Our business is subject to numerous risks. We caution you that the following important
factors, among others, could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors and oral statements. Any
or all of our forward-looking statements in this Quarterly Report or Form
10-Q
and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make
or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may differ materially
from those anticipated in forward looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further
disclosure we make in our reports filed with the SEC.
RISKS RELATED TO OUR BUSINESS
Our operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which
could cause our stock price to decline.
Our operating results may fluctuate as a result of a variety of factors, many of which are outside of our
control. If our operating results or guidance fall below the expectations of research analysts or investors, the price of our common stock could decline substantially. Fluctuations in our operating results or guidance may be due to a number of
factors, including, but not limited to, those listed below:
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our ability to renew existing customers, increase sales to existing customers and attract new customers;
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the amount and timing of operating costs and capital expenditures related to the operation, maintenance and expansion of our business;
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service outages or security breaches;
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changes in our pricing policies or those of our competitors;
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our ability to successfully implement strategic business model changes;
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the timing and success of new services, features and upgrades by us or our competitors;
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changes in sales compensation plans or organizational structure;
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the timing of costs related to the development or acquisition of technologies, services or businesses;
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seasonal variations or other cyclicality in the demand for our services;
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general economic, industry and market conditions and those conditions specific to Internet usage and online businesses;
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litigation, including class action litigation, involving us and our services or the industry in which we operate, in general;
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the purchasing and budgeting cycles of our customers;
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the financial condition of our customers; and
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geopolitical events such as war, threat of war or terrorist acts.
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We believe that our revenue and operating
results may continue to vary in the future and that
period-to-period
comparisons of our operating results may not be meaningful.
If our services or computer systems are breached, our customers may be harmed, our reputation may be damaged and we may be exposed to significant
liabilities.
Our services and computer systems store and transmit confidential data of our customers and their customers, which may include
credit card information, account and device information, passwords and other critical data.
Any breach of the cybersecurity measures we have taken to
safeguard this information may subject us to fines and penalties, time consuming and expensive litigation, trigger indemnification obligations and other contractual liabilities, damage our reputation and harm our customers and our business.
Cyber-attacks from computer hackers and cyber criminals and other malicious Internet-based activity continue to increase generally, and our services and
systems, including the systems of our outsourced service providers, have been and may in the future continue to be the target of various forms of cyber-attacks such as DNS attacks, wireless network attacks, viruses and worms, malicious software,
application centric attacks,
peer-to-peer
attacks, phishing attempts, backdoor trojans and distributed denial of service attacks. The techniques used by computer hackers
and cyber criminals to obtain unauthorized access to data or to sabotage computer systems change frequently and generally are not detected until after an incident has occurred. While we make significant efforts to maintain the security and integrity
of our services and computer systems, our cybersecurity measures and the cybersecurity measures taken by our third-party data center facilities may be unable to anticipate, detect or prevent all attempts to compromise our systems. If our
cybersecurity measures are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained
log-in
credentials or otherwise, our reputation could be
damaged, our business may be harmed and we could incur significant liabilities.
Many states have enacted laws requiring companies to notify individuals
of security breaches involving their personal data. These mandatory disclosures regarding a security breach may be costly to comply with and may lead to widespread negative publicity, which may cause our customers to lose confidence in the
effectiveness of our cybersecurity measures. Additionally, some of our customer contracts require us to notify customers in the event of a security breach and/or indemnify customers from damages they may incur as a result of a breach of our services
and computer systems. There can be no assurance that the limitations of liability provisions in our contracts for a security breach would be enforceable or would otherwise protect us from any such liabilities or damages with respect to any
particular claim. We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims related to a breach of our services or
computer systems. The successful assertion of one or more large claims against us that exceed our available insurance coverage could have a material adverse effect on our business, financial condition and operating results.
Our business strategy includes acquiring or investing in other companies, which may ultimately fail to meet our expectations, divert our
managements attention, result in additional dilution to our stockholders and disrupt our business and operating results.
Our business
strategy continues to contemplate us making strategic acquisitions of, or strategic investments in, complementary businesses, services, technologies and intellectual property rights. Acquisitions of high-technology companies are inherently risky,
and negotiating these transactions can be time-consuming, difficult and expensive and our ability to close these transactions may often be subject to conditions or approvals that are beyond our control. Consequently, these transactions, even if
undertaken and announced, may not close. In connection with an acquisition, investment or strategic transaction we may do one or more of the following, which may harm our business and adversely affect our operating results:
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issue additional equity securities that would dilute our stockholders and decrease our earnings per share;
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use cash and other resources that we may need in the future to operate our business;
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incur debt on unfavorable terms or that we are unable to repay;
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incur large charges or substantial liabilities; and
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become subject to adverse tax consequences, substantial depreciation or deferred compensation charges.
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Following an acquisition, the integration of an acquired company may cost more than we anticipate, and we may be subject to unforeseen liabilities arising
from an acquired companys past or present operations. These liabilities may be greater than the warranty and indemnity limitations we negotiate. Any unforeseen liability that is greater than these warranty and indemnity limitations could have
a negative impact on our financial condition. Some of the additional risks associated with integrating acquired companies may include, but are not limited to:
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difficulties and delays integrating the employees, culture, technologies, products and systems of the acquired companies;
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an uncertain revenue and earnings stream from the acquired company, which could dilute our earnings;
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being subject to unfavorable revenue recognition or other accounting treatment as a result of an acquired companys practices;
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difficulties retaining the customers of any acquired business due to changes in management or otherwise;
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our ongoing business may be disrupted and our managements attention may be diverted by acquisition, transition or integration activities;
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the potential loss of key employees of the acquired company;
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undetected errors or unauthorized use of a third-partys code in products of the acquired companies;
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unforeseen or unanticipated legal liabilities which are not discovered by due diligence during the acquisition process, including stockholder litigation related to the acquisition, third party intellectual property
claims or claims for potential violations of applicable law, rules and regulations, arising from prior or ongoing acts or omissions by the acquired businesses;
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entry into markets in which we have no or limited direct prior experience and where competitors have stronger market positions and which are highly competitive; and
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assuming
pre-existing
contractual relationships of an acquired company that we would not have otherwise entered into, the termination or modification of which may be costly or
disruptive to our business.
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If we fail to successfully integrate and manage the companies and technologies we acquire, or if an acquisition
does not further our business strategy as expected, our operating results will be adversely affected. Even if successfully integrated, there can be no assurance that any of our acquisitions or future acquisitions will be successful in helping us
achieve our financial and strategic goals.
The integration of the GoTo Business presents significant challenges.
On January 31, 2017, we completed our acquisition of the GoTo family of service offerings, or the GoTo Business, from a whollyowned subsidiary of
Citrix Systems, Inc., or Citrix, via a Reverse Morris Trust transaction, which we refer to herein as the Merger.
In connection with the Merger, there is
a significant degree of difficulty inherent in the process of integrating the GoTo Business with our company. These difficulties include:
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the integration of the GoTo Business with our current businesses while carrying on the ongoing operations of all businesses;
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managing a significantly larger company than before the consummation of the Merger;
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coordinating geographically separate organizations;
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integrating the business cultures of both companies, which may prove to be incompatible;
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creating uniform standards, controls, procedures, policies and information systems and controlling the costs associated with such matters;
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integrating certain information technology, purchasing, accounting, finance, sales, billing, human resources, payroll and regulatory compliance systems; and
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the potential difficulty in retaining key officers and personnel.
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The process of integrating operations could
cause an interruption of, or loss of momentum in, the activities in one or more of our businesses. Members of our senior management may be required to devote considerable amounts of time to this integration process, which will decrease the time they
will have to manage the business of our company, serve the existing businesses, or develop new products or strategies. If our senior management is not able to effectively manage the integration process, or if any significant business activities are
interrupted as a result of the integration process, our business could suffer.
Our successful or cost-effective integration of the GoTo Business cannot
be assured. The failure to do so could have a material adverse effect on our business, financial condition or results of operations after the Merger.
Depending upon the facts and circumstances, we may be obligated to indemnify Citrix for certain taxes and certain
tax-related
losses.
In connection with the Merger, Citrix distributed shares of its GoTo subsidiary to
Citrix stockholders on a pro rata basis, which we refer to as the Distribution. The U.S. federal income tax consequences of the Distribution and Merger to Citrix and Citrix stockholders depend upon whether the contribution of specified assets and
liabilities of the GoTo Business, which we refer to herein as the Contribution and the Distribution, taken together, qualify as a reorganization under Sections 368(a) and 355 of the Internal Revenue Code of 1986, as amended, or the Code, and
the Merger qualifies as a reorganization under Section 368(a) of the Code, in each case based on the applicable facts and circumstances that existed on the date of the Distribution and the Merger. If each of the Distribution and Merger so
qualify, then (i) Citrix stockholders will generally not recognize any gain or loss for U.S. federal income tax purposes as a result of the Distribution or the Merger, except for any gain or loss attributable to the receipt of cash in lieu of
fractional shares of our common stock, and (ii) except for taxable income or gain possibly arising as a result of certain internal reorganization transactions undertaken prior to or in anticipation of the Distribution, Citrix will not recognize
any gain or loss. Citrix received a tax opinion in connection with the Contribution and Distribution, which we refer to as the Distribution Tax Opinion, that provides in part that the Contribution and Distribution, taken together, qualify as a
reorganization under Sections 368(a)(1)(D) and 355 of the Code. LogMeIn and Citrix have received opinions from our respective outside legal counsel that provide in part that the Merger qualifies as a reorganization under Section 368(a) of the
Code. These opinions are not binding on the Internal Revenue Service, or the IRS, or the courts, and the IRS or the courts may not agree with the conclusions reached in these opinions. There can be no assurance that the IRS will not successfully
assert that either or both of the Distribution and the Merger are taxable transactions, and that a court will not sustain such assertion, which could result in tax being incurred by Citrix stockholders and Citrix.
Even if the Contribution and Distribution, taken together, otherwise qualify as a reorganization under Sections 368(a) and 355 of the Code, the Distribution
will nonetheless be taxable to Citrix (but not to Citrix stockholders) pursuant to Section 355(e) of the Code if 50% or more of the stock of either Citrix or LogMeIn is acquired, directly or indirectly (taking into account our stock acquired by
Citrix stockholders in the
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Merger), as part of a plan or series of related transactions that includes the Distribution. In that regard, because Citrix stockholders owned more than 50% of our stock immediately following the
Merger, the Merger standing alone will not cause the Distribution to be taxable under Section 355(e) of the Code, and the Distribution Tax Opinion so provided. However, if the IRS were to determine that other acquisitions of Citrix stock or our
stock are part of a plan or series of related transactions that includes the Distribution, such determination could result in the recognition of gain by Citrix (but not by Citrix stockholders) for U.S. federal income tax purposes, and the amount of
taxes on such gain would likely be substantial.
Under the Amended and Restated Tax Matters Agreement that we entered into with Citrix in connection with
the Merger, which we refer to as the Tax Matters Agreement, which provides for, among other things, the allocation between Citrix, on the one hand, and LogMeIn, on the other hand, of certain tax assets and liabilities, LogMeIn may be obligated, in
certain cases, to indemnify Citrix against taxes and certain
tax-related
losses on the Distribution that arise as a result of LogMeIns actions, or failure to act. Any such indemnification obligation
would be substantial and would likely have a material adverse effect on us. In addition, even if we are not responsible for tax liabilities of Citrix under the Tax Matters Agreement, LogMeIn nonetheless could be liable under applicable law for such
liabilities if Citrix were to pay such taxes.
Under the Tax Matters Agreement, we are restricted from taking certain actions that may adversely
affect the intended U.S. federal income tax treatment of the Contribution, the Distribution, the Merger and certain related transactions consummated in connection with Citrixs internal reorganization, and such restrictions may significantly
impair our ability to implement strategic initiatives that otherwise would be beneficial.
The Tax Matters Agreement generally restricts us from
taking certain actions after the Merger that may adversely affect the intended U.S. federal income tax treatment of the Merger and certain related transactions consummated in connection with Citrixs internal reorganization. Failure to adhere
to these restrictions, including in certain circumstances that may be outside of our control, could result in tax being imposed on Citrix for which we could bear responsibility and for which we could be obligated to indemnify Citrix. In addition,
even if we are not responsible for tax liabilities of Citrix under the Tax Matters Agreement, we nonetheless could be liable under applicable tax law for such liabilities if Citrix were to fail to pay such taxes. Because of these provisions in the
Tax Matters Agreement, we are restricted from taking certain actions, particularly for the two years following the Merger, including (among other things) the ability to freely issue stock, to make acquisitions and to raise additional equity capital.
These restrictions could have a material adverse effect on our liquidity and financial condition, and otherwise could impair our ability to implement strategic initiatives. Also, our indemnity obligation to Citrix might discourage, delay or prevent
a change of control that our stockholders may consider favorable.
A significant portion of our historical revenues have come from the sale of
remote access and support products and a decline in sales for these products could adversely affect our results of operations and financial condition.
A significant portion of our annual revenues have historically come from the sale of remote access and remote support services and we continue to anticipate
that sales of our remote access and remote support products will constitute a majority of our revenue for the foreseeable future. Any decline or variability in sales of our remote access and remote support products could adversely affect our results
of operations and financial condition. Declines and variability in sales of these products could potentially occur as a result of:
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the growing use of mobile devices such as smartphones and tablet computers to perform functions that have been traditionally performed on desktops and laptops, resulting in less demand for these types of remote access
products;
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the introduction of new or alternative technologies, products or service offerings by competitors;
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our failure to innovate or introduce new product offerings, features and enhancements;
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potential market saturation or our inability to enter into new markets;
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increased price and product competition;
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dissatisfied customers; or
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general weak economic, industry or market conditions.
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If sales of our remote access and remote support
products decline as a result of these or other factors, our revenue would decrease and our results of operations and financial condition would be adversely affected.
Assertions by a third party that our services and solutions infringe its intellectual property, whether or not correct, could subject us to costly and
time-consuming litigation or expensive licenses.
There is frequent litigation in the software and technology industries based on allegations of
infringement or other violations of intellectual property rights. We have been, and may in the future be, subject to third party patent infringement or other intellectual property-related lawsuits as we face increasing competition and become
increasingly visible. Regardless of the merit of these claims, they can be time-consuming, result in costly litigation and diversion of technical and management personnel or require us to develop a
non-infringing
technology or enter into license agreements. There can be no assurance that such licenses will be available on acceptable terms and conditions, if at all, and although we have previously
licensed proprietary technology, we cannot be certain that the owners rights in such technology will not be challenged, invalidated or circumvented. For these reasons and because of the potential for court awards that are difficult to predict,
it is not unusual to find even arguably unmeritorious claims settled for significant amounts. In addition, many of our service agreements require us to indemnify our customers from certain third-party intellectual property infringement claims, which
could increase our costs as a result of defending such claims and may require that we pay damages if there were an adverse ruling related to any such claims. These types of claims could harm our relationship with our customers, deter future
customers from subscribing to our services or expose us to further litigation. These costs, monetary or otherwise, associated with defending against third party allegations of infringement could have negative effects on our business, financial
condition and operating results.
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If our services are used to commit fraud or other similar intentional or illegal acts, we may incur
significant liabilities, our services may be perceived as not secure, and customers may curtail or stop using our services.
Certain services
offered by us enable users to remotely access third-party computer systems. We do not control the use or content of information accessed by our customers through our services. If our services are used to commit fraud or other bad or illegal acts,
including, but not limited to, posting, distributing or transmitting any computer files that contain a virus or other harmful component, interfering or disrupting third-party networks, infringing any third partys copyright, patent, trademark,
trade secret or other proprietary rights or rights of publicity or privacy, transmitting any unlawful, harassing, libelous, abusive, threatening, vulgar or otherwise objectionable material, or accessing unauthorized third-party data, we may become
subject to claims for defamation, negligence or intellectual property infringement and subject to other potential liabilities. As a result, defending such claims could be expensive and time-consuming, and we could incur significant liability to our
customers and to individuals or businesses who were the targets of such acts. As a result, our business may suffer and our reputation may be damaged.
If we are unable to attract new customers to our services on a cost-effective basis, our revenue and results of operations will be adversely affected.
We must continue to attract a large number of customers on a cost-effective basis. We rely on a variety of marketing methods to attract new
customers to our services, such as paying providers of online services and search engines for advertising space and priority placement of our website in response to Internet searches. Our ability to attract new customers also depends on the
competitiveness of the pricing of our services. If our current marketing initiatives are not successful or become unavailable, if the cost of such initiatives were to significantly increase, or if our competitors offer similar services at lower
prices, we may not be able to attract new customers on a cost-effective basis and, as a result, our revenue and results of operations would be adversely affected.
If we are unable to retain our existing customers, our revenue and results of operations would be adversely affected.
The services offered by us are generally sold pursuant to agreements that are one year in duration. Customers have no obligation to renew their subscriptions
after their subscription period expires, and these subscriptions may not be renewed on the same or on more profitable terms. As a result, our ability to grow depends in part on subscription renewals. We may not be able to accurately predict future
trends in customer renewals, and our customers renewal rates may decline or fluctuate because of several factors, including their satisfaction or dissatisfaction with our services, the prices of our services, the prices of services offered by
our competitors or reductions in our customers spending levels. If our customers do not renew their subscriptions for our services, renew on less favorable terms, or do not purchase additional functionality or subscriptions, our revenue may
grow more slowly than expected or decline, and our profitability and gross margins may be harmed.
If we fail to convert free users to paying
customers, our revenue and financial results will be harmed.
A significant portion of our user base utilizes our services free of charge through
our free services or free trials of our premium services. We seek to convert these free and trial users to paying customers of our premium services. If our rate of conversion suffers for any reason, our revenue may decline and our business may
suffer.
If our efforts to build a strong brand identity are not successful, we may not be able to attract or retain subscribers and our operating
results may be adversely affected.
We believe that building and maintaining a strong brand identity plays an important role in attracting and
retaining subscribers to our services, who may have other options from which to obtain their remote connectivity services. In order to build a strong brand, we believe that we must continue to offer innovative remote connectivity services that our
subscribers value and enjoy using, and also market and promote those services through effective marketing campaigns, promotions and communications with our user base. From time to time, subscribers may express dissatisfaction with our services or
react negatively to our strategic business decisions, such as changes that we make in pricing, features or service offerings, including the discontinuance of our free services. To the extent that user dissatisfaction with our services or strategic
business decisions is widespread or not adequately addressed, our overall brand identity may suffer and, as a result, our ability to attract and retain subscribers may be adversely affected, which could adversely affect our operating results.
The markets in which we participate are competitive, with low barriers to entry, and if we do not compete effectively, our operating results may be
harmed.
The markets for remote-connectivity solutions are competitive and rapidly changing, with relatively low barriers to entry. With the
introduction of new technologies and market entrants, we expect competition to intensify in the future. In addition, pricing pressures and increased competition generally could result in reduced sales, reduced margins or the failure of our services
to achieve or maintain widespread market acceptance. Often, we compete against existing services that our potential customers have already made significant expenditures to acquire and implement.
Certain of our competitors offer, or may in the future offer, lower priced, or free, products or services that compete with our services. This competition may
result in reduced prices and a substantial loss of customers for our services or a reduction in our revenue.
Many of our services directly compete with
large, established competitors such as WebEx (a division of Cisco Systems), and certain of our services also compete with current or potential services offered by companies like Adobe, AgileBits, Amazon, Apple, BlueJeans Networks, Box, Dashlane,
Dropbox, GFI, Google, IBM, KeePass, LivePerson, Microsoft, OKTA, Oracle, PTC, Splashtop, TeamViewer and Zoom Video Communications. Our audio services also compete with solutions from AT&T, BT, InterCall, PGi, RingCentral, Verizon and Vonage.
Many of our actual and potential competitors enjoy competitive advantages over us, such as greater name recognition, longer operating histories, more varied services and larger marketing budgets, as well as substantially greater financial, technical
and other resources. In addition, many of our competitors have established marketing relationships, access to larger customer bases and have major distribution agreements with consultants, system integrators and resellers.
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If we are unable to compete effectively for any of these reasons, our operating results will be harmed.
We may not be able to capitalize on potential emerging market opportunities and new services that we introduce may not generate the revenue and earnings
we anticipated, which may adversely affect our business.
Our business strategy involves identifying emerging market opportunities which we can
capitalize on by successfully developing and introducing new services designed to address those market opportunities. We have made and expect to continue to make significant investments in research and development in an effort to capitalize on
potential emerging market opportunities that we have identified. Emerging markets and opportunities often take time to fully develop, and they attract a significant number of competitors. If the emerging markets we have targeted ultimately fail to
materialize as we or others have anticipated or if potential customers choose to adopt solutions offered by our competitors rather than our own solutions, we may not be able to generate the revenue and earnings we anticipated, and our business and
results of operations would be adversely affected.
Industry consolidation may result in increased competition.
Some of our competitors have made or may make acquisitions or may enter into partnerships or other strategic relationships to offer a more comprehensive
service than they individually had offered. In addition, new entrants not currently considered to be competitors may enter the market through acquisitions, partnerships or strategic relationships. We expect these trends to continue as companies
attempt to strengthen or maintain their market positions. Many of the companies driving this trend have significantly greater financial, technical and other resources than we do and may be better positioned to acquire and offer complementary
services and technologies.
The companies resulting from such combinations may create more compelling service offerings and may offer greater pricing
flexibility than we can or may engage in business practices that make it more difficult for us to compete effectively, including on the basis of price, sales and marketing programs, technology or service functionality. These pressures could result
in a substantial loss of customers or a reduction in our revenues.
We may not be able to respond to rapid technological changes in time to address
the needs of our customers, which could have a material adverse effect on our sales and profitability.
The cloud-based remote-connectivity
services market is characterized by rapid technological change, the frequent introduction of new services and evolving industry standards. Our ability to remain competitive will depend in large part on our ability to continue to enhance our existing
services and develop new service offerings that keep pace with the markets rapid technological developments. Additionally, to achieve market acceptance for our services, we must effectively anticipate and offer services that meet changing
customer demands in a timely manner.
Customers may require features and capabilities that our current services do not have. If we fail to develop
services that satisfy customer requirements in a timely and cost-effective manner, our ability to renew services with existing customers and our ability to create or increase demand for our services will be harmed, and our revenue and results of
operations would be adversely affected.
We use a limited number of data centers to deliver our services. Any disruption of service at these
facilities could harm our business.
The majority of our services are hosted from third-party data center facilities located throughout the world.
We do not control the operation of these facilities. The owners of our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on
commercially reasonable terms, we may be required to transfer to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so.
Any changes in third-party service levels at our data centers or any errors, defects, disruptions or other performance problems with our services could harm
our reputation and may damage our customers businesses. Interruptions in our services might reduce our revenue, cause us to issue credits to customers, subject us to potential liability, cause customers to terminate their subscriptions or harm
our renewal rates.
Our data centers are vulnerable to damage or interruption from human error, intentional bad acts, pandemics, earthquakes, hurricanes,
floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. At least one of our data facilities is located in an area known for seismic activity, increasing our
susceptibility to the risk that an earthquake could significantly harm the operations of these facilities. The occurrence of a natural disaster, an act of terrorism, vandalism or other misconduct, a decision to close the facilities without adequate
notice or other unanticipated problems could result in lengthy interruptions in our services.
Failure to comply with credit card processing
standards may cause us to lose the ability to offer our customers a credit card payment option, which would increase our costs of processing customer orders and make our services less attractive to customers, the majority of which purchase our
services with a credit card.
Major credit card issuers have adopted credit card processing standards and have incorporated these standards into
their contracts with us. If we fail to maintain compliance with applicable credit card processing and documentation standards adopted by the major credit card issuers, these issuers could terminate their agreements with us, and we could lose our
ability to offer our customers a credit card payment option. Most of our individual and small and
medium-sized
business, or SMB, customers purchase our services online with a credit card, and our business
depends substantially upon the ability to offer the credit card payment option. Any loss of our ability to offer our customers a credit card payment option would make our services less attractive and hurt our business. Our administrative costs
related to customer payment processing would also increase significantly if we were not able to accept credit card payments for our services.
Evolving regulations and legal obligations related to data privacy, data protection and information security and our actual or perceived failure to
comply with such obligations, could have an adverse effect on our business.
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Our handling of the data we collect from our customers, as further described in our privacy policy, and our
processing of personally identifiable information and data of our customers customers through the services we provide, is subject to a variety of laws and regulations, which have been adopted by various federal, state and foreign governments
to regulate the collection, distribution, use and storage of personal information of individuals. Several foreign countries in which we conduct business, including the European Economic Area, or EEA, and Canada, currently have in place, or have
recently proposed, laws or regulations concerning privacy, data protection and information security, which are more restrictive than those imposed in the United States. Some of these laws are in their early stages and we cannot yet determine the
impact these revised laws and regulations, if implemented, may have on our business. However, any failure or perceived failure by us to comply with these privacy laws, regulations, policies or obligations or any security incident that results in the
unauthorized release or transfer of personally identifiable information or other customer data in our possession, could result in government enforcement actions, litigation, fines and penalties and/or adverse publicity, all of which could have an
adverse effect on our reputation and business.
For example, the new
EEA-wide
General Data Protection Regulation,
or GDPR, entered into force in May 2016 and will become applicable on May 25, 2018, replacing the data protection laws of each EEA member state. The GDPR will implement more stringent operational requirements for processors and controllers of
personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, increased requirements to erase an individuals information upon request, mandatory data breach
notification requirements and higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. It also significantly increases penalties for
non-compliance,
including where we act as a service provider (e.g. data processor). If our privacy or data security measures fail to comply with applicable current or future laws and regulations, we may be
subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data or our marketing practices, fines, for example, of up to 20 million Euros or up to 4% of the total worldwide annual
turnover of the preceding financial year (whichever is higher) under the GDPR, or other liabilities, as well as negative publicity and a potential loss of business.
We are also subject to evolving EEA laws on data export, as we may transfer personal data from the EEA to other jurisdictions. We currently rely upon the
EU-U.S.
Privacy Shield Framework and Swiss Privacy Shield as a means for legitimizing the transfer of personally identifiable information from the EEA to the United States. However, there is currently litigation
against this framework as well as litigation challenging other EU mechanisms for adequate data transfers (e.g. the standard contractual clauses), and it is uncertain whether the Privacy Shield framework and/or the standard contractual clauses will
be similarly invalidated by the European courts. We rely on a mixture of mechanisms to transfer data to/from the EEA to the U.S., and we could be impacted by changes in law as a result of the current challenges to these mechanisms in the European
courts which may lead to governmental enforcement actions, litigation, fines and penalties or adverse publicity which could have an adverse effect on our reputation and business.
Data protection regulation remains an area of increased focus in all jurisdictions and data protection regulations continue to evolve. There is no assurance
that we will be able to meet new requirements that may be imposed on the transfer of personally identifiable information from the EU to the United States without incurring substantial expense or at all. European and/or multi-national customers may
be reluctant to purchase or continue to use our services due to concerns regarding their data protection obligations. In addition, we may be subject to claims, legal proceedings or other actions by individuals or governmental authorities if they
have reason to believe that our data privacy or security measures fail to comply with current or future laws and regulations.
We are required to
comply with certain financial and operating covenants under our credit facility; any failure to comply with those covenants could cause amounts borrowed to become immediately due and payable or prevent us from borrowing under the facility.
We have a credit agreement with a syndicate of banks pursuant to which we have a $400 million secured revolving credit facility which is
available to us through February 1, 2022, at which time any amounts outstanding will be due and payable in full. At March 31, 2018, we did not have any outstanding borrowings under the credit facility. On April 2, 2018, we borrowed
$200 million under the credit facility to partially fund our acquisition of Jive Communications, Inc. We may wish to borrow amounts under the facility in the future for general corporate purposes, including, but not limited to, the potential
acquisition of complementary products or businesses, and share repurchases, as well as for working capital.
Under our credit agreement, we are, or will
be, required to comply with certain financial and operating covenants which will limit our ability to operate our business as we otherwise might operate it. Our failure to comply with any of these covenants or to meet any payment obligations under
the credit facility could result in an event of default which, if not cured or waived, would result in any amounts outstanding, including any accrued interest and unpaid fees, becoming immediately due and payable. We might not have sufficient
working capital or liquidity to satisfy any repayment obligations in the event of an acceleration of those obligations. In addition, if we are not in compliance with the financial and operating covenants at the time we wish to borrow additional
funds, we will be unable to borrow such funds.
The loss of key employees or an inability to attract and retain additional personnel may impair our
ability to grow our business.
We are highly dependent upon the continued service and performance of our executive management team as well as other
key technical and sales employees. These key employees are not party to an employment agreement with us, and they may terminate their employment at any time with no advance notice. The replacement of these key employees likely would involve
significant time and costs, and the loss of these key employees may significantly delay or prevent the achievement of our business objectives.
We face
intense competition for qualified individuals from numerous technology, software and manufacturing companies. For example, our competitors may be able to attract and retain a more qualified engineering team by offering more competitive compensation
packages. If we are unable to attract new engineers and retain our current engineers, we may not be able to develop and maintain our services at the same levels as our competitors and we may, therefore, lose potential customers and sales penetration
in certain markets. Our failure to attract and retain suitably qualified individuals could have an adverse effect on our ability to implement our business plan and, as a result, our ability to compete would decrease, our operating results would
suffer and our revenues would decrease.
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Our long-term success depends, in part, on our ability to expand the sales of our services to customers
located outside of the United States, and thus our business is susceptible to risks associated with international sales and operations.
We
currently maintain offices and have sales personnel outside of the United States and are expanding our international operations. Our international expansion efforts may not be successful. In addition, conducting international operations subjects us
to new risks than we have generally faced in the United States. These risks include:
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localization of our services, including translation into foreign languages and adaptation for local practices and regulatory requirements;
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lack of familiarity with and unexpected changes in foreign regulatory requirements;
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longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
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difficulties in managing and staffing international operations;
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fluctuations in currency exchange rates;
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potentially adverse tax consequences, including the complexities of foreign value-added or other tax systems;
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dependence on certain third parties, including channel partners with whom we do not have extensive experience;
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the burdens of complying with a wide variety of foreign laws and legal standards;
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increased financial accounting and reporting burdens and complexities;
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political, social and economic instability abroad, terrorist attacks and security concerns in general; and
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reduced or varied protection for intellectual property rights in some countries.
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Operating in international
markets also requires significant management attention and financial resources. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability.
Failure to effectively and efficiently service SMBs would adversely affect our ability to increase our revenue.
We market and sell a significant amount of our services to SMBs. SMBs are challenging to reach, acquire and retain in a cost-effective manner. To grow our
revenue quickly, we must add new customers, sell additional services to existing customers and encourage existing customers to renew their subscriptions. Selling to and retaining SMBs is more difficult than selling to and retaining large enterprise
customers because SMB customers generally:
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have high failure rates;
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are difficult to reach with targeted sales campaigns;
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have high churn rates in part because of the scale of their businesses and the ease of switching services; and
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generate less revenue per customer and per transaction.
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In addition, SMBs frequently have limited budgets and
may choose to spend funds on items other than our services. Moreover, SMBs are more likely to be significantly affected by economic downturns than larger, more established companies, and if these organizations experience economic hardship, they may
be unwilling or unable to expend resources on IT.
If we are unable to market and sell our services to SMBs with competitive pricing and in a
cost-effective manner, our ability to grow our revenue and maintain profitability will be harmed.
If we fail to meet the minimum service level
commitments offered to some of our customers, we could be obligated to issue credits for future services or pay penalties to customers, which could significantly harm our revenue.
Some of our current customer agreements provide minimum service level commitments addressing uptime, functionality or performance. If we are unable to meet the
stated service level commitments for these customers or our services suffer extended periods of unavailability, we are or may be contractually obligated to provide these customers with credits for future services or pay other penalties. Our revenue
could be significantly impacted if we are unable to meet our service level commitments and are required to provide a significant amount of our services at no cost or pay other penalties. We do not currently have any reserves on our balance sheet for
these commitments.
Our sales cycles for enterprise customers can be long, unpredictable and require considerable time and expense, which may cause
our operating results to fluctuate.
The timing of our revenue from sales to enterprise customers is difficult to predict. These efforts require us
to educate our customers about the use and benefit of our services, including the technical capabilities and potential cost savings to an organization. Enterprise customers typically undertake a significant evaluation process that has in the past
resulted in a lengthy sales cycle, typically several months. We spend substantial time, effort and money on our enterprise sales efforts without any assurance that these efforts will produce any sales. In addition, service subscriptions are
frequently subject to budget constraints and unplanned administrative, processing and other delays. If sales expected from a specific customer for a particular quarter are not realized in that quarter or at all, our results could fall short of
public expectations and our business, operating results and financial condition could be adversely affected.
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Adverse economic conditions or reduced IT spending may adversely impact our revenues and profitability.
Our business depends on the overall demand for IT and on the economic health of our current and prospective customers. The use of our service is
often discretionary and may involve a commitment of capital and other resources. Weak economic conditions in the United States, European Union and other key international economies may affect the rate of IT spending and could adversely impact our
customers ability or willingness to purchase our services, delay prospective customers purchasing decisions, reduce the value or duration of their subscription contracts, or affect renewal rates, all of which could have an adverse effect
on our business, operating results and financial condition.
Our success depends in large part on our ability to protect and enforce our
intellectual property rights.
We rely on a combination of patent, copyright, service mark, trademark and trade secret laws, as well as
confidentiality procedures and contractual restrictions, to establish and protect our intellectual property rights, all of which provide only limited protection. In addition, we have patented certain technologies used to provide our services and
have additional patents pending. We cannot assure you that any patents will issue from our currently pending patent applications in a manner that gives us the protection sought, if at all, or that any future patents issued will not be challenged,
invalidated or circumvented. Any patents that may issue in the future from pending or future patent applications may not provide sufficiently broad protection or they may not prove to be enforceable in actions against alleged infringers. Also, we
cannot assure you that any future service mark or trademark registrations will be issued for pending or future applications or that any registered service marks or trademarks will be enforceable or provide adequate protection of our proprietary
rights.
We endeavor to enter into agreements with our employees and contractors and agreements with parties with whom we do business to limit access to
and disclosure of our proprietary information. The steps we have taken, however, may not prevent unauthorized use or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive to ours or
infringe our intellectual property. Enforcement of our intellectual property rights also depends on our successful legal actions against these infringers, but these actions may not be successful, even when our rights have been infringed.
Furthermore, effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which our services are
available. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in Internet-related industries are uncertain and still evolving.
Our use of open source software could negatively affect our ability to sell our services and subject us to possible litigation.
A portion of the technologies we license incorporate
so-called
open source software, and we may incorporate
additional open source software in the future. Open source software is generally licensed by its authors or other third parties under open source licenses. If we fail to comply with these licenses, we may be subject to certain conditions, including
requirements that we offer our services that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and/or that
we license such modifications or derivative works under the terms of the particular open source license. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one
or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our services that contained the open source software and
required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of our services.
We rely on third-party
software, including server software and licenses from third parties to use patented intellectual property that is required for the development of our services, which may be difficult to obtain or which could cause errors or failures of our services.
We rely on software licensed from third parties to offer our services, including server software from Microsoft and patented third-party
technology. In addition, we may need to obtain future licenses from third parties to use intellectual property associated with the development of our services, which might not be available to us on acceptable terms, or at all. Any loss of the right
to use any software required for the development and maintenance of our services could result in delays in the provision of our services until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated,
which could harm our business. Any errors or defects in third-party software could result in errors or a failure of our services which could harm our business.
Material defects or errors in the software that we use to deliver our services could harm our reputation, result in significant costs to us and impair
our ability to sell our services.
The software applications underlying our services are inherently complex and may contain material defects or
errors, particularly when first introduced or when new versions or enhancements are released. We have from time to time found defects in our services, and new errors in our existing services may be detected in the future. Any defects that cause
interruptions to the availability of our services could result in:
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a reduction in sales or delay in market acceptance of our services;
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sales credits or refunds to customers;
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loss of existing customers and difficulty in attracting new customers;
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diversion of development resources;
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increased insurance costs.
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After the release of our services, defects or errors may also be identified from
time to time by our internal team and by our customers. The costs incurred in correcting any material defects or errors in our services may be substantial and could harm our operating results.
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Government regulation of the Internet, telecommunications and other communications technologies could harm
our business and operating results.
As Internet commerce and telecommunications continue to evolve, increasing regulation by federal, state or
foreign governments and agencies becomes more likely. For example, we believe increased regulation is likely in the area of data privacy, and laws and regulations applying to the solicitation, collection, processing or use of personal or consumer
information could affect our customers ability to use and share data, potentially reducing demand for our products and services. In addition, taxation of products and services provided over the Internet or other charges imposed by government
agencies or by private organizations for accessing the Internet or utilizing telecommunications services may also be imposed. Any regulation imposing greater fees for Internet use or restricting the exchange of information over the Internet could
diminish the viability of our services, which could harm our business and operating results.
Our software products contain encryption technologies,
certain types of which are subject to U.S. and foreign export control regulations and, in some foreign countries, restrictions on importation and/or use. We have submitted encryption products for technical review under U.S. export regulations and
have received the necessary approvals. Any failure on our part to comply with encryption or other applicable export control requirements could result in financial penalties or other sanctions under the U.S. export regulations, which could harm our
business and operating results. Foreign regulatory restrictions could impair our access to technologies that we seek for improving our products and services and may also limit or reduce the demand for our products and services outside of the United
States.
Given our levels of share-based compensation, our effective tax rate may vary significantly depending on our stock price.
The tax effects of the accounting for share-based awards may significantly impact our effective tax rate from period to period. In periods in which our stock
price is higher than the grant price of the share-based awards vested or expired in that period, we will recognize excess tax benefits that will decrease our effective tax rate. For example, in 2017, excess tax benefits recognized from share-based
awards resulted in a benefit from income taxes of $16.0 million. In future periods in which our stock price is lower than the grant price of the share-based awards vested or expired in that period, our effective tax rate may increase. The
amount and value of share-based awards vested or expired relative to our earnings in a period will also affect the magnitude of the impact of share-based awards on our effective tax rate. These tax effects are dependent on our stock price, which we
do not control, and a decline in our stock price could significantly increase our effective tax rate and adversely affect our financial results.
Uncertainties in the interpretation and application of the Tax Cuts and Jobs Act of 2017 could materially affect our tax obligations and effective tax
rate.
The Tax Cuts and Jobs Act of 2017 was enacted on December 22, 2017 and has affected U.S. tax law by changing U.S. federal income
taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, adopting elements of a territorial tax system, imposing a
one-time
transition tax, or repatriation tax, on all undistributed earnings and profits of certain U.S.-owned foreign corporations, revising the rules governing net operating losses and the rules governing foreign
tax credits, and introducing new anti-base erosion provisions. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply the law and impact our results of
operations in the period issued.
The results of the United Kingdoms referendum on withdrawal from the European Union may have a negative
effect on global economic conditions, financial markets and our business.
In June 2016, a majority of voters in the United Kingdom elected to
withdraw from the European Union in a national referendum. The referendum was advisory, and the terms of any withdrawal are subject to a negotiation period that could last at least two years after the government of the United Kingdom formally
initiates a withdrawal process. Nevertheless, the referendum has created significant uncertainty about the future relationship between the United Kingdom and the European Union, including with respect to the laws and regulations that will apply as
the United Kingdom determines which European Union laws to replace or replicate in the event of a withdrawal. The referendum may also give rise to calls for the governments of other European Union member states to consider withdrawal. These
developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market
liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our
business, financial condition and results of operations and reduce the price of our common stock.
Our operating results may be harmed if we are
required to collect sales or other related taxes for our subscription services or pay regulatory fees in jurisdictions where we have not historically done so.
Primarily due to the nature of our services in certain states and countries, we do not believe we are required to collect sales or other related taxes from our
customers in certain states or countries. However, one or more other states or countries may seek to impose sales, regulatory fees or other tax collection obligations on us, including for past sales by us or our resellers and other partners. A
successful assertion that we should be collecting sales or other related taxes on our services or paying regulatory fees could result in substantial tax liabilities for past sales, discourage customers from purchasing our services or otherwise harm
our business and operating results.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted
in the United States.
Generally accepted accounting principles in the United States, or GAAP, are subject to interpretation by the Financial
Accounting Standards Board, or FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting principles or interpretations could have a significant effect on our reported financial
results for subsequent periods and prior periods, if retrospectively adopted. Additionally, the adoption of new standards may potentially require enhancements or changes in our systems and may require significant time and cost on behalf of our
financial management. The prescribed periods of adoption of new standards and other pending changes in accounting principles generally accepted in the United States, are further discussed in Managements Discussion and Analysis of
Financial Condition and Results of Operations Recently Issued Accounting Pronouncements.
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Risks Related to Ownership of Our Common Stock
Our failure to raise additional capital or generate the cash flows necessary to expand our operations and invest in our services could reduce our ability
to compete successfully.
We may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable
terms, if at all. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests, and the per share value of our common stock could decline. If we engage in debt financing, we may be
required to accept terms that restrict our ability to pay dividends or make distributions, incur additional indebtedness and force us to maintain specified liquidity or other ratios. If we need additional capital and cannot raise it on acceptable
terms, we may not be able to, among other things:
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develop or enhance services;
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continue to expand our development, sales and marketing organizations;
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acquire complementary technologies, products or businesses;
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expand our operations, in the United States or internationally;
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hire, train and retain employees; or
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respond to competitive pressures or unanticipated working capital requirements.
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Our stock price may be
volatile, and the market price of our common stock may drop in the future.
During the period from our initial public offering in July 2009 through
April 23, 2018, our common stock has traded as high as $134.80 and as low as $15.15. An active, liquid and orderly market for our common stock may not be sustained, which could depress the trading price of our common stock. Some of the factors
that may cause the market price of our common stock to fluctuate include:
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the success or failure of acquisitions as well as our ability to realize anticipated growth opportunities and other financial and operating benefits therefrom;
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fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
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fluctuations in our recorded revenue, even during periods of significant sales order activity;
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changes in estimates of our financial results or recommendations by securities analysts;
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failure of any of our services to achieve or maintain market acceptance;
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changes in market valuations of companies perceived to be similar to us;
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announcements regarding changes to our current or planned products or services;
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success of competitive companies, products or services;
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changes in our capital structure, such as future issuances of securities or the incurrence of debt;
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announcements by us or our competitors of significant new services, contracts, acquisitions or strategic alliances;
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regulatory developments in the United States, foreign countries or both;
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litigation, including stockholder litigation and/or class action litigation, involving our company, our services or our general industry, as well as announcements regarding developments in
on-going
litigation matters;
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additions or departures of key personnel;
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general perception of the future of the remote-connectivity market or our services;
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investors general perception of us; and
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changes in general economic, industry and market conditions.
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In addition, if the market for technology stocks
or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it
could cause our stock price to fall and may expose us to class action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
There can be no assurance that we will continue to pay dividends or repurchase stock.
On February 23, 2017, our Board of Directors approved a three-year capital return plan. Pursuant to this plan, we intend to return up to $700 million
to our stockholders through a combination of share repurchases and dividends. As part of this capital return plan, we intend to pay a quarterly cash dividend, subject to quarterly declarations by our Board of Directors. Any future declarations,
amount and timing of any dividends and/or the amount and timing of any stock repurchases are subject to capital availability and determinations by our Board of Directors that cash dividends and/or stock repurchases are in the best interest of our
stockholders. Our ability to repurchase our shares and/or
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pay dividends to our stockholders is also subject to our maintaining compliance with our credit facility covenants as well as any potential tax restrictions which may be imposed on us related to
the Merger. Our ability to pay dividends and/or repurchase stock will depend upon, among other factors, our cash balances and potential future capital requirements for strategic transactions, including acquisitions, debt service requirements,
results of operations, financial condition and other factors beyond our control that our Board of Directors may deem relevant. A reduction in or elimination of our dividend payments, our dividend program and/or stock repurchases could have a
negative effect on our stock price.
If securities or industry analysts who cover us, our business or our market publish a negative report or change
their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock is
influenced by the research and reports that industry or securities analysts publish about us, our business, our market or our competitors. If any of the analysts who cover us or may cover us in the future publish a negative report or change their
recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline.
Certain stockholders could attempt to influence changes within the Company which could adversely affect our operations, financial condition and the
value of our common stock.
Our stockholders may from
time-to-time
seek to acquire a controlling stake in our company, engage in proxy solicitations, advance stockholder proposals or otherwise attempt to effect changes. Campaigns by stockholders to effect changes at publicly-traded companies are sometimes led by
investors seeking to increase short-term stockholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases or sales of assets or the entire company. Responding to proxy contests and other actions
by activist stockholders can be costly and time-consuming, and could disrupt our operations and divert the attention of our Board of Directors and senior management from the pursuit of our business strategies. These actions could adversely affect
our operations, financial condition and the value of our common stock.
Anti-takeover provisions contained in our certificate of incorporation and
bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our certificate of incorporation, bylaws and Delaware law contain
provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our Board of Directors. Our corporate governance documents include provisions:
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establishing that our Board of Directors is divided into three classes, with each class serving three-year staggered terms;
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authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;
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limiting the liability of, and providing indemnification to, our directors and officers;
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limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;
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requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our Board of Directors;
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controlling the procedures for the conduct and scheduling of our Board of Directors and stockholder meetings;
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providing our Board of Directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled special meetings;
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restricting the forum for certain litigation brought against us to Delaware;
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providing our Board of Directors with the exclusive right to determine the number of directors on our Board of Directors and the filling of any vacancies or newly created seats on our Board of Directors; and
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providing that directors may be removed by stockholders only for cause.
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These provisions, alone or together,
could delay hostile takeovers and changes in control of our company or changes in our management.
As a Delaware corporation, we are also subject to
provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which generally prevents certain interested stockholders, including a person who beneficially owns 15% or more of our outstanding common stock, from
engaging in certain business combinations with us within three years after the person becomes an interested stockholder unless certain approvals are obtained. Any provision of our certificate of incorporation or by-laws or Delaware law that has the
effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common
stock.
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