What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2020-10-22 compared with 2020-07-23 · 47 added, 40 removed, 403 unchanged (18% of the section changed)

4 unchanged sentences

The United States and the global community we serve are facing unprecedented challenges posed by the COVID-19 pandemic.

The pandemic, and the preventative measures taken in response (including “shelter-in-place” or “stay-at-home” and similar orders issued by international, federal, state or local authorities and the subsequent relaxation of such orders), have resulted in, and are expected to continue to result in, significant volatility and business and economic disruptions and uncertainty.

We have taken steps to protect our employees and we continue to operate all of our services, including our registry services for .com and .net and our root operations, but the extent to which the effects of the pandemic will impact our business, operations, financial condition and results of operations is uncertain and rapidly changing and will depend on numerous evolving factors that we may not be able to control or predict, including:

The pandemic, and the preventative measures taken in response (including “shelter-in-place” or “stay-at-home” and similar orders issued by international, federal, state or local authorities and the subsequent relaxation of such orders), have resulted in, and are expected to continue to result in, significant volatility, business and economic disruptions and uncertainty.

We have taken steps to protect our employees and we continue to operate all of our services, including our registry services for .com and .net and our root operations, but the extent to which the effects of the pandemic will impact our business, operations, financial condition and results of operations is uncertain and will depend on numerous evolving factors that we may not be able to control or predict, including:

• the duration and scope of the pandemic;

• the extent and effectiveness of responsive actions, including the relaxation of orders by authorities or by us, and the impact of these and other factors on our employees, customers and vendors;

• the impact of the pandemic on our employees, including key personnel;

• the extent and effectiveness of responsive actions, including the relaxation of orders by authorities, and the impact of these and other factors on our employees, customers and vendors;

• the impact of the pandemic on our key personnel and other employees (including the impact of work-from-home arrangements on employee productivity and morale);

• the extent to which we are able to maintain and replace critical internet infrastructure components when necessary;

1 unchanged sentence

• any negative impact on the demand for new and renewal domain name registrations resulting from the economic disruption caused by the pandemic and responses thereto.

As of the date of this Quarterly Report on Form 10-Q, our business, operations financial condition and results of operations have not been adversely impacted by the COVID-19 pandemic.

Further, the impact of COVID-19 and the volatile regional and global economic conditions stemming from the pandemic may also precipitate or exacerbate other risks discussed in these Risk Factors, any of which could have a material effect on us.

This situation is changing rapidly and additional effects may arise that we are not presently aware of or that we currently do not consider to present significant risks to our operations.

I f we are unable to successfully respond to and manage the impact of the pandemic, and the resulting responses to it, our business, operations, financial condition and results of operations could be adversely impacted and this impact could be material.

As of the date of this Quarterly Report on Form 10-Q, our financial condition and results of operations have not been adversely impacted by the COVID-19 pandemic.

Regardless, t his situation is uncertain and additional effects may arise that we are not presently aware of or that we currently do not consider to present significant risks to our operations.

Risks arising from our agreements governing our business could limit our ability to maintain or grow our business.

1 unchanged sentence

com TLD and (ii) Registry Agreements with ICANN with respect to the .com , .net, .name, and other gTLDs including our IDN gTLDs.

As substantially all of our revenues are derived from operation of these gTLDs, limitations and obligations in, or changes or challenges to, these agreements, particularly the agreements that involve .

As substantially all of our revenues are derived from the operation of these gTLDs, limitations and obligations in, or changes or challenges to, these agreements, particularly the agreements that involve .

net , could have a material adverse impact on our business.

38 unchanged sentences

Historically, all gTLD registry operators were subject to a vertical integration prohibition;

however, ICANN has established a process whereby registry operators may seek ICANN’s approval to remove this restriction, and ICANN has approved such removal for certain other registry operators.

Additionally, ICANN’s registry agreement for new

gTLDs generally permits such vertical integration with certain limitations, including ICANN’s right, but not the obligation, to refer such vertical integration activities to competition authorities.

however, ICANN has established a process whereby registry operators may seek ICANN’s approval to remove this restriction, and

ICANN has approved such removal for certain other registry operators.

Additionally, ICANN’s registry agreement for new gTLDs generally permits such vertical integration with certain limitations, including ICANN’s right, but not the obligation, to refer such vertical integration activities to competition authorities.

If we seek to become vertically integrated, it is uncertain whether approval to do so would be obtained under ICANN’s processes.

35 unchanged sentences

For example, the government of China has indicated that it will issue, and has issued, new regulations, and has begun to enforce existing regulations, that impose additional costs on, and risks to, our provision of registry services in China and could impact the growth or renewal rates of domain name registrations in China.

In addition to registry operators, some of these regulations also require registrars to obtain a government-issued license for each TLD whose domain name registrations they intend to sell directly to registrants.

In addition to registry operators, registrars are also required by some of these regulations to obtain a government-issued license for each TLD whose domain name registrations they intend

to sell directly to registrants.

Any failure to obtain the required licenses, or to comply with any license requirements or any updates thereto, by us or our registrars could impact our current and future business in China.

29 unchanged sentences

Therefore, attacks against third-party suppliers that provide products or services supporting these critical elements of our operations could also impact our infrastructure.

Despite the significant time and money expended on our security measures, we have been subject to a security breach, that was previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, and our infrastructure may in the future be vulnerable to physical break-ins, disruptions resulting from destructive malware, hardware or enabling software defects, computer viruses, attacks by hackers or nefarious actors or similar disruptive problems, including hacktivism.

possible that we may have to expend additional financial and other resources to address such problems.

future be vulnerable to physical break-ins, disruptions resulting from destructive malware, hardware or enabling software defects, computer viruses, attacks by hackers or nefarious actors or similar disruptive problems, including hacktivism.

It is possible that we may have to expend additional financial and other resources to address such problems.

Any physical or electronic break-in or other security breach or compromise of the information stored at our data centers or domain name registration systems may cause an outage of, or jeopardize the security of information stored on our premises or in the computer systems and networks of our customers.

6 unchanged sentences

While we strive to remediate known vulnerabilities on a timely basis, such vulnerabilities could be exploited before our remediation is effective and if so, could cause systems and service interruptions, data loss and other damages, any of which could be materially harmful to our business.

Vulnerabilities in, and exploits leading to, breaches of our or our vendors’ technology, systems or services could expose us or our customers to a risk of outages, loss or misuse of Company data, including but not limited to sensitive personal information.

Vulnerabilities in, and exploits leading to, breaches of our or our vendors’ technology, systems or services could expose us or our customers to a risk of outages and loss or misuse of Company data, including but not limited to, sensitive personal information.

Additionally, our networks have been, and likely will continue to be, subject to DDoS attacks.

Recent attacks have demonstrated that DDoS attacks continue to grow in size and sophistication and have an ability to widely disrupt internet services.

Recent attacks have demonstrated that DDoS attacks continue to grow in size and sophistication and have the ability to widely disrupt internet services.

Particularly since 2016, the size of DDoS attacks has grown rapidly, and we have successfully mitigated DDoS attacks during this time frame that are significantly larger than those we have historically experienced.

2 unchanged sentences

We have historically incurred, and will continue to incur, significant costs to enable our infrastructure to process levels of attack traffic that are significant multiples of our normal transaction volume.

Any new technologies or services used to replace or enhance existing or future DDoS and other attack mitigation capabilities may introduce risk that may not exist today in those environments and, if security incidents occur associated with those new technologies or services, could disrupt our networks, increase response time, negatively impact our ability to meet our contracted service level obligations, and generally impede our ability to provide reliable service to our customers and the broader internet community.

Any new technologies or services used to replace or enhance existing or future DDoS and other attack mitigation capabilities may introduce risk that may not exist today in those environments.

If security incidents occur associated with such new technologies or services, they could disrupt our networks, increase response time, negatively impact our ability to meet our contracted service level obligations, and generally impede our ability to provide reliable service to our customers and the broader internet community.

Changes to the multi-stakeholder model of internet governance could materially and adversely impact our business.

14 unchanged sentences

ICANN is mandated through its bylaws to uphold a private sector-led multi-stakeholder approach to internet governance for the public benefit.

If ICANN or the

Empowered Community fails to uphold or significantly redefines the multi-stakeholder model, it could harm our business.

If ICANN or the Empowered Community fails to uphold or significantly redefines the multi-stakeholder model, it could harm our business.

Additionally, the Empowered Community could adversely impact ICANN, which could negatively impact its ability to coordinate the multi-stakeholder system of governance, or negatively affect our interests.

10 unchanged sentences

Root zone servers are name servers that contain authoritative data for the very top of the DNS hierarchy.

These servers have the software and DNS configuration data necessary to locate name servers that contain authoritative data for the TLDs.

These servers have the software and DNS configuration data that enables DNS resolvers to locate name servers that contain authoritative data for the TLDs.

These root zone servers are critical to the functioning of the internet.

We also have an important operational role in support of a key IANA function as the Root Zone Maintainer.

We also have an important operational role in support of a key Internet Assigned Numbers Authority (“IANA”) function as the Root Zone Maintainer.

In this role, we provision and publish the authoritative root zone data and make it available to all root server operators under an agreement with ICANN, the Root Zone Maintainer Service Agreement (“RZMA”).

18 unchanged sentences

(iii) internet users were to significantly decrease the use of web browsers in favor of applications to locate and access content;

(iv) internet users were to significantly decrease the use of domain names to develop and protect their online identity;

or (v) internet users were to increasingly use third-level domains or alternate identifiers, such as identifiers from social networking and microblogging sites, in each case the demand for domain

names in our TLDs could decrease.

(iv) internet users were to significantly decrease the use of

domain names to develop and protect their online identity;

or (v) internet users were to increasingly use third-level domains or alternate identifiers, such as identifiers from social networking and microblogging sites, in each case the demand for domain names in our TLDs could decrease.

This may trigger current or prospective customers and parties in our target markets to reevaluate their need for registration or renewal of domain names.

26 unchanged sentences

In order to remain competitive and retain our market position, we must continually improve our access to technology and software, support the latest transmission technologies, and adapt our products and services to changing market conditions and our customers’ and internet users’ preferences and practices, or potentially launch entirely new products and services such as new gTLDs in anticipation of, or in response to, market trends.

We cannot assure that competing technologies developed by others or the emergence of new industry standards will not adversely affect our competitive position or render our services or technologies noncompetitive or obsolete.

In addition, our industry is characterized by announcements of collaborative

relationships involving our competitors.

We cannot assure that competing technologies developed by others

or the emergence of new industry standards will not adversely affect our competitive position or render our services or technologies noncompetitive or obsolete.

In addition, our industry is characterized by announcements of collaborative relationships involving our competitors.

The existence or announcement of any such relationships could adversely affect our ability to attract and retain customers.

6 unchanged sentences

As a result of these challenges, it is possible that resolution of domain names within some of these new gTLDs may be blocked within certain state or organizational environments, challenging universal resolvability of these strings and their general acceptance and usability on the internet.

See the “Competition” section in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2019 for further information.

We must establish and maintain strong relationships with registrars and their resellers to maintain their focus on marketing our products and services otherwise our business could be harmed.

See the “Competition” section in Part I, Item 1 of the 2019 Form 10-K for further information.

We must establish and maintain strong relationships with registrars and their resellers to maintain their focus on marketing our products and services;

otherwise, our business could be harmed.

All of our domain name registrations occur through registrars.

38 unchanged sentences

In the event that a registrar has not implemented back-up services in conformance with industry best practices, the failure could result in permanent loss of transactions at the registrar during that period.

Any of these problems or outages could create potential liability and exposure, including from a failure to meet our service level agreements in our Registry Agreements, and could decrease customer satisfaction, harming our business or resulting in adverse publicity and damage to our reputation that could adversely affect the market’s perception of the security of e-commerce and communications over the internet as well as of the reliability of our services or call into question our ability to preserve the security and stability of the internet.

Any of these problems or outages could create potential liability and exposure, including from a failure to meet our service level agreements in our Registry Agreements, and could decrease customer satisfaction, harming our business, or resulting in adverse publicity and damage to our reputation that could adversely affect the market’s perception of the security of e-commerce and communications over the internet, as well as, the reliability of our services, or call into question our ability to preserve the security and stability of the internet.

Our operating results may be adversely affected as a result of unfavorable market, economic, social, public health, and political conditions.

6 unchanged sentences

• our ability to service our debt, to obtain financing or assume new debt obligations.

In addition, to the extent that the above conditions impacts specific industry and geographic sectors in which many end-users of our products and services are concentrated, we may experience a disproportionate negative impact on our business.

In addition, to the extent that any of the above conditions impacts specific industry and geographic sectors in which many end-users of our products and services are concentrated, we may experience a disproportionate negative impact on our business.

Our international operations subject our business to additional economic, legal, regulatory and political risks that could have an adverse impact on our revenues and business.

2 unchanged sentences

We may also need to tailor some of our services for a particular location and to enter into international distribution and operating relationships.

We may fail to maintain our ability to conduct business, including potentially material business operations in some international locations, or we may not succeed in expanding our services into new international locations or expand our presence in existing locations.

Failure to do so could materially harm our business.

Moreover, local laws and customs in many countries differ

significantly from those in the U.S.

Moreover, local laws and customs in many countries differ significantly from those in the U.S.

In many foreign countries, particularly in those with developing economies, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S.

5 unchanged sentences

• legal uncertainty regarding liability, enforcing our contracts, and compliance with foreign laws;

• economic tensions between governments and changes in international trade policies and/or the economic and trade sanctions programs administered by the Office of Foreign Assets Control (“OFAC”) of the U.S.

• political and economic tensions between governments and changes in international trade policies and/or the economic and trade sanctions programs administered by the Office of Foreign Assets Control (“OFAC”) of the U.S.

Department of the Treasury;

12 unchanged sentences

government data collection policies.

Escalating political tensions between the United States and China in particular may pose additional risks for companies doing business in China.

Since 2018, the United States and China have imposed tariffs on certain of each other’s exports.

In 2019, the U.S.

government announced restrictions on trading with certain Chinese companies.

The Chinese government subsequently announced actions that, if implemented, could impose additional restrictions on the Chinese operations of non-Chinese companies.

If we or our business become subject to these or any future government actions, our management’s attention could be diverted, our reputation could be damaged, or our business in China could be adversely affected.

We rely on our intellectual property rights to protect our proprietary assets, and any failure by us to protect or enforce, or any misappropriation of, our intellectual property could harm our business.

55 unchanged sentences

Such initiatives may result in a reduction of cash or increased costs.

We may not be able to successfully or profitably develop, integrate, operate, maintain and manage any such initiative and the related operations or

employees in a timely manner or at all.

We may not be able to successfully or profitably develop, integrate, operate, maintain, and manage any such initiative and the related operations or employees in a timely manner or at all.

Furthermore, under our agreements with ICANN, we are subject to certain restrictions in the operation of .com , .net, .name and other TLDs, including required ICANN approval of new registry services for such TLDs.

19 unchanged sentences

If this proposal is ultimately agreed to and implemented by the OECD’s member states, there could be significant modifications in the way multinational corporations are taxed.

In addition, some international tax jurisdictions have, or may, independently of the OECD, enact new tax regimes aimed at income resulting from digital services.

In addition, some international tax jurisdictions, independently of the OECD, have enacted or may enact new tax regimes aimed at income resulting from digital services.

Although we cannot predict the nature or outcome of such changes or the likelihood of such proposals being adopted legislatively throughout the world and tax treaties being modified accordingly, any or all of these changes in tax policy for the digital economy could increase our taxes and adversely impact our financial condition, results of operations and cash flow.

Our marketable securities portfolio could experience a decline in market value, which could materially and adversely affect our financial results.

As of June 30, 2020, we had $1.20 billion in cash, cash equivalents, marketable securities and restricted cash, of which $887.9 million was invested in marketable securities.

As of September 30, 2020, we had $1.16 billion in cash, cash equivalents, marketable securities and restricted cash, of which $1.00 billion was invested in marketable securities.

The cash equivalents and marketable securities consist primarily of debt securities issued by the U.S.

1 unchanged sentence

If the global credit or liquidity market deteriorates or other events negatively impact the market for U.S.

Treasury securities, our investment portfolio may be impacted and we could determine that some of our investments have experienced an other-than-temporary decline in fair value, requiring an impairment charge which could adversely impact our results of operations and cash flows.

securities, our investment portfolio may be impacted and we could determine that some of our investments have experienced an other-than-temporary decline in fair value, requiring an impairment charge which could adversely impact our results of operations and cash flows.

We are subject to the risks of owning real property.

26 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-Q

Item 1A. Risk Factors