverse impact on our business and employees in the U.K.

Failure to develop and maintain adequate internal systems could cause us to be unable to properly provide service to our customers, causing us to lose customers, suffer harm to our reputation and incur additional costs.

9 unchanged sentences

Even if we are able to renew the leases on our existing data centers, we expect that rental rates, which will be determined based on then-prevailing market rates with respect to the renewal option periods and which will be determined by negotiation with the landlord after the renewal option periods, will be higher than rates we currently pay under our existing lease agreements.

Migrations to new facilities could also be expensive and present technical challenges that may result in downtime for our affected customers.

Migrations to new facilities could also be expensive and present technical challenges that may result in downtime for our affected customers or loss of data.

There can also be no assurances that our plans to mitigate customer downtime for affected customers will be successful.

3 unchanged sentences

For example, we lease data center space from third-party landlords, purchase equipment from equipment providers and source equipment maintenance through third parties.

While we have entered into various agreements for the lease of data center space, equipment, maintenance and other services, the third-party could fail to live up to the contractual obligations under those agreements.

While we have entered into various agreements for the lease of data center space, equipment, maintenance and other services, a third-party could fail to comply with their contractual obligations under those agreements.

For example, a data center landlord may fail to adequately maintain its facilities or provide an appropriate data center infrastructure for which it is responsible.

41 unchanged sentences

States are also constantly amending existing laws, requiring attention to frequently changing regulatory requirements.

Further, the California Consumer Privacy Act ("CCPA") took effect on January 1, 2020 and imposes obligations on companies that process personal information of California residents.

It remains unclear how various provisions of the CCPA will be interpreted and enforced.

Among other things, the CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used.

The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

Other states have enacted or are considering enacting their own data privacy laws.

The CCPA and these other state laws may increase our compliance costs and potential liability.

Because the interpretation and application of many privacy and data protection laws along with contractually imposed industry standards are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our services and platform capabilities.

12 unchanged sentences

The outcome of any such lawsuit would depend on the specific facts of the case and any legal and policy considerations that we may not be able to mitigate.

In such cases, we could be liable for substantial damage awards that may exceed our liability insurance coverage by unknown but significant amounts, which could materially and adversely impair our business, financial condition and results of operations.

In such cases, we could be liable for substantial damage awards that may exceed our insurance coverage by unknown but significant amounts, which could materially and adversely impair our business, financial condition and results of operations.

Our clients include national, provincial, state and local governmental entities.

225 unchanged sentences

• our future ability to borrow under our Revolving Credit Facility, the availability of which depends on, among other things, our compliance with the covenants in the First Lien Credit Agreement.

We cannot assure you that our business will generate cash flow from operations, or that we will be able to draw under our Revolving Credit Facility or otherwise, in an amount sufficient to fund our liquidity needs.

We cannot be certain that our business will generate cash flow from operations, or that we will be able to draw under our Revolving Credit Facility or otherwise, in an amount sufficient to fund our liquidity needs.

If our cash flows and capital resources are insufficient to service our indebtedness and other liquidity needs, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness.

2 unchanged sentences

Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

We cannot assure you that we will be able to restructure or refinance any of our debt on commercially reasonable terms or at all.

In addition, the terms of existing or future debt agreements, including the First Lien Credit Agreement and the 5.375% Notes Indenture and the 3.50% Notes Indenture, may restrict us from adopting some of

these alternatives.

We cannot be certain that we will be able to restructure or refinance any of our debt on commercially reasonable terms or at all.

alternatives.

In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.

62 unchanged sentences

• our operating and financial performance and prospects;

• quarterly variations in the rate of growth (if any) of our financial or operational indicators, such as EPS, net income, revenues, Non-GAAP Net Income, Non-GAAP Operating Profit, Adjusted EBITDA, Bookings, and ARR;

• the public reaction to our press releases, our other public announcements and our filings with the SEC;

18 unchanged sentences

Future sales of our common stock in the public market, or the perception in the public market that such sales may occur, could reduce our stock price.

As of December 31, 2021 , we had 211.2 million shares of common stock outstanding and approximately 18.9 million shares of common stock underlying outstanding options and RSUs under the 2017 Incentive Plan and the 2020 Incentive Plan, and we have reserved an additional 15.7 million shares of common stock for issuance under the 2020 Incentive Plan and 10.4 million shares of common stock for issuance under the ESPP and we may be required to issue additional shares of common stock to an affiliate of ABRY under the merger agreement related to the acquisition of Datapipe.

As of December 31, 2022 , we had 215.7 million shares of common stock outstanding and approximately 23.0 million shares of common stock underlying outstanding options and restricted stock under the 2017 Incentive Plan and the 2020 Incentive Plan, and we have reserved an additional 31.2 million shares of common stock for issuance under the 2020 Incentive Plan and 9.6 million shares of common stock for issuance under the ESPP and we may be required to issue additional shares of common stock to an affiliate of ABRY under the merger agreement related to the acquisition of Datapipe.

In addition, certain of our existing stockholders, including Apollo and ABRY, have certain rights to require us to register the sale of common stock held by them including in connection with underwritten offerings.

42 unchanged sentences

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

What changed 10-K

Item 1A. Risk Factors