What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2025-03-10 compared with 2024-03-15 · 106 added, 75 removed, 331 unchanged (35% of the section changed)

4 unchanged sentences

Our business could be negatively affected by cyber or other information security breaches, threats or other disruptions.

We routinely experience cybersecurity threats, threats to our information technology infrastructure and attempts to gain access to our sensitive information, as do our customers, suppliers, subcontractors and joint venture partners.

We may experience similar security threats at customer sites that we operate and manage as a contractual requirement.

We experience similar security threats at customer sites that we operate and manage as a contractual requirement.

The threats we face vary from attacks common to most industries to more advanced and persistent, highly organized adversaries who target us because we protect national security information.

While we have security measures in place to protect our data, the data of our customers or end-users of our services, our services and underlying infrastructure may in the future be materially breached or compromised as a result of the following:

While we have security measures in place to protect our data and the data of our customers or end-users of our services, our services and underlying infrastructure may in the future be materially breached or compromised as a result of the following:

• Third-party attempts to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information to gain access to our customers' data, our data or our IT systems;

10 unchanged sentences

In the normal course of business, we are the target of malicious cyberattack attempts.

To date, any such attempts have not been material or significant to us, including to our reputation or business operations, or had a material financial impact, but there can be no assurance that future cyberattacks will not be material or significant.

To date, any such attempts have not been material to us, including to our reputation or business operations, or had a material financial impact, but there can be no assurance that future cyberattacks will not be material.

A security breach or incident could result in unauthorized parties obtaining access to, or the denial of authorized access to, our IT systems or data, or our customers' systems or data, including intellectual property, proprietary, sensitive, or other confidential information.

A security breach or incident could result in the unauthorized disclosure of large quantities of our customers' customers' personally identifiable information.

A security breach or incident could result in the unauthorized disclosure of large quantities of our customers' personally identifiable information.

A security breach could also result in a loss of confidence in the security of our services, damage our reputation, negatively impact our future sales, disrupt our business and lead to increases in insurance premiums and legal and financial exposure and liability.

Finally, the detection, prevention and remediation of known or potential security vulnerabilities, including those arising from third-party hardware or software, may result in additional financial burdens due to additional direct and indirect costs, such as additional infrastructure capacity spending to mitigate any system degradation.

If our customers do not renew their subscriptions or contracts for our solutions and services and expand our relationship with them, our revenue could decline and our results of operations would be adversely impacted.

If our customers do not renew their subscriptions or contracts for our solutions and services and expand our relationships with them, our revenue could decline and our results of operations would be adversely impacted.

To continue to maintain and grow our business, it is important that our existing customers renew their subscriptions or contracts for our solutions and services when existing contract terms expire.

2 unchanged sentences

Our attrition rates may increase or fluctuate as a result of a number of factors, including customer dissatisfaction with our services, customers' spending levels, mix of customer base, decreases in the number of users at our customers, competition, pricing increases or changes, and deteriorating general economic conditions or budgetary constraints.

Our future success also depends in part on our ability to expand our relationships with our current customers by selling additional features and services, more subscriptions or enhanced editions of our services.

Our future success also depends in part on our ability to expand our relationships with our current customers by selling additional features, solutions and services, more subscriptions or enhanced editions of our solutions and services.

This may also require increasingly sophisticated and costly sales efforts that are targeted at senior leaders.

Similarly, the rate at which our customers purchase new or enhanced services depends on a number of factors, some of which are beyond our control.

Similarly, the rate at which our customers purchase new or enhanced solutions and services depends on a number of factors, some of which are beyond our control.

If our efforts to maintain and expand our relationships with our existing customers are not successful, our business could be harmed.

6 unchanged sentences

First, the process may be delayed or disrupted.

Changes in congressional schedules, negotiations for program funding levels or unforeseen world events can interrupt the funding for a program or contract.

Changes in congressional schedules, administration priorities, negotiations for program funding levels or unforeseen world events can interrupt the funding for a program or contract.

Second, funds for multi-year contracts can be changed in subsequent years in the appropriations process.

1 unchanged sentence

government has increasingly relied on IDIQ contracts and other procurement vehicles that are subject to a competitive bidding and funding process even after the award of the basic contract, adding an element of uncertainty to future funding levels.

Delays in the funding process or changes in funding or funding priorities can impact the timing of available funds or can lead to changes in program content or termination at the government's convenience.

Delays in the funding process or changes in funding or funding priorities can impact the timing of available funds or can lead to changes in program content, delay or termination at the government's convenience.

Any decisions by the U.S.

government to not exercise contract options or to terminate, cancel, delay, modify or curtail our major programs or contracts would adversely affect our revenues, revenue growth and profitability.

Federal government spending reductions, workforce changes, and policy shifts may impact our existing operations and future opportunities for new contracts.

Uncertainty exists regarding how future budget and program decisions will unfold, including the spending priorities of the new U.S.

presidential administration and Congress, and what challenges budget reductions will present for us and our industry generally.

The current administration's efforts to reduce the size and spending of the federal government pose several potential risks to our operations.

The focus on reducing government spending may lead to fewer contracts being awarded, reduced contract values, or delays in the awarding of contracts.

Changes in federal priorities may result in a shift away from governance, risk and compliance software solutions, cybersecurity, and digital identity services, potentially reducing demand for our offerings.

Budgetary constraints and spending freezes may lead to delays in contract awards and renewals, as well as modifications or terminations of existing contracts.

This could disrupt our revenue streams and require adjustments to our operations and workforce.

As federal agencies adjust their spending priorities, there may be a reduction in new business opportunities, limiting our growth prospects and market expansion efforts.

Terminations, reductions in force, and hiring freezes within federal agencies may lead to a loss of institutional knowledge and expertise, resulting in delays or disruptions in project execution.

Workforce shortages may also affect contract management and oversight, impacting the quality and timeliness of our service delivery.

The uncertainty surrounding federal budget allocations, workforce changes, and policy shifts may hinder our ability to execute long-term strategic initiatives and build and maintain long-term relationships with key government stakeholders.

As federal agencies face staffing challenges and budget constraints, there may be increased competition among contractors for limited government resources and attention, leading to more stringent contract terms and lower profit margins.

We continue to monitor these developments closely and are actively engaging with stakeholders to mitigate potential adverse impacts.

However, there can be no assurance that we will be able to fully offset the effects of any reductions in federal government spending, workforce changes, or policy shifts on our business operations and customer relationships.

We are dependent on a few key customer contracts for a significant portion of our future revenue, and a significant reduction in goods and services or delay in implementation to one or more of these contracts would reduce or delay our future revenue and could materially affect our anticipated operating results.

1 unchanged sentence

Our business will likely be harmed if any of our key customer contracts generate less revenue than we forecast, and the termination or delay of a large contract or multiple contracts could have a material adverse effect on our revenue and profitability.

Adverse events affecting the programs subject to these contracts could also negatively affect our ability to process transactions under those contracts, which could adversely affect our revenue and the results of operations.

Adverse events affecting the programs subject to these contracts, such as a significant decline in the traveling public or any significant supply chain delay, could also negatively affect our ability to process transactions under those contracts, which could adversely affect our revenue and the results of operations.

A failure to attract, train, retain and motivate key and skilled employees, including key members of our management team, would adversely affect our ability to execute our strategy and may disrupt our operations.

6 unchanged sentences

Competition for skilled personnel is intense and many U.S.

government programs also require contractors to have security clearances, certain of which can be difficult and time-consuming to obtain.

government programs also require contractors to have security clearances, which can be difficult and time-consuming to obtain.

We may not be successful in attracting and retaining qualified personnel.

10 unchanged sentences

The competitive bidding process presents a number of risks, including the following:

• We may expend substantial funds and time to prepare bids and proposals for contracts that may ultimately be awarded to one of our competitors;

• We may be unable to accurately estimate the resources and costs that will be required to perform any contract we are awarded, which could result in substantial cost overruns and decreased margins;

• We may encounter expense and delay if our competitors protest or challenge awards of contracts, and any such protest or challenge could result in a requirement to resubmit bids on modified specifications or in the termination, reduction or modification of the awarded contract;

• The protest of contracts awarded to us may result in the delay of program performance and the generation of revenue while the protest is pending;

• If we are not given the opportunity to re-compete for U.S.

government contracts previously awarded to us, we may incur expenses to protest such a decision and ultimately may not succeed in competing for or winning such contract renewal.

government contracts for which we compete typically have multiple option periods, and if we fail to win a contract or a task order, we generally will be unable to compete again for that contract for several years.

• From time to time we expend substantial funds and time to prepare bids and proposals for contracts that are ultimately awarded to one of our competitors;

• From time to time we are unable to accurately estimate the resources and costs that will be required to perform any contract we are awarded, which results in substantial cost overruns and decreased margins;

• From time to time we encounter expense and delay when our competitors protest or challenge awards of contracts, and any such protest or challenge could result in a requirement to resubmit bids on modified specifications or in the termination, reduction or modification of the awarded contract;

• From time to time the protest of contracts awarded to us results in the delay of program performance and the generation of revenue while the protest is pending;

• From time to time we are not given the opportunity to re-compete for U.S.

government contracts previously awarded to us, and we may incur expenses to protest such a decision and ultimately may not succeed in competing for or winning such contract renewal.

government contracts for which we compete typically have multiple option periods, and if, as happens from time to time, we fail to win a contract or a task order, we generally will be unable to compete again for that contract for several years.

If we fail to win new contracts or to receive renewal contracts upon re-competition, it may result in additional costs and expenses and possible loss of revenue, and we will not have an opportunity to compete for these contract opportunities again until such contracts expire.

4 unchanged sentences

The product or program needs of our government and commercial customers change and evolve regularly.

Accordingly, our future performance in part depends on our ability to identify emerging technological trends, develop and manufacture competitive products, and bring those products to market quickly at cost-effective prices.

If we fail to effectively anticipate, identify and respond to those changes in a timely manner, our business could be negatively impacted.

Accordingly, our future performance in part depends on our ability to identify emerging technological trends, devote adequate research and development resources, develop and manufacture competitive products, and bring those products to market quickly at cost-effective prices.

If we fail to effectively anticipate, identify and respond to these changes in product or program needs in a timely manner, our business could be negatively impacted.

Likewise, if we are unable to develop new products that meet customers' changing needs, future sales and earnings may be adversely affected.

7 unchanged sentences

Failure to effectively develop and execute our sales and business development capabilities will harm our ability to grow our business.

Our ability to increase our customer base and achieve broader market acceptance of our solutions and services will depend, to a significant extent, on our ability to perform at a high level in our business development, growth, sales and marketing operations and activities.

We believe that selling and marketing our security solutions requires advanced sales skills, customer relationships and technical knowledge to generate interest and effectively communicate our solutions or services to new markets.

Our ability to increase our customer base and achieve broader market acceptance of our solutions and services depends, to a significant extent, on our ability to perform at a high level in our business development, growth, sales and marketing operations and activities.

We believe that selling and marketing our security solutions requires advanced sales skills, customer relationships and technical knowledge to generate interest and to effectively communicate our solutions or services to new markets.

We may not achieve anticipated revenue growth from our growth team if we are unable to hire and develop talented business development and sales personnel, if our new business development and sales personnel are unable to achieve desired productivity levels in a reasonable period of time, or if we are unable to retain our existing sales force.

1 unchanged sentence

Any errors, disruption, performance problems, or failure in their or our operational infrastructure could adversely affect our business, financial condition, and results of operations.

We rely on the technology, infrastructure, and software applications of certain third parties in order to host or operate some of certain key platform features or functions of our business.

We rely on the technology, infrastructure, and software applications of certain third parties in order to host or operate certain key platform features or functions of our business.

Additionally, we rely on third-party computer hardware and cloud capabilities in order to deliver our solutions and services.

7 unchanged sentences

Furthermore, our solutions are, in many cases, important or essential to our customers' operations, including, in some cases, their cybersecurity or oversight and compliance programs, and subject to service level agreements.

Any interruption in our service, whether as a result of an internal or third-party issue, could damage our brand and reputation, cause our customers to terminate or not renew their contracts with us or decrease the use of our solutions and services, require us to indemnify our customers against certain losses, result in our issuing credit or paying penalties or fines, subject us to other losses or liabilities, cause our solutions to be perceived as unreliable or unsecure, and prevent us from gaining new or additional business from current or future customers, any of which could harm our business, financial condition, and results of operations.

Any interruption in our service, whether as a result of an internal or third-party issue, could damage our brand and reputation, cause our customers to terminate or not renew their contracts with us or decrease the use of our solutions and services, require us to indemnify our customers against certain losses, result in our issuing credit or paying penalties or fines, subject us to other losses or liabilities, cause our solutions to be perceived as unreliable or unsecured, and prevent us from gaining new or additional business from current or future customers, any of which could harm our business, financial condition, and results of operations.

Moreover, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, financial condition, and results of operations could be adversely affected.

8 unchanged sentences

We depend on these subcontractors and suppliers to fulfill their contractual obligations in a timely and satisfactory manner in full compliance with customer requirements.

If one or more of our suppliers or subcontractors is unable to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-upon services per its contractual obligations, our ability to perform our obligations as a prime contractor may be adversely affected, and we may be exposed to liability.

Our systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic occurrences or events outside of our control.

Our systems and the third-party systems, upon which we and our customers rely, are also vulnerable to damage or interruption from catastrophic occurrences, telecommunication failures, cybersecurity threats, social unrest, geopolitical and similar events, or acts of misconduct.

Despite any precautions we may take, the occurrence of a catastrophic disaster or other unanticipated problems at our or our third-party vendors' hosting facilities, or within our systems or the systems of third parties upon which we rely, could result in interruptions, performance problems, or failure of our infrastructure, technology, or solutions, which may adversely impact our business.

In addition, our ability to conduct normal business operations could be severely affected.

In the event of significant physical damage to one of these facilities, it may take a significant period of time to achieve full resumption of our services, and our disaster recovery planning may not account for all eventualities.

In addition, any negative publicity arising from these disruptions could harm our reputation and brand and adversely affect our business.

We may be also be impacted by natural disasters, wars, terrorist attacks, power outages, public health crisis (epidemics or pandemics), or other events outside of our control.

If major disasters such as earthquakes, floods, hurricanes, tornadoes, fires, or other events occur, or our information system or communications network breaks down, operates improperly, or is unusable, our headquarters and other facilities may be seriously damaged, or we may have to stop or delay production and delivery of our solutions and services.

In addition, the recent COVID-19 pandemic disrupted the normal operations of many businesses and other organizations, including the temporary closure or scale-back of business operations and the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis.

The pandemic may adversely affect our customers' ability to perform their missions and is, in many cases disrupting their operations.

It may also result in a change in spending priorities on the part of our customers, which could precipitate the cancellation, delay or deferral of programs, contracts or business opportunities.

It may also impact the ability of our subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in their costs and cause delays in performance.

These supply chain effects, and the direct effect of the virus and the disruption on our operations, may negatively impact both our ability to meet customer demand and our revenue and profit margins.

Our employees, in some cases, are working remotely due either to safety concerns or to customer-imposed limitations and using various technologies to perform their functions.

Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our solutions and services to our customers, and could decrease demand for our offerings.

We may incur shutdowns, delays, disruptions or expenses relating to such events outside of our control, which could have a material adverse impact on our business, operating results and financial condition.

Moreover, any significant natural disaster, pandemic, other catastrophic or force majeure events could affect our personnel, supply chain, or service providers' ability to provide materials and perform services on a timely basis.

Act of terrorism and other geopolitical unrest could also potentially cause disruptions in our business or the business of our supply chain, services providers, or the economy as a whole.

Because we do not carry insurance for all of these possible losses, and significant recovery time could be required to resume operations, our financial condition and operating results could be materially adversely affected by such an event outside of our control.

If one or more of our suppliers or subcontractors is unable to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-upon services per its contractual obligations, our ability to perform our obligations as a contractor may be adversely affected, and we may be exposed to liability.

Failure to adequately protect our intellectual property, technologies and proprietary rights could harm our business, competitive position, financial condition, and results of operations.

9 unchanged sentences

The inability to adequately protect and enforce our intellectual property and other proprietary rights could seriously harm our business, results of operations and financial condition.

Failure to accurately estimate the factors upon which we base our contract pricing could adversely impact our earnings and profitability.

Generally, our customer contracts are either fixed-price or cost-reimbursable.

Under fixed-price contracts, which represented approximately 78.5% of our 2023 revenues, we receive a fixed price irrespective of the actual costs we incur and, consequently, we carry the burden of any cost overruns.

Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time, and resources accurately.

Generally, our customer contracts are either firm-fixed-price ("FFP") or cost-reimbursable.

Under FFP contracts, which represented approximately 75% of our 2024 revenues, we receive a fixed price irrespective of the actual costs we incur, and consequently, we carry the burden of any cost overruns.

Due to their nature, fixed-price contracts inherently have more risk than cost-reimbursable contracts, particularly fixed-price development contracts where the costs to complete the development stage of the program can be highly variable, uncertain and difficult to estimate.

1 unchanged sentence

If our costs exceed the contract ceiling and are not authorized by the customer or are not allowable under the contract or applicable regulations, we may not be able to obtain reimbursement for all such costs and our fees may be reduced or eliminated.

Because many of our contracts involve advanced designs and innovative technologies, we may experience unforeseen technological difficulties and cost overruns.

In addition, because many of our contracts involve advanced designs and innovative technologies, we may experience unforeseen technological difficulties and cost overruns.

Under both types of contracts, we must accurately estimate the likely volume of work that will occur, costs and resource requirements involved, and assess the probability of completing individual transactions or milestones within the contracted time period and amount to maximize or earn profit on these contracts.

1 unchanged sentence

Cost overruns or poor cost controls could lower earnings, or may incur a net loss on a contract, and cause a negative impact on our results of operations.

We will face risks associated with the growth of our business in new commercial markets and with new customer verticals, and we may not be able to continue our organic growth nor have the necessary resources to dedicate to the overall growth of our business.

We will face risks associated with the growth of our business in new commercial markets and with new customer verticals, and we may not be able to achieve organic growth nor have the necessary resources to dedicate to the overall growth of our business.

To increase our revenue and achieve and maintain profitability, we plan to expand our operations in new commercial markets, including those where we may have limited operating experience, and may be subject to increased business, technology and economic risks that could affect our financial results.

2 unchanged sentences

Although sales to a new customer have often led to additional sales to the same customer or similarly situated customers, it is uncertain we will achieve the same penetration and organic growth in the future, and our reputation, business, financial condition, and results of operations could be negatively impacted.

As we expand into and within new and emerging markets and heavily regulated industry verticals, we will likely face additional regulatory scrutiny, risks, and burdens from the governments and agencies which regulate those markets and industries.

Failure to deliver high-quality technical support services may adversely affect our relationships with our customers and our financial results.

2 unchanged sentences

Increased customer demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results.

In addition, our sales process is highly dependent on the reputation of our solutions and support and on positive recommendations from our existing customers.

In addition, our sales process is highly dependent on the reputation of our solutions, support and positive recommendations from our existing customers.

Failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our offerings to existing and prospective customers, and our business, operating results and financial position.

8 unchanged sentences

We currently incorporate technology that we license from third parties, including software, into our solutions.

The third-party technology licenses used by us may not continue to be available on commercially reasonable terms or at all.

The third-party technology licenses we use may not continue to be available on commercially reasonable terms or at all.

Our business could suffer if we lost the right to use these technologies.

23 unchanged sentences

Potential future acquisitions, strategic investments, partnerships, divestitures, mergers or joint ventures may subject us to significant risks, any of which could harm our business.

We have in the past acquired, and may in the future seek to acquire or invest in complementary businesses, products or technologies to enhance our technical capabilities or otherwise offer growth opportunities.

Our long-term strategy may include identifying and acquiring, partnering with, investing in or merging with suitable candidates on acceptable terms, or divesting of certain business lines or activities.

8 unchanged sentences

Any acquired business, technology, service or product could significantly underperform relative to our expectations and may not achieve the benefits we expect from possible acquisitions.

For all these reasons, our pursuit of an acquisition, partnership, investment, divestiture, merger, or joint venture could cause its actual results to differ materially from those anticipated.

For all these reasons, our pursuit of an acquisition, partnership, investment, divestiture, merger, or joint venture could cause its actual results to differ materially from those anticipated and/or negatively affect our business.

Public confidence in, and acceptance of, identity platforms and biometrics generally, and our solutions specifically, will be a key factor in our business’s continued growth.

6 unchanged sentences

On the other hand, any negative associations or perceptions with our solutions or biometrics could impede our business growth and could adversely affect our business, results of operations and financial condition.

Likewise, any breaches on our information technology systems, particularly on the use and collection of biometric information, may subject us to significant reputational, financial, legal or operational consequences.

Likewise, any breaches of our information technology systems, particularly on the use and collection of biometric information, may subject us to significant reputational, financial, legal or operational consequences.

Any decline or disruption in the travel industry could materially adversely affect our business, results of operations and financial condition.

One of our growth strategies is to increase revenue from our TSA PreCheck enrollment offerings.

Accordingly, our performance is dependent in part on the strength of the travel industry.

Our revenue is therefore susceptible to declines in or disruptions to leisure and business travel that may be caused by factors entirely out of our control, including, but not limited to, prolonged extreme weather, natural or man-made disasters, travel-related health concerns (including pandemics and epidemics or other outbreak of contagious diseases), restrictions related to travel, stay-at-home orders, wars and military actions, terrorist attacks, sources of political uncertainty or political events, protests, foreign policy changes, regional hostilities, general economic conditions (such as a recession or inflation), changes in regulations, labor unrest or travel-related accidents.

Because these events or concerns, and the full impact of their effects, are largely unpredictable, they can dramatically and suddenly affect travel behavior and other activities by consumers, and therefore demand for our TSA PreCheck services, which could materially adversely affect our business, results of operations and financial condition.

Additionally, as the Real ID Act will require passengers having compliant identification to travel by air in the United States by May 7, 2025, such regulation, if not extended, may decrease the number of travelers with compliant identification and, therefore, negatively impact the demand for our PreCheck services, which could materially adversely affect our business, results of operations and financial condition.

Actions that we are taking to restructure our business to improve profitability may not be as effective as anticipated.

During the fourth quarter of fiscal year 2022, we committed to a restructuring plan to streamline our workforce and spending to better align our cost structure with the volume of our business.

We began the execution of the restructuring plan early 2023, incurring restructuring-related costs, including employee severance and related benefit costs and external consulting and advisory fees related to the implementation of the restructuring plan.

We committed to a restructuring plan to streamline our workforce and realign our cost structure with the volume of our business.

We executed the restructuring plan in early 2023, incurring restructuring-related costs, including employee severance and related benefit costs and external consulting and advisory fees related to the implementation of the restructuring plan.

In addition, we undertook another restructuring action in the third quarter of 2024 in an effort to optimize our strategic priorities, and incurred severance and related benefit costs.

We may be unable to realize the expected improved profitability and efficiency from our restructuring efforts.

We are subject to payment processing risk.

In certain instances, our customers pay for our products and services using their credit or debit cards as a payment method.

Under this arrangement, we rely on third-party systems to process payments.

Acceptance and processing of these payment methods are subject to certain rules and regulations, and require payment of interchange and other fees.

The increases in payment processing fees, any disruption in our payment processing systems, material changes in the payment network, delays in receiving payments from third-party payment processors, or changes to rules or regulations concerning payment processing could adversely impact our results of operations.

Goodwill and intangible assets represent significant assets on our balance sheet and any impairment on these assets could negatively impact our results of operations, and shareholders' equity.

As of December 31, 2024, goodwill and intangible assets, net was 31% of our total assets.

Goodwill and intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable, and at least annually in the case of goodwill.

The impairment test is based on several factors, estimates and assumptions requiring judgment.

Adverse changes in macroeconomic conditions, industry and market consideration, overall financial performance, market capitalization and relevant entity-specific events could result in an impairment of goodwill and intangible assets.

For instance, in the third quarter of 2024, we decided to discontinue the development and/or sale of all or part of certain solutions for selected capitalized software projects, and certain projects which we ceased to use before the end of its useful life.

As a result, we recognized an impairment loss on intangible assets of $11.7 million as of December 31, 2024.

Any future impairment of goodwill and intangible assets could have a negative impact on our results of operations and shareholders' equity in the period in which they are recognized.

Artificial Intelligence is an emerging technology and may involve significant risks and uncertainties.

The field of AI is characterized by rapid technological advancements and is subject to significant risks and uncertainties.

Our future success is dependent on our ability to develop, integrate, and effectively utilize AI technologies especially in our Xacta solution.

Given that this is a new and complex technology, we may face challenges related to the designing, developing, and implementing AI processes and procedures, including the risk of unforeseen operational failures.

Further, this technology is subject to evolving industry standards and regulatory constraints.

Failures to effectively address these risks and uncertainties may materially and adversely affect our business and results of operations.

Industry, Legal and Regulatory Risks

1 unchanged sentence

We operate in an intensely competitive market and diverse industry segment, and we expect competition to increase in the future from established businesses and new market entrants.

Based on our current market analysis, there is no single company or small group of companies in a dominant competitive position.

Based on our current market analysis, no single company or small group of companies is in a dominant competitive position.

Some large competitors offer capabilities in a number of markets that overlap many of the same areas in which we offer services, while certain companies are focused upon only one or a few of such markets.

Some of the firms that compete with us in multiple areas include large, established defense contractors.

Some firms that compete with us in multiple areas include large, established defense contractors.

In addition, we compete with smaller specialty companies, including risk and compliance management companies, organizational messaging companies, and security consulting organizations, and companies that provide secure network offerings.

19 unchanged sentences

In addition, over the last few years, the U.S.

government has been unable to complete its budget process before the end of its fiscal year, resulting in both a government shutdown and continuing resolutions to extend sufficient funds only for U.S.

government has been unable to complete its budget process before the end of its fiscal year, resulting in a series of continuing resolutions to extend sufficient funds only for U.S.

government agencies to continue operating.

Not long ago, the federal government was shut down due to a lack of funding for over one month between late 2018 and early 2019, and currently a series of continuing resolutions have funded the government at fiscal year 2023 levels, with no new starts.

Moreover, the national debt threatened to reach the statutory debt ceiling in 2023, and such an event in future years could result in the U.S.

Moreover, the national debt threatened to reach the statutory debt ceiling, and such an event in future years could result in the U.S.

government defaulting on its debts.

10 unchanged sentences

government agencies to award extra tasks in the weeks immediately prior to the end of its fiscal year in order to avoid the loss of unexpended fiscal year funds.

As a result of this seasonality, we have historically experienced higher revenues in our third and fourth fiscal quarters, ending September 30 and December 31, respectively, with the pace of orders typically substantially reduced during our first and second fiscal quarters ending March 31 and June 30, respectively.

As a result of this seasonality, we have historically experienced higher revenues in the second half of our fiscal year, with the pace of orders typically substantially reduced during the first half of our fiscal year.

We are required to comply with stringent, complex and evolving laws, rules, regulations and standards, as well as contractual obligations relating to privacy, data protection and security, technology protection, and other matters.

2 unchanged sentences

Foreign data protection, data security, privacy, and other laws and regulations can impose different obligations or be more restrictive than those in the United States.

federal and state and foreign laws and regulations, which, depending on the regime, may be enforced by private parties or government entities, are constantly evolving and can be subject to significant change, and they are likely to remain uncertain for the foreseeable future.

federal, state and foreign laws and regulations, which, depending on the regime, may be enforced by private parties or government entities, are constantly evolving and can be subject to significant change, and they are likely to remain uncertain for the foreseeable future.

In addition, the application, interpretation, and enforcement of these laws and regulations are often uncertain, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices.

22 unchanged sentences

government contracts.

A conviction could result in debarment for a specified period of time.

To the best of management's knowledge, there are no pending government investigations, inquiries, claims or audits against the Company likely to have a material adverse effect on our business or our consolidated results of operations, cash flows or financial position.

A conviction could result in debarment for a specified period of time, and debarment could materially and negatively affect our business and operating results.

We are subject to governmental export and import controls that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.

16 unchanged sentences

We may fail to meet our publicly announced guidance and other expectations about our business and operating results, which may cause our stock price to decline.

From time to time, we may release guidance in our quarterly earnings conference calls, quarterly earnings releases, or otherwise, regarding our future performance that represents our management's estimates as of the date of release.

From time to time, we release guidance in our quarterly earnings conference calls, quarterly earnings releases, or otherwise, regarding our future performance that represents our management's estimates as of the date of release.

This guidance, which includes forward-looking statements, is based on projections prepared by our management.

6 unchanged sentences

Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances beyond our control could result in the actual operating results being different from our guidance, and the differences may be adverse and material.

In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock.

In light of the foregoing, investors are urged not to rely upon our guidance when making an investment decision regarding our common stock.

Furthermore, if we make downward revisions to our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet the expectations of securities analysts, investors or other interested parties, the price of our common stock may decline.

17 unchanged sentences

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting, and to report any material weaknesses in such internal control.

In fiscal year ended 2022, management identified a material weakness related to ineffective design and maintenance of controls over the assessment of the accounting for forfeitures of non-standard equity awards.

While the identified material weakness has been remediated in fiscal year 2023, we cannot provide assurance that we will not identify additional material weaknesses in future periods or that we will be successful in remediating any future significant deficiencies or material weaknesses in internal control over financial reporting.

We are continuing to develop and refine our disclosure controls, internal control over financial reporting and other procedures that are designed to ensure information required to be disclosed by us in our consolidated financial statements and in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.

18 unchanged sentences

These economic conditions can arise suddenly and the full impact of such conditions can remain uncertain at any point in time.

In addition, geopolitical developments, such as the invasion of Ukraine by Russia, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.

In addition, geopolitical developments, such as the invasion of Ukraine by Russia and the conflict in Gaza, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.

Moreover, these conditions can affect the rate of information technology spending and could adversely affect our customers' ability or willingness to purchase our solutions and services, delay prospective customers' purchasing decisions, reduce the value or duration of their subscription contracts, or affect attrition rates, all of which could adversely affect our future sales and operating results.

Our systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic occurrences or events outside our control.

Our systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic occurrences, telecommunication failures, cybersecurity threats, social unrest, geopolitical and similar events, or acts of misconduct.

In addition, our ability to conduct normal business operations could be severely affected.

In addition, any negative publicity arising from these disruptions could harm our reputation and brand and adversely affect our business.

We may also be impacted by natural disasters, wars, terrorist attacks, power outages, public health crises (epidemics or pandemics), or other events outside our control.

Moreover, any significant natural disaster, pandemic, or other catastrophic or force majeure events could affect our personnel, supply chain, or service providers' ability to provide materials and perform services on a timely basis.

Acts of terrorism and other geopolitical unrest could also potentially cause disruptions in our business or the business of our supply chain, services providers, or the economy as a whole.

Because we do not carry insurance for all these possible losses, and significant recovery time could be required to resume operations, our financial condition and operating results could be materially adversely affected by such an event outside our control.

Increased scrutiny of our environmental, social and governance responsibilities may result in additional costs and risks, and may adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us.

Investor advocacy groups, institutional investors, investment funds, proxy advisory services, stockholders, and customers are increasingly focused on companies' ESG practices.

Additionally, public interest and legislative pressure related to public companies' ESG practices continue to grow.

Additionally, public interest and legislative pressure related to public companies' ESG practices continue to change.

If our ESG practices fail to meet regulatory requirements or investor or other industry stakeholders' evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, support for local communities, Board of Director and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency and employing ESG strategies in our operations, our brand, reputation and employee retention may be negatively impacted and customers and suppliers may be unwilling to do business with us.

In addition, as we work to align our ESG practices with industry standards, we will likely continue to expand our disclosures in these areas and doing so may result in additional costs and require additional resources to monitor, report, and comply with our various ESG practices.

In addition, as we work to align our ESG practices with industry standards, we may expand our disclosures in these areas and doing so may result in additional costs and require additional resources to monitor, report, and comply with our various ESG practices.

If we fail to adopt ESG standards or practices as quickly as stakeholders desire, report on our ESG efforts or practices accurately, or satisfy the expectations of stakeholders, our reputation, business, financial performance and growth may be adversely impacted.

3 unchanged sentences

If these assumptions turn out to be incorrect, our revenue or our stock-based compensation expense could materially differ from our expectations, which could have a material adverse effect on our financial results.

A change in any of these principles or guidance, or in their interpretations or application to us, may have a significant effect on our reported results, as well as our processes and related controls, and may retroactively affect previously reported results or our forecasts, which may negatively impact our financial statements.

A change in any of these principles or guidance, or in their interpretations or application to us, may have a significant impact on our reported results, as well as our processes and related controls, and may retroactively affect previously reported results or our forecasts, which may negatively impact our financial statements.

For example, any recent new standards issued by the Financial Accounting Standards Board could materially impact our consolidated financial statements .

11 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