What changed in this filing

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Item 1A. Risk Factors

2023-02-14 compared with 2022-02-10 · 133 added, 129 removed, 626 unchanged (30% of the section changed)

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Risk Factors Summary

Risks Related to the Coronavirus (COVID-19) Pandemic

• The effect of the COVID-19 pandemic on our operations, and the operations of our customers, partners and suppliers, has had and could have a material adverse effect on our business, financial condition, cash flows and results of operations, and the extent to which the pandemic will have a continued impact remains uncertain.

Risks Related to Industry Dynamics and Competition

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• The impact of worldwide economic, political and social conditions, including effects on advertising and marketing budgets, may adversely affect our business and operating results.

• Social and ethical issues relating to the use of new and evolving technologies, such as AI, in our offerings may result in reputational harm and liability.

Risks Related to Operating our Business

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• We may need to raise additional capital in the future and may be unable to do so on acceptable terms or at all.

• We have incurred debt which could have a negative impact on our financing options and liquidity position, which could in turn adversely affect our business.

Risks Related to the Coronavirus (COVID-19) Pandemic

Risks Related to our Intellectual Property and Security Vulnerabilities

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• Our international operations and our continued expansion internationally expose us to many risks.

• The uncertainty caused by the U.K.’s exit from the European Union (Brexit) on January 31, 2020 may negatively impact our operations.

• We are subject to foreign exchange risk.

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• Income tax laws or regulations could be enacted or changed and existing income tax laws or regulations could be applied to us in a manner that could increase the costs of our products and services, which could harm our financial condition and results of operations.

• Our operations may expose us to greater than anticipated withholding, sales and transaction tax liabilities, including VAT, which could harm our financial condition and results of operations.

• We may be exposed to greater than anticipated withholding, sales, use, value added and other non-income tax liabilities, including as a result of future changes in laws or regulations, which could harm our financial condition and results of operations.

Risks Related to Ownership of Our Common Stock

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This concentration of ownership may have an effect on matters requiring the approval of our stockholders, including elections to our board of directors and transactions that are otherwise favorable to our stockholders.

• Purchases of shares of our common stock pursuant to our share repurchase program may affect the value of our common stock, and there can be no assurance that our share repurchase program will enhance stockholder value.

• Purchases of shares of our common stock pursuant to our share repurchase program may affect the value of our common stock and diminish our cash reserves, and there can be no assurance that our share repurchase program will enhance stockholder value.

• If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

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• If we fail to maintain an effective system of internal control over financial reporting, we may not be able to report our financial results accurately or in a timely fashion, and we may not be able to prevent fraud;

in such case, our stockholders

could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our stock.

Risks Related to the Coronavirus (COVID-19) Pandemic

The effect of the COVID-19 pandemic on our operations, and the operations of our customers, partners and suppliers, has had and could have a material adverse effect on our business, financial condition, cash flows and results of operations, and the extent to which the pandemic will have a continued impact remains uncertain.

In December 2019, a novel coronavirus disease (“COVID-19”) was initially reported and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic.

COVID-19 has had a widespread and detrimental effect on the global economy as a result of the continued fluctuation in the number of cases and affected countries and actions by public health and governmental authorities, businesses, other organizations and individuals to address the outbreak, including travel bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations and shutdowns.

Despite recent developments of vaccines, the duration and severity of COVID-19 and possible mutations and the degree of its impact on our business is uncertain and difficult to predict.

The continued spread of the outbreak could result in one or more of the following conditions that could have a material adverse impact on our business operations and financial condition:

decreased business spending by our customers and prospective customers, reduced demand for our products, lower renewal rates by our customers;

increased customer losses/churn and turnover of talent;

increased challenges in or cost of acquiring new customers and talent;

reduction in the amount of content uploaded by our contributors and/or reduction in the number of contributors on our site because of reduced royalties earned by our contributors;

inability of our Custom contributors and editorial photographers to complete assignments because of travel and in-person event restrictions;

increased competition;

increased risk in collectability of accounts receivable;

reduced productivity due to remote work arrangements;

lost productivity due to illness and/or illness of family members;

inability to hire key roles;

adverse effects on our strategic partners’ businesses;

impairment charges;

extreme currency exchange-rate fluctuations;

inability to recover costs from insurance carriers;

business continuity concerns for us and our third-party vendors;

inability of counterparties to perform under their agreements with us;

increased risk of vulnerability to cybersecurity attacks or breaches resulting from a greater number of our employees working remotely for extended periods of time;

and challenges with Internet infrastructure due to high loads.

If we are not able to respond to and manage the potential impact of such events effectively, our business could be harmed.

As we generally recognize revenue from our customers as content is downloaded, the impact to our reported revenue resulting from recent and near-term changes in our sales activity due to COVID-19 may not be fully apparent until future periods.

Our efforts to help mitigate the negative impact of the outbreak on our business may not be effective, and we may be affected by a protracted economic downturn.

Furthermore, while many governmental authorities around the world have and continue to enact legislation to address the impact of COVID-19, including measures intended to mitigate some of the more severe anticipated economic effects of the virus, we may not benefit from such legislation or such legislation may prove to be ineffective in addressing COVID-19’s impact on our and our customer’s businesses and operations.

Even after the COVID-19 outbreak has subsided, we may continue to experience impacts to our business as a result of the coronavirus’ global economic impact and any recession that has occurred or may occur in the future.

Further, as the COVID-19 situation is unprecedented and continuously evolving, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or in a manner that we currently do not consider to present significant risks to our operations.

In addition, the overall uncertainty regarding the economic impact of the COVID-19 pandemic and the impact on our revenue growth, could impact our cash flows from operations and liquidity.

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.

Material changes to our cash flows, liquidity and the volatility of the stock market and our stock price could impact our capital allocation strategy, including our quarterly dividend program and our outstanding authorization under our stock repurchase program.

in such case, our stockholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our stock.

Risks Related to Industry Dynamics and Competition

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The industry in which we operate is intensely competitive and rapidly evolving, with low barriers to entry.

We compete with a wide and diverse array of companies, from significant media companies to individual content creators.

We compete with a wide and diverse array of companies, from significant media companies to newly emerging generative artificial intelligence (“AI”) technologies to individual content creators.

Our current and potential domestic and international competitors range from large established companies to emerging start-ups across different industries, including online marketplace and traditional stock content suppliers of current and archival creative and editorial imagery, photography, footage, and music;

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customer service;

availability of additional platform features, such as workplace tools and ability to engage with additional platform features;

and the global nature of a company’s interfaces and marketing efforts, including local content, languages, currencies, and payment methods.

availability of additional platform features, such as

workplace tools and ability to engage with additional platform features;

the global nature of a company’s interfaces and marketing efforts, including local content, languages, currencies, and payment methods;

and newly emerging generative AI technologies.

If our competitors use their experience and resources to provide an offering that is more attractive to customers across these categories, or if our competitors innovate and provide products faster than we can, we may be unable to compete effectively and our business will be harmed.

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Some of these competitors may be able to respond more quickly to new or expanding technology and devote more resources to product development, marketing or content acquisition than we can.

Additionally, there has been a recent trend toward industry consolidation and competitors have acquired, invested in or partnered with other competitors or leveraged their own content-related competencies to enter our market.

We expect this trend toward industry consolidation to continue as companies attempt to hold or strengthen their market positions in an evolving industry.

We believe that industry consolidation may result in stronger competitors that are better able to compete for customers.

This could lead to more variability in operating results as we compete with larger competitors and could have a material adverse effect on our business, operating results, and financial condition.

This could lead to more variability in operating results and could have a material adverse effect on our business, operating results, and financial condition.

While we believe that there are obstacles to creating a meaningful network effect between customers and contributors, the barriers to creating a platform that allows for the licensing of content or provides workflow tools are low.

If competitors offer higher royalties or more favorable royalty earning potential, easier submission workflows, or less rigorous vetting processes or

incentivize contributors to distribute their content on an exclusive basis, contributors may choose to stop distributing new content with us or remove their existing content from our collection.

If competitors offer higher royalties or more favorable royalty earning potential, easier submission workflows, or less rigorous vetting processes or incentivize contributors to distribute their content on an exclusive basis, contributors may choose to stop distributing new content with us or remove their existing content from our collection.

Further, as technology advances or other market dynamics make creating, sourcing, archiving, indexing, reviewing, searching or delivering content easier or more affordable, our existing and potential competitors may also seek to develop new products, technologies or capabilities that could render many of the products, services and content types that we offer obsolete or less competitive.

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Historically, our operations have been focused on our marketplace for content.

Further expansion of our operations and our marketplace into additional content categories, such as Shutterstock Editorial, or into new products and services, such as Shutterstock Studios, an end-to-end custom creative shop, our creative flow applications, such as Catalog and Plan, creative editing software and our predictive performance functionality, involves numerous risks and challenges, including increased capital requirements, increased marketing spend to gain brand awareness of these new operations, potential new competitors,

and the need to develop new contributor and strategic relationships.

Further expansion of our operations and our marketplace into additional content categories, such as Shutterstock Editorial and AI generated content, or into new products and services, such as Shutterstock Studios, an end-to-end custom creative shop and our Creative Flow Applications Suite, involves numerous risks and challenges, including increased capital requirements, increased marketing spend to gain brand awareness of these new operations, potential new competitors, and the need to develop new contributor and strategic relationships.

Growth into additional content, product and service areas may require changes to our existing business model and cost structure and modifications to our infrastructure and may expose us to new regulatory and legal risks, any of which may require expertise in which we have little or no experience.

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Financial difficulties experienced by our customers, third-party resellers, vendors and strategic partners due to economic volatility or unfavorable changes could result in these companies scaling back operations, exiting businesses, merging with other businesses or filing for bankruptcy protection and potentially ceasing operations, all of which could adversely affect our business, financial condition and results of operations.

Social and ethical issues relating to the use of new and evolving technologies, such as AI, in our offerings may result in reputational harm and liability.

Social and ethical issues relating to the use of new and evolving technologies such as AI in our offerings may result in reputational harm and liability, and may cause us to incur additional research and development costs to resolve such issues.

We are increasingly building AI into many of our offerings.

As with many innovations, AI presents risks and challenges that could affect its adoption, and therefore our business.

If we enable or offer solutions that draw controversy due to their perceived or actual impact on society, we may experience brand or reputational harm, competitive harm or legal liability.

Potential government regulation related to AI ethics may also increase the burden and cost of research and development in this area, subjecting us to brand or reputational harm, competitive harm or legal liability.

Failure to address AI ethics issues by us or others in our industry could undermine public confidence in AI, which could slow adoption of AI in our products and services.

Risks Related to Operating our Business

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Our growth creates additional challenges and risks with respect to attracting, integrating and retaining qualified employees, particularly enterprise sales leadership and sales personnel.

In addition, we expect that, if we continue to grow, a large percentage of our

sales force at any time will be new to the company and our offerings.

In addition, we expect that, if we continue to grow, a large percentage of our sales force at any time will be new to the company and our offerings.

New hires require significant training and may take a significant amount of time before they achieve full productivity.

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Further, as we have a limited history of operations at our current scale and under our current strategy, our ability to forecast our future operating results and plan for and model future growth is more limited than that of companies with longer operating histories and is subject to a number of uncertainties.

In addition, we have encountered and expect to continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly changing markets.

In addition, we have encountered and expect to continue to

encounter risks and uncertainties frequently experienced by growing companies in rapidly changing markets.

If our assumptions regarding these risks and uncertainties are incorrect or change, or if we do not execute on our strategy and manage these risks and uncertainties successfully, our operating results could differ materially from our expectations and those of securities analysts and investors, our business could suffer and the trading price of our common stock could decline.

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For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability.

We rely on third parties to provide payment processing services, including the processing of credit cards and debit cards, and it could disrupt our business if these companies became unwilling or unable to provide these services to us, including if they were to suffer a cyberattack or security incident.

including if they were to suffer a cyberattack or security incident.

We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply.

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If we raise additional funds through the issuance of equity, equity-linked or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

Any debt financing we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.

In addition, on May 6, 2022, we entered into a credit facility (the “Credit Facility”) among the Company, as borrower, certain direct and indirect subsidiaries of the Company as Subsidiary Guarantors, the Lenders party thereto, and Bank of America, N.A., as Administrative Agent for the lenders.

The Credit Facility contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, dispose of assets, enter into transactions with affiliates, and enter into burdensome agreements, in each case, subject to limitations and exceptions set forth in the Credit Facility.

In addition, the Credit Facility also requires us to comply with certain financial ratio covenants, including a consolidated leverage ratio and a consolidated interest coverage ratio, in each case, determined in accordance with the terms of the Credit Facility.

Our ability to comply with these ratios may be affected by events beyond our control.

The existence of the Credit Facility, and any additional debt financing we secure in the future that may include restrictive covenants relating to our capital raising activities and other financial and operational matters, may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.

If we are unable to obtain additional capital when required, or are unable to obtain additional capital on satisfactory terms, our ability to continue to support our business growth or to respond to business opportunities, challenges, or unforeseen circumstances could be adversely affected, and our business may be harmed.

We have incurred debt which could have a negative impact on our financing options and liquidity position, which could in turn adversely affect our business.

As of December 31, 2022, we had $50.0 million in aggregate principal amount of total debt.

Additionally, our revolving credit facility has remaining borrowing capacity of $48.0 million, net of standby letters of credit, as of December 31, 2022.

Our overall leverage and the terms of our financing arrangements could:

• limit our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity;

• make it more difficult for us to satisfy the terms of our debt obligations;

• limit our ability to refinance our indebtedness on terms acceptable to us, or at all;

• limit our flexibility to plan for and to adjust to changing business and market conditions and increase our vulnerability to general adverse economic and industry conditions;

• require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payments on our debt, thereby limiting the availability of our cash flow to fund future investments, capital expenditures, working capital, business activities and other general corporate requirements;

• increase our vulnerability to adverse economic or industry conditions.

Our ability to meet expenses and debt service obligations will depend on our future performance, which could be affected by financial, business, economic and other factors.

In addition, a breach of any of the covenants in our outstanding debt agreements or our inability to comply with the required financial ratios could result in a default under our debt instruments, including the Credit Facility.

If an event of default occurs, our creditors could elect to declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable and/or require us to apply all of our available cash to repay borrowings.

If we are not able to pay our debt service obligations we may be required to refinance all or part of our debt, sell assets, borrow more money or raise additional equity capital.

Risks Related to the Coronavirus (COVID-19) Pandemic

In December 2019, a novel coronavirus disease (“COVID-19”) was initially reported and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic.

Despite the developments of vaccines, the duration and severity of COVID-19 and possible mutations and the degree of its impact on our business is uncertain and difficult to predict.

The continued spread of the outbreak could result in one or more of the following conditions that could have a material adverse impact on our business operations and financial condition:

decreased business spending by our customers and prospective customers;

reduced demand for our products, lower renewal rates by our customers;

increased customer losses/churn and turnover of talent;

increased challenges in or cost of acquiring new customers and talent;

reduction in the amount of content uploaded by our contributors and/or reduction in the number of contributors on our site because of reduced royalties earned by our contributors;

inability of our Custom contributors and editorial photographers to complete assignments because of travel and in-person event restrictions;

increased competition;

increased risk in collectability of accounts receivable;

reduced productivity due to remote work arrangements;

lost productivity due to illness and/or illness of family members;

inability to hire key roles;

adverse effects on our strategic partners’ businesses;

impairment charges;

extreme currency exchange-rate fluctuations;

inability to recover costs from insurance carriers;

business continuity concerns for us and our third-party vendors;

inability of counterparties to perform under their agreements with us;

increased risk of vulnerability to cybersecurity attacks or breaches resulting from a greater number of our employees working remotely for extended periods of time;

and challenges with Internet infrastructure due to high loads.

If we are not able to respond to and manage the potential impact of such events effectively, our business could be harmed.

Our efforts to help mitigate the negative impact of the outbreak on our business may not be effective, and we may be affected by a protracted economic downturn.

In addition, the overall uncertainty regarding the economic impact of the COVID-19 pandemic and the impact on our revenue growth, could impact our cash flows from operations and liquidity.

Material changes to our cash flows, liquidity and the volatility of the stock market and our stock price

could impact our capital allocation strategy, including our quarterly dividend program and our outstanding authorization under our stock repurchase program.

Risks Related to our Intellectual Property and Security Vulnerabilities

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The satisfactory performance, reliability and availability of our web properties and our network infrastructure are critical to our reputation, our ability to attract and retain customers and contributors to our platform and our ability to maintain adequate customer service levels.

Any system interruptions that result in the unavailability of our websites could result in

negative publicity, damage our reputation and brand or adversely affect our results of operations.

Any system interruptions that result in the unavailability of our websites could result in negative publicity, damage our reputation and brand or adversely affect our results of operations.

We have in the past experienced, and may in the future experience temporary system interruptions for a variety of reasons, including security breaches and other security incidents, malware (including viruses and malicious software), telecommunication and other network failures, power failures, programming errors, undetected bugs, design faults, data corruption, denial-of-service attacks, poor scalability or network overload from an overwhelming number of visitors trying to reach our websites at the same time.

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Depending on the nature of the information compromised in a cybersecurity incident, data breach or disruption or unauthorized access or failure of systems compromising our customers’, contributors’ or employees’ data, we may also have obligations to notify customers, contributors, employees or governmental bodies about the incident and we may need to provide some form of remedy and compensation for the individuals affected.

In addition, ongoing rulemaking and the potential for changes to cybersecurity disclosure rules may subject us to enhanced or uncertain requirements.

Complying with these obligations could cause us to incur substantial costs, including compliance, crisis management and remediation costs, and receive negative publicity.

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As supervisory authorities issue further guidance on personal information export mechanisms, including circumstances where the standard contractual clauses cannot be used and/or start taking enforcement action, we could suffer additional costs, complaints, and/or regulatory investigations or fines.

Moreover, if we are otherwise unable to transfer personal information between and among countries and

regions in which we operate, it could affect the manner in which we provide our services and could adversely affect our financial results.

Several other foreign jurisdictions, such as Brazil, where a General Data Privacy Law that imposes detailed rules for the collection, use, processing and storage of personal data in Brazil was signed into law in August 2018 and took effect in 2020, with enforcement beginning in August 2021;

and India, where in July 2018 a committee formed by the Indian government issued a report and draft data protection bill that was updated in December 2019 by the Ministry of Electronics and Information Technology and remains subject to continuing joint parliamentary review, have adopted or are considering adopting new or updated comprehensive privacy legislation to offer additional data privacy protections for individuals.

Moreover, if we are otherwise unable to transfer personal information between and among countries and regions in which we operate, it could affect the manner in which we provide our services and could adversely affect our financial results.

Several other foreign jurisdictions have adopted or are considering adopting new or updated comprehensive privacy legislation to offer additional data privacy protections for individuals.

For example, in Brazil, the General Data Privacy Law, which was signed into law in August 2018 and was subject to enforcement beginning in August 2021, imposes detailed rules for the collection, use, processing and storage of personal data.

Similarly, in India, a committee formed by the Indian government issued a report and draft data protection bill in July 2018, which was updated in December 2019 by the Ministry of Electronics and Information Technology and remains subject to continuing joint parliamentary review.

Similarly, data privacy laws have been enacted in a number of jurisdictions, including, but not limited to, the European Union, Illinois and California, which regulate the collection of certain biometric data regarding individuals, including their facial images, and the use of such data, including in facial recognition systems.

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However, the California Privacy Rights Act (“CPRA”), certified by the California Secretary of State to appear as a ballot initiative, was passed by Californians during the November 3, 2020 election.

The CPRA, which will come into effect on January 1, 2023 (with a look back to January 2022), amends and expands the CCPA to add additional disclosure obligations (including an obligation to disclose retention periods or criteria for categories of personal information), grant consumers additional rights (including rights to correct their data, limit the use and disclosure of sensitive personal information, and opt out of the sharing of personal information for certain targeted behavioral advertising purposes), and establishes a privacy enforcement agency known as the California Privacy Protection Agency (“CPPA”).

categories of personal information), grant consumers additional rights (including rights to correct their data, limit the use and disclosure of sensitive personal information, and opt out of the sharing of personal information for certain targeted behavioral advertising purposes), and establishes a privacy enforcement agency known as the California Privacy Protection Agency (“CPPA”).

The CPPA will serve as California’s chief privacy regulator, which will likely result in greater regulatory activity and enforcement in the privacy area.

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While we continually work to safeguard our internal network systems and validate the security of our third-party providers, to mitigate these potential risks, including through information security policies and employee awareness and training, there is no assurance that such actions will be sufficient to prevent cyber-attacks or cybersecurity breaches.

SEC rulemaking undertakes to expand security incident reporting requirements and may subject us to additional and uncertain requirements in the event of an actual or perceived security incident.

Any actual or perceived breach or the perceived threat of an attack or breach, could cause our customers, contributors and other third parties to cease doing business with us, or subject us to lawsuits, regulatory fines, criminal penalties, statutory damages, and other costs, including for provision of breach notices and credit monitoring to our customers, and other action or liability, and could lead to business interruption, any of which could harm our reputation, business, financial condition, results of operations and stock price.

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We rely on trademark, copyright and patent law, trade secret protection, and non-disclosure agreements and other contractual restrictions to protect our proprietary rights.

We have registered “Shutterstock,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid,” “PicMonkey,” “Pattern89,” “Shotzr,” “Shutterstock Studios” and “Shutterstock Editor” and associated logos and other marks as trademarks in the United States and other jurisdictions and we are the registered owner of the shutterstock.com, bigstock.com, offset.com, premiumbeat.com rexfeatures.com, turbosquid.com and picmonkey.com internet domain names and various other related domain names.

We have registered “Shutterstock,” “Shutterstock Editorial,” “Asset Assurance,” “Offset,” “Bigstock,” “Rex Features,” “PremiumBeat,” “TurboSquid,” “PicMonkey,” “Pattern89,” “Shotzr,” “Pond5,” “Splash News,” “Shutterstock Studios” and “Shutterstock Editor” and associated logos and other marks as trademarks in the United States and other jurisdictions and we are the registered owner of the shutterstock.com, bigstock.com, offset.com, premiumbeat.com, rexfeatures.com, turbosquid.com, picmonkey.com, pond5.com and splashnews.com internet domain names and various other related domain names.

Effective intellectual property protection for our trademarks and domain names may not be available or practical in every country in which we operate or intend to operate.

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Revenues derived from customers outside of the United States comprise a significant portion of our revenues and we seek to expand our international operations to attract customers and contributors in countries other than the United States as a critical element of our business strategy.

For each of the years ended December 31, 2021, 2020 and 2019, approximately two-thirds of our revenue, respectively, was derived from customers located outside of the United States.

For each of the years ended December 31, 2022, 2021 and 2020, approximately 60%, 66% and 67%, respectively, of our revenue was derived from customers located outside of the United States.

Our ability to expand our business and attract talented employees, as well as customers and contributors, in an increasing number of international markets requires considerable management attention and resources and is subject to the challenges of supporting a growing business in an environment of multiple languages, cultures, customs, legal systems, alternative dispute systems, regulatory systems and commercial infrastructures.

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• higher costs associated with doing business internationally.

These risks may make it impossible or prohibitively expensive to expand to new international markets, delay entry into such markets, or require us to enter into commercial arrangements with local partners, all of which may affect our ability to

grow our business.

As international e-commerce and other online and web services grow, competition is expected to intensify and local companies may have a substantial competitive advantage because of their greater understanding of, and focus on, the local customer.

If we do not effectively enter new international markets, our competitive advantage may be harmed.

The uncertainty caused by the U.K.’s exit from the European Union (Brexit) on January 31, 2020 may negatively impact our operations.

On January 31, 2020, the United Kingdom (the “U.K.”) withdrew from the European Union (the “E.U.”), commonly referred to as “Brexit,” following a July 2016 referendum in which Brexit was approved by U.K.

Following a transition period during which existing trade rules continued to apply through December 31, 2020, the U.K.

entered into a EU-UK trade and cooperation agreement that details the future economic relationship between the U.K.

The EU-UK trade and cooperation agreement went into effect on January 1, 2021, however, there is still uncertainty on the application and interpretation of many of the provisions, including with respect to the relationship between the Republic of Ireland, where the Company recently established and maintains significant technology operations, and Northern Ireland that could have adverse effects on our operations.

In 2021, sales to customers in the U.K.

accounted for approximately 8% of our total revenue and sales to customers in Europe, including the U.K., accounted for approximately 33% of our total revenue.

The impact of Brexit on our business will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations.

It is possible that economic activity in the U.K.

will be adversely impacted and that there will be increased regulatory and legal complexities, including those relating to tax, trade, security and employees.

Such changes could be costly and potentially disruptive to our operations and business relationships in these markets.

In addition, Brexit could lead to economic uncertainty and instability, including significant volatility in global stock markets and currency exchange rates, that may adversely impact our business or that of our customers.

Currency volatility could weaken the British pound, decreasing income from our U.K.

operations translated to dollars as well as decreasing the profitability of our U.K.

Any of these effects of Brexit, among others, could adversely affect our business, financial condition, operating results and cash flows.

We are subject to foreign exchange risk.

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Income tax laws or regulations could be enacted or changed and existing income tax laws or regulations could be applied to us in a manner that could increase the costs of our products and services, which could harm our financial condition and results of operations.

We believe that our worldwide provision for income taxes is reasonable, but our ultimate tax liability may differ from the amounts recorded in our financial statements.

Any additional income tax liability may have a material adverse effect on our financial results in the period or periods for which such determination is made.

We believe that our worldwide provision for income taxes is reasonable, but our ultimate income tax liability may differ from the amounts recorded in our financial statements.

Any additional income tax liability may have a material adverse effect on our financial results in the period or periods in which such additional liability arises.

We have established reserves for such additional income tax liabilities as we believe are appropriate.

However, there can be no assurance that our ultimate income tax liability will not exceed those reserves.

Tax law and regulatory changes in the U.S., the E.U.

and other jurisdictions, including tax law and regulatory changes that may be enacted by the U.S.

Income tax law and regulatory changes in the U.S., the E.U.

and other jurisdictions, including income tax law and regulatory changes that may be enacted by the U.S.

federal and state governments or as a result of tax policy recommendations from organizations such as the Organization for Economic Co-operation and Development (the “OECD”), have and may continue to have an impact on our financial condition and results of operations.

Specifically, the enactment of the TCJA has had and may continue to have a significant effect on our financial statements.

Certain provisions of the TCJA are likely to be amended by future legislation or, by their terms, are scheduled to change or expire on specified dates.

Certain provisions of the TCJA may be amended by future legislation or, by their terms, are scheduled to change or expire on specified dates.

In addition, questions remain regarding the interpretation and implementation of the TCJA.

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The revenue threshold would be reduced to €10 billion beginning seven years after the effective date of Pillar One.

Pillar Two would subject multinational enterprises with annual revenue of more than €750 million to a global minimum tax at a rate of 15%.

Based on current US tax law, there exists disparity between the US minimum tax under GILTI and the proposed Pillar Two framework.

On December 20th the OECD published detailed model legislation for the Pillar Two project, to assist in the implementation of a landmark reform to the international tax system.

The participating countries are expected to implement the agreement by entering into a multilateral convention and enacting domestic legislation by 2023.

Pillar Two would subject multinational enterprises with annual revenue of more than €750 million to a global minimum income tax at a rate of 15%.

Based on current U.S.

income tax law, disparities exist between the U.S.

minimum income tax under GILTI and the proposed Pillar Two framework.

To assist in the implementation of Pillar Two, the OECD published detailed model legislation on December 20, 2021, and related

commentary on March 14, 2022.

The participating countries are expected to implement the OECD’s two-pillar agreement by entering into a multilateral convention and enacting domestic legislation by 2024.

Such legislation could increase our global effective tax rate and have a material effect on our financial position and results of operations.

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Until the convention is adopted, however, countries that had previously enacted a digital services tax, may continue to impose their tax.

The imposition of digital services taxes may have a material effect on our financial condition and results of operations.

Our operations may expose us to greater than anticipated withholding, sales and transaction tax liabilities, including VAT, which could harm our financial condition and results of operations.

The continued imposition of digital services taxes may have a material effect on our financial condition and results of operations.

We may be exposed to greater than anticipated withholding, sales, use, value added and other non-income tax liabilities, including as a result of future changes in laws or regulations, which could harm our financial condition and results of operations.

We are subject to non-income taxes, including withholding, sales, use and value added taxes, in various jurisdictions in which we conduct business.

Fiscal authorities in one or more of those jurisdictions may contend that our tax liabilities or our obligations to remit transactional taxes are greater than in prior taxable periods and more than anticipated relative to future taxable periods.

Fiscal authorities in one or more of those jurisdictions may contend that our non-income tax liabilities are greater than the amounts we have accrued and/or reserved for.

Moreover, future changes in non-income tax laws or regulations may materially increase our liability for such taxes in future periods.

Significant judgment is required in determining our exposure for non-income taxes.

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In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain.

Certain jurisdictions in which we do not collect withholding, sales, use, value added or other taxes on our sales or assess use tax on our purchases may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect or remit such taxes in the future.

Moreover, certain jurisdictions in which we do not collect or pay withholding, sales, use, value added or other non-income taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect or pay such taxes in the future.

We continue to evaluate the impact, if any, of the imposition of sales tax on customer demand for our products and results of operations.

Recent legislation, including the decision in the matter of South Dakota v.

Wayfair, Inc., has, and will continue to, significantly increase the effort, resources and costs associated with the collection and compliance burden for sales tax.

The prospective taxation by multiple jurisdictions of e-commerce businesses could also subject us to exposure to withholding tax, sales tax, VAT and other transaction taxes on our past and future transactions in jurisdictions in which we currently are, or in the future may be, required to report taxable transactions.

A successful assertion by a jurisdiction that we failed to pay such taxes, or the adoption of new laws requiring the registration for, collection of, and payment of such taxes, could result in substantial tax liabilities related to past, current and future sales, create increased administrative burdens and costs, discourage customers from purchasing content from us, or otherwise substantially harm our business and results of operations.

Recent legislation, including legislation relating to the U.S.

Supreme Court decision in South Dakota v.

Wayfair, Inc.

, has, and will continue to, significantly increase the effort, resources and costs associated with the collection and compliance burden for sales tax.

The prospective taxation by multiple jurisdictions of e-commerce businesses could also subject us to exposure to withholding, sales, use, value added and other non-income taxes on our past and future transactions in jurisdictions in which we currently are, or in the future may be, required to report taxable transactions.

A successful assertion by a jurisdiction that we failed to pay such taxes, or the adoption of new laws requiring the registration for, collection of, and/or payment of such taxes, could result in substantial tax liabilities related to past, current and future sales and other transactions, create increased administrative burdens and costs, discourage customers from purchasing content from us, or otherwise substantially harm our business and results of operations.

We are currently subject to and in the future may become subject to additional compliance requirements for certain of those taxes.

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As a result, comparing our operating results on a period to period basis may not be meaningful.

In addition to other risk factors discussed in this “Risk Factors” section, factors that may contribute to the variability of our quarterly and annual results include:

• our ability to retain our current customers and to attract new customers and contributors;

• our ability to provide new and relevant content to our customers;

• our ability to effectively manage our growth;

• the effects of increased competition on our business;

• our ability to keep pace with changes in technology or our competitors;

• changes in our pricing policies or the pricing policies of our competitors;

• interruptions in service, whether or not we are responsible for such interruptions, and any related impact on our reputation and brand;

• costs associated with litigation or other claims, suits, investigations, audits or proceedings, including those related to our indemnification of our customers, intellectual property, tax matters, privacy matters, labor and employment matters, and/or commercial claims;

• our ability to pursue, and the timing of, entry into new geographies or markets and, if pursued, our management of such expansion;

• the impact of general economic conditions on our revenue and expenses;

• changes in government regulation affecting our business;

• costs related to potential acquisitions of technology or businesses.

Because of these risks and others, it is possible that our future results may be below our expectations and the expectations of analysts and investors.

Because of the risks described in this “Risk Factors” section and others, it is possible that our future results may be below our expectations and the expectations of analysts and investors.

In such an event, the price of our common stock may decline significantly.

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In the past, certain companies that have experienced volatility in the market price of their common stock have been subject to securities class action litigation.

We may be the target

of this type of litigation in the future.

We may be the target of this type of litigation in the future.

Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

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This could also trigger certain change in control provisions in our employment agreements and agreements relating to certain outstanding equity awards.

Purchases of shares of our common stock pursuant to our share repurchase program may affect the value of our common stock, and there can be no assurance that our share repurchase program will enhance stockholder value.

Purchases of shares of our common stock pursuant to our share repurchase program may affect the value of our common stock and diminish our cash reserves, and there can be no assurance that our share repurchase program will enhance stockholder value.

Pursuant to our share repurchase program which was publicly announced in November 2015, we were authorized to repurchase up to $100 million of our outstanding common stock.

In February 2017, our Board authorized us to repurchase up to an additional $100 million of our outstanding common stock.

We had approximately $73 million and $66 million of remaining authorization for purchases under the share repurchase program as of December 31, 2021 and February 4, 2022, respectively.

The timing and amount of any share repurchases will be determined based on market conditions, share price and other factors and we may not repurchase any shares under this authorization.

This activity could increase (or reduce the size of any decrease in) the market price of our common stock at the time of such repurchases.

As of December 31, 2022, there was no remaining authorization for purchases under the share repurchase program.

Our board may authorize additional purchases at any time.

The timing and amount of any share repurchases will be determined based on market conditions, share price and other factors, and we are not obligated to repurchase any shares.

Repurchases of our shares could increase (or reduce the size of any decrease in) the market price of our common stock at the time of such repurchases.

Our board has the right to amend or suspend the share repurchase program at any time or terminate the share repurchase program upon a determination that termination would be in our best interests.

Additionally, repurchases under our share repurchase program have diminished and would continue to diminish our cash reserves, which could impact our ability to pursue possible strategic opportunities and acquisitions and could result in lower overall returns on our cash balances.

Further, under the Inflation Reduction Act of 2022, a 1% excise tax is imposed on the fair market value of certain net stock purchases, which could increase the cost of repurchasing shares of our common stock.

There can be no assurance that any share repurchases will enhance stockholder value, as the market price of our common stock may nevertheless decline.

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All shares of our common stock are freely transferable without restriction or registration under the Securities Act, except for shares held by our “affiliates,” which remain subject to the restrictions set forth in Rule 144 under the Securities Act.

We filed a registration statement on Form S-8 under the Securities Act covering shares of common stock issuable pursuant to options and shares reserved for future issuance under our 2012 Omnibus Equity Incentive Plan and our Amended and Restated 2012 Employee Stock Purchase Plan.

Shares issued pursuant to such options and plans can be freely sold in the

public market upon issuance and vesting, subject to the terms of the award agreements delivered under such plans, unless they are held by “affiliates,” as that term is defined in Rule 144 of the Securities Act.

We filed registration statements on Form S-8 under the Securities Act covering shares of common stock issuable pursuant to options and shares reserved for future issuance under our 2022 Omnibus Equity Incentive Plan and our 2012 Omnibus Equity Incentive Plan.

Shares issued pursuant to such options and plans can be freely sold in the public market upon issuance and vesting, subject to the terms of the award agreements delivered under such plans, unless they are held by “affiliates,” as that term is defined in Rule 144 of the Securities Act.

We may also issue our shares of common stock or securities convertible into our common stock from time to time in connection with a financing, acquisition, investment or otherwise.

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For example, we have continued to upgrade our financial and business processing applications to accommodate the increased volume of products and transactions resulting from our growth to date.

If we experience delays or difficulties in implementing these systems, or if we otherwise do not effectively manage our growth,

we may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, or satisfy customer requirements, among other things.

If we experience delays or difficulties in implementing these systems, or if we otherwise do not effectively manage our growth, we may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, or satisfy customer requirements, among other things.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Act and related regulations implemented by the SEC and the stock exchanges are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming.

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Also, the TCJA amended Section 162(m) of the U.S.

federal income tax code (“Section 162(m)”), which provides that public companies are not entitled to a tax deduction for individual compensation over $1 million that is paid to certain executive officers.

Prior to the amendment under the TCJA, Section 162(m) provided an exception to the deductibility limitations for “performance-based compensation” that met certain requirements.

As amended, beginning in 2018, except for certain grandfathered arrangements in place prior to November 2, 2017 under the amendment’s transition rules, Section 162(m) no longer includes an exception to the limitations for “performance-based compensation” and expands the group of executive officers covered by the limitation.

Further, the American Rescue Plan Act was signed into law on March 11, 2021, and added a new subsection to Section 162(m) of the Internal Revenue Code to expand the application to an additional five most highly compensated individuals.

The expansion of Section 162(m) coverage is effective for tax years beginning after December 31, 2026.

Internal Revenue Code, which denies a publicly held corporation a deduction for U.S.

federal income tax purposes for compensation paid to certain covered employees to the extent that the compensation for a taxable year exceeds $1 million per employee.

Before that amendment, Section 162(m) provided an exception for “performance-based compensation” that met certain requirements.

The TCJA eliminated the exception for

performance-based compensation, other than for certain arrangements in place before November 2, 2017, and expanded the group of employees covered by the limitation under Section 162(m).

The American Rescue Plan Act, enacted on March 11, 2021, further expanded the group of covered employees to include an additional five most highly compensated employees, effective for taxable years beginning after December 31, 2026.

These and other increased costs associated with operating as a public company may decrease our net income or increase our net loss and may cause us to reduce costs in other areas of our business or increase the prices of our products or services to offset the effect of such increased costs.

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

What changed 10-K

Item 1A. Risk Factors