Item 1A. Risk Factors
You should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our Class A common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also impair our business, financial condition, results of operations, and growth prospects. You should not interpret our disclosure of any of the following risks to imply that such risks have not already materialized.
Risk Factors Summary
Below is a summary of the principal factors that make an investment in our Class A common stock speculative or risky:
• Although we recently generated net income, we have a history of losses and we may not be able to sustain profitability.
• We have a limited operating history at our current scale, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
• Macroeconomic uncertainties, including inflationary pressures, supply chain disruptions, labor shortages, significant volatility in global markets, and recession risks have in the past and may continue to adversely affect our business, future results of operations, and financial condition, the effects of which remain uncertain.
• Our quarterly results may fluctuate significantly and may not meet our expectations or those of investors or securities analysts.
• Sales efforts to large customers, which are a growing part of our business involve risks that may not be present or that are present to a lesser extent with respect to sales to smaller organizations. If we fail to effectively manage these risks, our business, financial condition, and results of operations may be adversely affected.
• If we are unable to attract new customers, convert customers using our trial versions into paying customers, and expand usage of our products within or across organizations, our revenue growth would be harmed.
• Our ability to attract new customers and increase revenue from existing customers depends on our ability to develop new features, integrations, capabilities, and enhancements and to partner with third parties to design complementary products.
• Failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, standards, and other obligations related to data privacy or security (including security incidents) could harm our business. Compliance or the actual or perceived failure to comply with such obligations could increase the costs of our products and services, limit their use or adoption, and otherwise negatively affect our operating results and business.
• We have experienced significant growth in recent periods and our recent growth rates may not be indicative of our future growth.
• Our business depends substantially on our customers renewing their subscriptions and purchasing additional subscriptions from us. Any decline in our customer retention would harm our future operating results.
• We operate in a highly competitive industry, and competition presents an ongoing threat to the success of our business.
• We recognize revenue from subscriptions over the term of our customer contracts. Consequently, downturns or upturns in new sales may not be immediately reflected in our operating results and may be difficult to discern.
• We track certain key business metrics, which are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and materially adversely affect our stock price, business, results of operations, and financial condition.
• We believe our long-term value as a company will be greater if we focus on growth, which may negatively impact our profitability.
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• The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our stock prior to our initial public offering, including our executive officers, employees, and directors and their affiliates, and limiting your ability to influence corporate matters, which could adversely affect the trading price of our Class A common stock.
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Risks Related to Our Business
Although we recently generated net income, we have a history of losses and we may not be able to sustain profitability.
Other than the fiscal year ended December 31, 2025, we have incurred net losses in each fiscal year since our founding. We generated net income of $183.7 million and incurred a net loss $95.4 million for the years ended December 31, 2025 and 2024. As of December 31, 2025, we had an accumulated deficit of $3.6 billion. Although we generated net income in the fiscal year ended December 31, 2025, we cannot assure you that we will sustain profitability. Any failure by us to sustain profitability could cause the value of our Class A common stock to decline. Our losses reflect, among other things, the significant investments we made to develop and commercialize our products, serve our existing customers, and broaden our customer base.
As a result of expected investments and expenditures related to the growth of our business, we may experience losses in future periods and these losses may be significantly greater than the losses we would incur if we developed our business more slowly. In addition, we may find that these efforts are more expensive than we currently anticipate or that they may not result in increases in our revenue.
We have experienced significant growth in recent periods and our recent growth rates may not be indicative of our future growth.
We have experienced significant growth in recent periods. Even if our revenue continues to increase, we expect that our revenue growth rate may continue to decline in the future as a result of a variety of factors, including the maturation of our business. O ur growth may continue to be impacted by macroeconomic factors beyond our control, including, but not limited to high interest rates, inflation, foreign exchange rate volatility, global geopolitical uncertainties, and supply-chain issues. Further, as we operate in a rapidly changing industry, widespread acceptance and use of our products are critical to our future growth and success. We believe our revenue growth depends on a number of factors, including, but not limited to, our ability to:
• attract new customers;
• grow or maintain our net dollar retention rate, expand usage within organizations, and sell additional subscriptions;
• gain continued acceptance and use of our products both inside and outside of the United States;
• expand the features and capabilities of our products, including artificial intelligence (AI) and machine learning features;
• increase awareness of our brand on a global basis;
• provide excellent customer experience and customer service;
• price our subscription plans effectively;
• continue to successfully expand our sales force;
• maintain the security and reliability of our products;
• successfully compete against and withstand competitive pressure from established companies and new market entrants; and
• comply with existing and new applicable laws and regulations.
We may not successfully accomplish any of these objectives, and as a result, it is difficult for us to forecast our future results of operations. If we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve (or, if achieved, maintain) profitability. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth.
In addition, in order to fuel our growth, we expect to continue to expend substantial financial and other resources on:
• expansion and enablement of our sales, services, and marketing organization to increase brand awareness and drive adoption of our products;
• product development, including investments in our product development team and the development of new products and new features and functionality, as well as investments in further differentiating our existing offerings;
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• strategic technology and sales channel partnerships;
• acquisitions or strategic investments; and
• general administration, including legal and accounting expenses associated with being a public company.
These investments may not result in increased revenue in our business. If we are unable to maintain or increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position, and results of operations will be harmed, and we may not be able to achieve or maintain profitability. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If our revenue does not meet our expectations in future periods, our business, financial position, and results of operations may be harmed.
We have a limited operating history at our current scale, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We have been growing significantly in recent periods and, as a result, have a relatively short history operating our business at its current scale. The growth and expansion of our business and products may place a significant strain on our management and our operational and financial resources. To keep growing successfully, we will need to:
• Strengthen our technology systems and financial infrastructure;
• Improve security and compliance processes;
• Manage relationships with partners and customers effectively; and
• Scale our team and operations efficiently.
Additionally, we operate in an industry that is characterized by rapid technological innovation, intense competition, changing customer needs, and frequent introductions of new products, technologies, and services. If we cannot keep pace with these changes or fail to build the right systems and processes, we may struggle to manage our growth and accurately predict our financial performance.
Our future growth rate is subject to a number of uncertainties, such as general economic and market conditions, including high inflation and recessionary or other uncertain economic environments. If general economic and market conditions diminish the rate of global IT spending, the demand for our products would be adversely affected. If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in the market, or if we do not address these risks successfully, our results of operations could fall short of our expectations, and our business, results of operations, and financial condition would suffer.
Macroeconomic uncertainties, including inflationary pressures, rising interest rates, supply chain disruptions, labor market volatility, geopolitical tensions, and recession risks, have in the past adversely affected and may continue to adversely affect our business, future results of operations, and financial condition.
Global economic and business activities continue to face widespread macroeconomic uncertainties, including inflation, supply chain disruptions, labor shortages, as well as recession risks, which may continue for an extended period and which have resulted and may in the future result in decreased business spending by our customers and prospective customers and business partners and third-party business partners, reduced demand for our products, lower renewal rates by our customers, longer or delayed sales cycles, including due to existing customers and prospective customers delaying contracts, entering into new subscriptions, renewing existing subscriptions, or reducing budgets related to the products that we offer, all of which could have an adverse impact on our business operations and financial condition.
The technology industry in particular has experienced heightened sensitivity to macroeconomic conditions, with enterprise technology spending often viewed as discretionary and subject to deferral during periods of economic uncertainty. Our customers have in the past and may continue to respond to macroeconomic pressures by reducing their technology budgets, delaying implementations, seeking shorter contract terms, or demanding more favorable pricing, all of which could have an adverse impact on our business operations, financial condition, and growth prospects.
To the extent that macroeconomic uncertainties continue to harm our business, many of the other risks described in these risk factors may be exacerbated including, but not limited to, those relating to our ability to increase sales to existing and new customers, develop and deploy new offerings and applications and maintain effective marketing and sales capabilities.
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Our quarterly results have and may continue to fluctuate significantly and may not meet our expectations or those of investors or securities analysts.
Our quarterly results of operations, including the levels of our revenue, deferred revenue, working capital, and cash flows, have varied significantly in the past and may vary significantly in the future, such that period-to-period comparisons of our results of operations may not be meaningful. Our quarterly financial results have and may continue to fluctuate due to a variety of factors, many of which are outside of our control and have been, and may continue to be, difficult to predict, including, but not limited to:
• the level of demand for our products;
• our ability to grow or maintain our net dollar retention rate, expand usage within organizations, and sell subscriptions;
• the timing and success of new features, integrations, capabilities, and enhancements by us to our products, or by our competitors to their products, or any other changes in the competitive landscape of our market;
• our ability to achieve continued acceptance and use of our products;
• errors in our forecasting of the demand for our products, which would lead to lower revenue, increased costs, or both;
• the amount and timing of operating expenses and capital expenditures, as well as entry into operating leases, that we may incur to maintain and expand our business and operations and to remain competitive;
• the timing of expenses and recognition of revenue;
• the continued ability to hire high quality and experienced talent in a fiercely competitive environment;
• pricing pressure as a result of competition or otherwise;
• seasonal buying patterns for software spending;
• declines or increases in the values of foreign currencies, primarily the Indian rupee, British pound, and euro, relative to the U.S. dollar;
• general economic conditions in either domestic or international markets, including inflationary pressures and geopolitical uncertainty and instability and their effects on software spending;
• security breaches, technical difficulties, or interruptions to our products;
• the timing of the grant or vesting of equity awards to employees, directors, or consultants;
• changes in, and continuing uncertainty in relation to, the legislative or regulatory environment;
• legal and regulatory compliance costs in new and existing markets;
• costs and timing of expenses related to the acquisition of businesses, talent, technologies, or intellectual property, including potentially significant amortization costs and possible write-downs;
• adverse litigation judgments, other dispute-related settlement payments, or other litigation-related costs; and
• health epidemics, influenza, and other highly communicable diseases or viruses.
Any one or more of the factors above may result in significant fluctuations in our quarterly results of operations, which may negatively impact the trading price of our Class A common stock. You should not rely on our past results as an indicator of our future performance.
Sales efforts to large customers involve risks that may not be present or that are present to a lesser extent with respect to sales to smaller organizations.
Larger customers are becoming a bigger part of our business. Sales to large customers involve longer sales cycles, more complex customer requirements, substantial upfront sales costs, and less predictability in completing some of our sales. A number of factors influence the length and variability of our sales cycle, including the need to educate potential customers about the uses and benefits of our products, the considerable time spent by potential customers to evaluate and test our products prior to making a purchase decision, the discretionary nature of purchasing and budget cycles, and the competitive nature of
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evaluation and purchasing approval processes. Our typical sales cycle for mid-market and enterprise customers is approximately 130 to 150 days, compared to 30 days for SMB customers. Moreover, large customers are often more demanding than other customers and begin to deploy our products on a limited basis, but, nevertheless require implementation services and negotiate pricing discounts or other onerous terms, which increase our upfront investment in the sales effort with no guarantee that sales to these customers will justify our substantial upfront investment, which can affect our roadmaps and deliverables. If we fail to effectively manage these risks associated with sales cycles and sales to large customers, our business, financial condition, and results of operations may be adversely affected.
If we are unable to attract new customers, convert customers using our trial versions into paying customers, and expand usage of our products within or across organizations, our revenue growth would be harmed.
To increase our revenue and achieve profitability, we must increase our customer base through various methods, including, but not limited to, adding new customers, converting customers using our free trial versions into paying customers, and expanding usage across our existing customers' organizations. We encourage customers on our base level paid plans to upgrade to plans with more features and to incorporate add-ons. Additionally, we seek to expand within organizations by having organizations add new users, upgrade their plans, or expand their use of our products into other departments within the organization. While we have experienced significant growth in the number of customers on our products, we do not know whether we will continue to achieve similar customer growth rates in the future. Numerous factors may impede our ability to add new customers, convert customers using free trial versions into paying customers, expand usage within organizations, and sell subscriptions to our products, including but not limited to, our failure to attract, retain, and effectively train and motivate new sales and marketing personnel, develop or expand relationships with our partners, compete effectively against alternative products or services, successfully deploy new features and integrations, provide a quality customer experience and customer support, or ensure the effectiveness of our marketing programs.
In addition, because many of our new customers originate from word-of-mouth and other non-paid referrals from existing customers, we must ensure that our existing customers continue using our products in order for us to benefit from those referrals.
Our ability to attract new customers and increase revenue from existing customers depends on our ability to develop new features, integrations, capabilities, and enhancements, and to partner with third parties to design complementary products.
Our ability to attract new customers and increase revenue from existing customers depends in large part on our ability to continually enhance and improve our products and the features, integrations, and capabilities we offer, and to introduce compelling new features, integrations, and capabilities that reflect the changing nature of our market. Accordingly, we must continue to invest in research and development and in our ongoing efforts to improve and enhance our products. The success of any enhancement to our products depends on several factors, including timely completion and delivery, competitive pricing, adequate quality testing, integration with existing technologies, and overall market acceptance. Any new features, integrations, and capabilities that we develop may not be introduced in a timely or cost-effective manner, may contain errors, failures, vulnerabilities, or bugs, or may not achieve the market acceptance necessary to generate significant revenue.
Our ability to grow is also subject to the risk of future disruptive technologies. Uncertainty around new and emerging AI applications, such as generative AI content creation, has required and may continue to require additional investment in the development of proprietary datasets, machine learning models and systems to test for accuracy, bias and other variables, which are often complex. Developing, testing and deploying AI systems may also increase the cost profile of our offerings due to the nature of the computing costs involved in such systems.
Additionally, we rely on third parties to develop products that are complementary to ours in order to retain existing customers and attract new customers. In order for such complementary products to enhance our customers’ use of our products, we must maintain interoperability as described further below.
Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our ability to attract and expand our base of customers may be impaired, and our business and results of operations will be harmed.
We believe that the brand identity that we have developed has significantly contributed to the success of our business with our existing customer base. We also believe that maintaining and enhancing the “Freshworks” brand is critical to expanding our customer base and establishing and maintaining relationships with partners. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to ensure that our products remain high-quality, reliable, and useful at competitive prices, as well as with respect to our free trial version. Maintaining and enhancing our brand may require us to make substantial investments, and these investments may not be successful. If we fail to promote and maintain the
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“Freshworks” brand, or if we incur excessive expenses in this effort, our business, results of operations, and financial condition would be adversely affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brand may become more difficult and expensive.
Our business depends substantially on our customers renewing their subscriptions and purchasing additional subscriptions from us. Any decline in our customer retention would harm our future operating results.
Our business is primarily subscription based, and customers are not obligated to and may not renew their subscriptions after their existing subscriptions expire. In order for us to maintain or improve our operating results, it is important that our customers renew their subscriptions when the initial contract term expires and add additional users to their subscriptions. Our customers have no obligation to renew their subscriptions, and we cannot ensure that customers will renew subscriptions with a similar contract period, with the same or greater number of users, or for the same or upgraded level of subscription plan. Customers may or may not renew their subscription plans as a result of a number of factors, including their satisfaction or dissatisfaction with our products, our pricing or pricing structure, the pricing or capabilities of the products and services offered by our competitors, the effects of general economic conditions, inflation, or customers’ budgetary constraints. If customers do not renew their subscriptions, renew on less favorable terms, or fail to add more users, or if we fail to expand the adoption of our products within and across organizations, our revenue may or grow less quickly than anticipated, which would our business, results of operations, and financial condition. We have also experienced and may experience in the future a reduction in renewal rates and increased churn rates, particularly within our SMB customers, many of whom are on month-to-month subscriptions, as well as reduced customer spend and payments that could materially impact our business, results of operations, and financial condition in future periods. If we to predict customer demands or to attract new customers and maintain and expand new and existing customer relationships, our revenue may grow more than expected, may not grow at all, or may , and our business may be .
We use generative and agentic artificial intelligence, including in certain of our products and services, which may result in operational challenges, legal liability, reputational concerns and other negative consequences that could adversely affect our business and results of operations.
We deploy generative and agentic AI into certain of our products and services, which may result in adverse effects to our operations, legal liability, reputation and competitive risks, and other adverse consequences. The rapid evolution of AI and the use of generative and agentic AI may lead to challenges, concerns and risks that are significant or that we may not be able to predict, especially if our use of these technologies in our products and services becomes more important to our operations over time. For example, there is ongoing litigation over whether the use of copyrighted materials to train certain AI models is lawful, and the impact of decisions in such litigation on our use of AI tools is unknown.
Generative and agentic AI in our products and services may be difficult to deploy successfully due to operational issues inherent to the nature of such technologies. Moreover, known risks of generative and agentic AI currently include risks related to accuracy, bias, toxicity, privacy and security and data provenance. For example, AI algorithms use machine learning and predictive analytics which may be insufficient or of poor quality and reflect inherent biases and could lead to flawed, biased, and inaccurate results. Since we may use AI outputs to make certain decisions, due to these potential inaccuracies or flaws, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits, including exposure to reputational and competitive harm, customer loss, and legal liability. In addition, generative and agentic AI may create content that appears correct but is factually or , or contains copyrighted or other protected material, and if our customers or others use this content to their , we may be to brand or reputational , competitive , and/or legal liability. For example, or recommendations, summaries, or analyses that generative or agentic AI features assist in producing could lead to customer or skepticism of our products, affect our reputation or brand, and affect our financial results. Further, use or of generative or agentic AI by our employees or others may result in disclosure of confidential company and customer data, reputational , privacy law and legal liability. While we have policies and practices designed to mitigate risk around our use of AI tools, our practices may not be free, and our use of such tools may a third party’s rights, be non-compliant with the applicable terms of use or our other legal obligations, or result in a security or privacy risk or data leakage. Moreover, because our products and services are configurable, there is a risk that our customers could use our products and services in way that applicable law, contract, or our acceptable use and conduct policy. Our use of generative and agentic AI may also lead to novel and cybersecurity risks, including the of personal data, which may affect our operations and reputation.
Generative and agentic AI is also the subject of a quickly evolving legal and regulatory environment, and new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns, or other complications related to our use of generative or agentic AI could cause us to divert resources towards compliance and adversely affect our business, reputation, or financial
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results. For example, the U.S.’s regulatory framework related to AI technologies remains in development and has been the subject of federal level executive orders and legislation has been introduced and enacted at the state level. Additionally, obligations under the EU AI Act have gone into effect and will continue to be implemented in phases through 2030, and other jurisdictions have passed or are considering similarly focused legislation. Some of our operations are subject to the EU AI Act and depending on how the EU AI Act is implemented and interpreted, we may have to adapt our business practices, contractual arrangements and services to comply with such obligations. Our use of AI technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits.
Any of these risks could be difficult to eliminate or manage, and, if not addressed, could adversely affect our business, financial condition, results of operations, and growth prospects.
We operate in a highly competitive industry, and competition presents an ongoing threat to the success of our business.
The market for employee experience (EX) and customer experience (CX) products is rapidly evolving and increasingly competitive, fragmented, and subject to rapidly changing technology, shifting user and customer needs, new market entrants, and frequent introductions of new products and services. We compete with a significant number of companies that range in size from large and diversified enterprises with significant financial resources to smaller companies. These competitors have developed or are developing products and services that currently, or in the future may, compete with some or all of our offerings.
Many of our current and potential competitors may have longer operating histories, greater brand name recognition, stronger and more extensive partner relationships, significantly greater financial, technical, marketing, and other resources, lower labor and development costs, and larger customer bases than we do. These competitors may invest and engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns, and adopt more aggressive pricing policies that will allow them to build larger customer bases than we have. Our competitors may also offer their products and services at a lower price, or may offer price concessions, delayed payment terms, financing terms, or other terms and conditions that are more enticing to potential customers. We also use and build AI offerings into many of our products and we face increased competition as AI technologies are integrated into the various competitive offerings. Our current and potential competitors may develop and market new technologies, including through more effective utilization of evolving AI technologies, greater investment in AI research and development, access to superior training datasets, or deployment of more advanced AI models, which could materially reduce the competitiveness of, or render , our existing or future products and materially affect our business, results of operations, and financial condition. If we to effectively develop, integrate, or utilize AI technologies in our products and services, or if competitors through AI implementations, our competitive position, value proposition, and market share could be affected.
The market for our products is rapidly evolving and highly competitive, with relatively low barriers to entry, and in the future there will likely be an increasing number of similar products offered by additional competitors. Large companies we do not currently consider to be competitors may enter the market, through acquisitions or through innovation and expansion of their existing products, to compete with us either directly or indirectly. Further, our potential and existing competitors may make acquisitions or enter into strategic relationships and rapidly acquire significant market share due to a larger customer base, superior product offerings, more effective sales and marketing operations, or greater financial, technical, and other resources.
Any one of these competitive pressures in our market, or our failure to compete effectively, may result in price reductions; fewer customers; reduced revenue, gross profit, and gross margin; increased net losses; and loss of market share. Any failure to meet and address these factors would harm our business, results of operations, and financial condition. Moreover, large customers may demand greater price concessions or other more favorable terms.
We track certain key business metrics, which are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and materially adversely affect our stock price, business, results of operations, and financial condition.
We track certain key business metrics that may differ from estimates or similar metrics published by third parties due to differences in sources, methodologies, or the assumptions on which we rely. Our internal systems and tools are subject to a number of limitations, and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our metrics, including the metrics we publicly disclose. For example, our designations of customers as “small- and mid-sized businesses,” “mid-market,” or “enterprise” are based on third-party reporting which may be inaccurate. In addition, our estimates of number of total customers may be impacted by mergers or acquisitions of such customers or such customers purchasing our products via resellers. If the internal systems and tools we use to track these metrics undercount or overcount performance or contain algorithmic or other technical errors, the data we report may not be accurate. While these
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numbers are based on what we believe to be reasonable estimates of our metrics for the applicable period of measurement, there are inherent challenges in measuring how our products are used across large populations globally.
Limitations or errors with respect to how we measure data or with respect to the data that we measure may affect our understanding of certain details of our business, which could affect our long-term strategies. If our key business metrics are not accurate representations of our business, if we discover material inaccuracies with respect to these figures, or if investors perceive there to be inaccuracies, our stock price could decline. In addition, we are currently, and may in the future be, subject to stockholder litigation, which may significantly harm our reputation, and could materially adversely affect our business, results of operations, and financial condition.
We believe our long-term value as a company will be greater if we focus on growth, which may negatively impact our profitability.
A significant part of our business strategy and culture is to focus on long-term growth and customer success over short-term financial results. Our profitability may be lower than it would be if our strategy were to maximize near-term profitability. If we are ultimately unable to improve growth and profitability at the level or during the time frame anticipated by securities or industry analysts and our stockholders, the trading price of our Class A common stock may decline.
We recognize revenue from subscriptions over the term of our customer contracts. Consequently, downturns or upturns in new sales may not be immediately reflected in our operating results and may be difficult to discern.
We generally recognize subscription revenue from customers ratably over the terms of their contracts, and a majority of our revenue is derived from subscriptions that have terms longer than one month. As a result, a portion of the revenue we report each quarter is derived from the recognition of deferred revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed subscriptions with terms that are longer than one month in any single quarter may have a small impact on our revenue for that quarter. However, such a decline will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our products, and potential changes in our pricing policies or rate of expansion or retention, may not be fully reflected in our results of operations until future periods. We may also be unable to reduce our operating expenses in a timely fashion if our revenues were to significantly decline. In addition, because we believe a substantial percentage of subscriptions to our products are shorter than many comparable SaaS companies and because we have many variations of billing cycles, our remaining performance obligations may be a less meaningful indicator of our future financial results as compared to other SaaS companies. A significant portion of our costs are expensed as incurred, while revenue from subscriptions is recognized over the life of the agreement with the applicable customer.
Failure to effectively develop and expand our direct sales capabilities would harm our ability to expand usage of our products within our customer base and achieve broader market acceptance of our products.
Our ability to expand usage of our products within our customer base and achieve broader market acceptance among organizations depends to an extent on our ability to expand our sales operations successfully, particularly our direct sales efforts targeted at broadening use of our products across departments and entire organizations. We plan to continue expanding our direct sales force, both domestically and internationally, to expand use of our products within our customer base and reach larger organizations. This expansion will require us to continue to invest significant financial and other resources to grow and train our direct sales force. Our business, results of operations, and financial condition will be harmed if these efforts do not generate a corresponding increase in revenue. We may not achieve anticipated revenue growth from expanding our direct sales force if we are unable to hire and develop talented direct sales personnel, if our new direct sales personnel are unable to achieve productivity levels in a reasonable period of time, or if we are to retain our existing direct sales personnel. We believe that there is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to revenue growth will depend, in large part, on our in recruiting, training, and retaining a sufficient number of sales personnel to support our growth.
If we are unable to develop and maintain successful relationships with channel partners, our business, operating results, and financial condition could be adversely affected.
Our product-led sales growth has primarily depended on word-of-mouth, online marketing, and our direct sales force to sell subscriptions to our products. However, we believe that continued growth in our business is dependent upon identifying, developing, and maintaining strategic relationships with channel partners that can drive substantial additional revenue. While we have developed relationships with over 500 channel partners, our agreements with our existing channel partners are non-exclusive, so our channel partners may offer customers the products of several different companies, including products that compete with ours. They may also cease marketing our products with limited or no notice and without penalty. We expect that
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any additional channel partners we identify and develop will be similarly non-exclusive and not bound by any requirement to continue to market our products. If we fail to identify additional channel partners in a timely and cost-effective manner, or at all, or are unable to assist our current and future channel partners in independently selling and deploying our products, our business, results of operations, and financial condition could be adversely affected. If our channel partners do not effectively market and sell our products, or fail to meet the needs of our customers, our reputation and ability to grow our business may also be adversely affected.
The failure to attract and retain additional qualified personnel could harm our business and prevent us from executing our business strategy and growth plans, and the steps we took recently to realign our workforce to our focused priorities may not have the expected benefits or may exacerbate these difficulties.
Our success depends largely upon the continued services and performance of our senior management and other key personnel. From time to time, there have been and, may in the future be, changes in our senior management team resulting from the hiring or departure of executives and key employees, which could disrupt our business. Our senior management and key employees are employed on an at-will basis. We currently do not have “key person” insurance on any of our employees. The loss of key personnel may cause disruptions in, and harm to, our operations and have an adverse effect on our ability to grow our business and our results of operations and financial condition.
In addition, to execute our business model, we must attract and retain highly qualified personnel. Competition for executive officers, software engineers and product managers (particularly with AI and machine learning backgrounds), sales personnel, and other key personnel in our industry is intense in the locations in which we operate. As we become a more mature company, we may find our recruiting efforts more challenging. The incentives to attract, retain, and motivate employees provided by our equity awards, or by other compensation arrangements, may not be as effective as in the past.
Many of the companies with which we compete for experienced personnel have greater resources than we have. Our recruiting efforts may also be limited by laws and regulations, such as restrictive immigration laws, and restrictions on travel or availability of visas. Furthermore, any actual or perceived decline in the value of our equity awards as a result of volatility in our stock price could harm our hiring and retention efforts. If we do not succeed in attracting highly qualified personnel or retaining or motivating existing personnel, we may be unable to support our continued growth.
We believe that a critical component of our success has been our culture. We have invested substantial time and resources in building our team with an emphasis on shared values and a commitment to diversity and inclusion. As we continue to develop the infrastructure to support our growth, we will need to maintain our culture among a larger number of employees dispersed across the globe. Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel.
If our information technology, systems, or those of third parties with whom we work, or our data are or were to be compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, loss of revenue or profits, loss of customers or sales, and other adverse consequences.
We (and the third parties with whom we work) process large amounts of sensitive information, including personal data, proprietary business information, trade secrets, and intellectual property, making us and our third-party service providers targets for evolving cyber threats. We (and the third parties with whom we work) face a variety of risks and threat actors, including ransomware attacks (which are becoming increasingly prevalent and severe), social engineering (including AI-enhanced deep fakes), online and offline fraud, malware, malicious code, denial-of-service attacks credential stuffing/harvesting attacks, personnel misconduct or error, software bugs, supply-chain attacks, nation-state actors, organized criminal groups, and attacks enhanced or facilitated by AI technologies. These risks and threat actors are increasingly sophisticated and difficult to detect. During geopolitical and depending on the relevant jurisdictions in which we (or third parties with whom we work or to whom we provide services) operate, we may face heightened risks of cyber-attacks that could materially our operations and ability to deliver services. Hybrid work arrangements and business transactions (for example, acquisitions) further expand our cybersecurity risks. For example, acquired entities’ information technology systems may introduce additional and other security issues that were not discovered during due diligence. Additionally, our data and information technology systems may be or for reasons other than a , such as hardware or natural .
We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work). However, we have not and may not in the future detect and remediate all such vulnerabilities, including on a timely basis. Additionally, we face security threats and vulnerabilities as a SaaS company arising from any vulnerabilities in our products and services and our customers’ use of our products and service
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(for example, customers’ failure to appropriately secure their account credentials or other manner in which they interact with our products and services). Our reliance on third-party service providers for cloud infrastructure, data centers, and other critical functions also introduces cybersecurity risks beyond our direct control, including supply-chain attacks and vulnerabilities in vendor systems. Additionally, use of third-party AI technologies by our personnel or in our products/services poses significant data security risks, as these tools may not protect the confidentiality of inputs, may use our data to train third-party models, or could inadvertently reveal sensitive information through AI-generated outputs. For example despite implementing guidelines for AI tool usage, we cannot guarantee compliance or track all relevant personnel interactions with these technologies, creating risks that may be particularly difficult to eliminate or manage.
It is difficult and costly to maintain measures designed to detect, investigate, mitigate, contain and remediate security incidents. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective, and we have in the past and may in the future experience security incidents. For example, we have been the target of unsuccessful phishing / credential stuffing / other type of cyberattack attempts in the past, and expect such attempts will continue in the future.
Any actual or perceived security incident impacting us (or the third parties with whom we work) could result in government investigations, enforcement actions, litigation, regulatory penalties, operational disruptions, reputational harm, customer loss, monetary fund diversions, diversions of management attention, financial costs for remediation, notification, and legal proceedings and other adverse consequences. Applicable obligations may require us or we may voluntarily choose to notify relevant stakeholders of security incidents. We may be required to fundamentally change our business practices in response to security incidents, and our insurance coverage and limitations of liability in our contracts may be inadequate to cover all potential damages, costs and other losses. The costs and resources required to prevent, detect, and respond to security continue to increase as we expand our business and process larger volumes of sensitive information, potentially resources from growth initiatives and affecting our competitive position.
If we fail to manage our technical operations infrastructure, or experience service outages, interruptions, or delays in the deployment of our products, our results of operations may be harmed.
We have in the past and may in the future experience system slowdowns and interruptions. Additionally, growth in our customer base could place additional demands on our products and cause or otherwise exacerbate slowdowns or interrupt the availability of our products. If there is a substantial increase in the volume of usage of our products, we will be required to further expand and upgrade our technology and infrastructure. There can be no assurance that we will be able to accurately project the rate or timing of increases, if any, in the use of our products or expand and upgrade our systems and infrastructure to accommodate such increases on a timely basis. In such cases, we may lose customers or partners if our users are not able to access our products or encounter slowdowns when doing so. Some of our subscriptions include standard service-level commitments. If we are unable to meet the stated service-level commitments, including failing to meet the uptime and delivery requirements under our customer subscription agreements, we may be obligated to provide these customers with service credits which could significantly affect our revenue in the periods in which the uptime or delivery occurs and the credits are applied. Additionally, we could also face subscription , which could significantly affect both our current and future revenue. Any service-level could also our reputation, which could also affect our business and results of operations. Our recovery plan may not be sufficient to address all aspects or any consequence or , and our insurance may not be sufficient to compensate us for the that could occur.
Amazon Web Services (AWS) provides the vast majority of our cloud computing infrastructure for hosting our products, mobile applications, and internal business tools under a long-term commercial agreement. Any significant disruption of, limitation of access to, or interference with AWS would negatively affect our operations and could seriously harm our business. Transitioning to another cloud provider would require significant time and expense and could disrupt service delivery. If AWS increases pricing, terminates our relationship, establishes more favorable terms with competitors, or changes its terms of service unfavorably, our business and financial condition would be materially harmed.
In addition, we rely on hardware and infrastructure purchased or leased from third parties and software, AI tools and SaaS products licensed from third parties to operate critical business functions, and we face risks as a result of our reliance on these third-party providers, including risks inherent in how third party AI tools used in our solutions have been developed and deployed, including situations in which the third party may lack a proper license or consent for the data used to train their AI tools. Our business would be disrupted if any such third-party hardware, software, AI tools, SaaS products and infrastructure becomes unavailable on commercially reasonable terms, or at all or has degradations in performance. Any errors or defects in third-party hardware, software, AI tools, SaaS products or infrastructure could result in errors or a failure of our products, which could harm our business and results of operations. Additionally, should we choose to switch any third-party hardware, software, AI tools, SaaS products and/or infrastructure, or with respect to the transition could impact our business and results of operations.
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If we are unable to ensure that our products interoperate with a variety of software applications that are developed by others, including our integration partners, we may become less competitive and our business, results of operations, and financial condition may be harmed.
Our products integrate with a variety of hardware and software platforms and SaaS products and technologies, and we need to continuously modify and enhance our products to adapt to changes in hardware, software, and browser technologies. In particular, we have developed our products to be able to easily integrate with third-party applications, including the applications of software providers (some of which compete with us) as well as our partners, through the interaction of APIs. In general, we rely on the providers of such software systems to allow us access to their APIs to enable these integrations. We are typically subject to standard terms and conditions of such providers, which govern the distribution, operation, and fees of such software systems, and which are subject to change by such providers from time to time. Our business will be harmed if any key provider of such software systems:
• discontinues or limits our access to its software or APIs;
• modifies its terms of service or other policies, including fees charged to, or other restrictions on, us or other application developers;
• changes how information is accessed by us or our customers;
• establishes more favorable relationships with one or more of our competitors; or
• develops or otherwise favors its own competitive offerings over our products.
Third-party services and products are constantly evolving, and we may not be able to modify our products to assure their compatibility with that of all other third parties. In addition, some of our competitors may be able to disrupt the operations or compatibility of our products with their products or services, or exert strong business influence on our ability to, and terms on which we, operate our products. Should any of our competitors modify their products or standards in a manner that degrades the functionality of our products or gives preferential treatment to competitive products or services, whether to enhance their competitive position or for any other reason, the interoperability of our products with these products could decrease. If we are not permitted or able to integrate with these and other third-party applications in the future, our business, results of operations, and financial condition would be harmed.
Further, certain of our products include a mobile application to enable users to access our products through their mobile devices. If our mobile applications do not perform well, our business will suffer. In addition, our products interoperate with servers, mobile devices, and software applications predominantly through the use of protocols, many of which are created and maintained by third parties. We, therefore, depend on the interoperability of our products with such third-party services, mobile devices, and mobile operating systems, as well as cloud-enabled hardware, software, networking, browsers, database technologies, and protocols that we do not control. The loss of interoperability, whether due to actions of third parties or otherwise, and any changes in technologies that degrade the functionality of our products or give preferential treatment to competitive services could adversely affect adoption and usage of our products. Also, we may not be successful in developing or maintaining relationships with key participants in the mobile industry or in ensuring that we operate effectively with a range of operating systems, networks, devices, browsers, protocols, and standards. If we are unable to effectively anticipate and manage these risks, or if it is for customers to access and use our products, our business, results of operations, and financial condition may be .
We rely on search engines, including traditional web search and emerging AI-powered platforms, to drive traffic to our websites, and changes in these platforms could adversely affect our business.
Our success depends in part on our ability to attract users through unpaid search results on traditional web search engines such as Google. Search engines frequently update their algorithms, ranking methodologies, and user interfaces in ways that are outside our control. The search ecosystem is also evolving to include AI-generated responses and standalone AI search experiences, which increasingly provide answers without requiring users to click through to a website. These changes have contributed to a rise in “zero-click” searches, which could have an adverse impact on business, results of operations, and financial condition.
Historically, traffic to our websites from search engines has been driven by our position in unpaid search results. Traffic from large language model (LLM)-based platforms currently represents a small portion of our total website traffic but has been growing in recent quarters. As these platforms become more widely adopted, they may become a more material component of our customer acquisition strategy.
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At the same time, the rise of AI-powered search may reduce the effectiveness of traditional SEO strategies. Our rankings and visibility may be affected by changes to search engine algorithms, crawling or indexing practices, or interface designs that prioritize AI-generated content over traditional web links. These changes may reduce traffic to our sites, even if our content remains high-quality. Additionally, our content may be used by AI systems to generate responses or train models without driving attributable traffic or revenue.
Although we have made investments to improve our visibility in both traditional and AI-powered search environments, there can be no assurance that these efforts will fully offset the impact of ongoing changes in user behavior and search technology. If we are unable to maintain or improve our visibility, our ability to attract users through unpaid channels may decline, requiring increased investment in paid marketing to meet growth targets. This could increase customer acquisition costs and negatively affect our operating results.
We rely on third parties maintaining open digital marketplaces to distribute our mobile applications for our products. If such third parties interfere with the distribution of our mobile applications, our business would be adversely affected.
We rely on third parties maintaining open digital marketplaces, including the Apple App Store and Google Play, which make our mobile applications for certain of our products available for download. We cannot assure you that the marketplaces through which we distribute these mobile applications will maintain their current structures or that such marketplaces will not charge us fees to list our application for download. We are also dependent on these third-party marketplaces to enable us and our users to timely update these mobile applications, and to incorporate new features, integrations, and capabilities.
In addition, Apple and Google, among others, for competitive or other reasons, could stop allowing or supporting access to our mobile applications through their products, could allow access for us only at an unsustainable cost, or could make changes to the terms of access in order to make our mobile applications less desirable or harder to access. Furthermore, the promulgation of new laws or regulations in the European Union (EU) and the United Kingdom (UK), such as the EU Digital Markets Act (DMA), EU Digital Services Act (DSA), and the UK Online Safety Act (OSA) that restrict or otherwise unfavorably impact the marketplaces through which we distribute our products could require us to change certain aspects of our business and operations. In addition, our products are enabled to allow our customers to use multiple communication methods with their consumers, including email, web widget, WhatsApp, SMS, and iMessage among others. To comply with the DMA, third parties may increase the cost of or otherwise limit our ability to integrate our products with certain communication methods.
Real or perceived errors, failures, vulnerabilities, or bugs in our products would harm our business, results of operations, and financial condition.
The software technology underlying and integrating with our products is inherently complex and may contain material defects or errors. Errors, failures, vulnerabilities, or bugs have in the past, and may in the future, occur in our products, especially when updates are deployed or new features, integrations, or capabilities are rolled out. Any such errors, failures, vulnerabilities, or bugs may not be found until after new features, integrations, or capabilities have been released. Furthermore, we will need to ensure that our products can scale to meet the evolving needs of customers, particularly as we increase our focus on larger teams and organizations. Real or perceived errors, failures, vulnerabilities, or bugs in our products could result in an interruption in the availability of our products, negative publicity, user experience, or leaking of personal information and data of organizations, of or in market acceptance of our products, of competitive position, regulatory , or by organizations for sustained by them, all of which would our business, results of operations, and financial condition.
If we experience excessive fraudulent activity, we could incur substantial costs and lose the right to accept credit cards for payment, which could cause our customer base to decline significantly.
We currently accept payments using a variety of methods, including credit card and debit card, and a large number of our customers authorize us to bill their credit card accounts through our third-party payment processing partners for subscriptions to our products. We are subject to regulations and compliance requirements, such as the payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard (PCI-DSS) and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we (or a third-party processing payment card transactions on our behalf) suffer a security breach affecting payment card information, we may have to pay significant fines, penalties, and assessments arising out of the major card brands’ rules and regulations, contractual indemnifications, or liability contained in merchant agreements and similar contracts, and we may lose our ability to accept payment cards for payment for our goods and services, which could materially impact our operations and financial performance.
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If customers pay for their subscription plans with stolen credit cards, we could incur substantial third-party vendor costs for which we may not be reimbursed or able to recover. Further, our customers provide us with credit card billing information online, and we do not review the physical credit cards used in these transactions, which increases our risk of exposure to fraudulent activity. We also incur chargebacks from the credit card companies for claims that the customer did not authorize the credit card transaction for subscription plans, something that we have experienced in the past. If the number of claims of unauthorized credit card transactions becomes excessive, we could be assessed substantial fines for excess chargebacks, and we could lose the right to accept credit cards for payment. In addition, credit card issuers may change merchant standards, including data protection and documentation standards, required to utilize their services from time to time. Our third-party payment processing partners must also maintain compliance with current and future merchant standards to accept credit cards as payment for our paid subscription plans. Substantial due to or our to accept credit card payments would cause our customer base to significantly decrease and would our business.
We employ a pricing model that subjects us to various challenges that could make it difficult for us to derive sufficient value from our customers particularly because we do not have the history with our subscription or pricing models that we need to accurately predict optimal pricing necessary to attract and retain customers.
We generally charge our customers for their use of our products based on the number of users they enable as “agents” under their customer account, as well as the features and functionality enabled. The features and functionality we provide within our solutions enable our customers to promote customer self-service and otherwise efficiently and cost-effectively address product support requests without the need for substantial human interaction. As a result of these features, customer agent staffing requirements may be minimized, and our revenue may be adversely affected. Conversely, customers may overestimate their agent needs when they initially use our solutions, negatively affecting our ability to accurately forecast the number of agents our customers need in forward periods. We generally also require a separate subscription to enable the functionality of each of our products. We are continuing to analyze and improve our pricing and packaging models as we adapt to a changing market, but we do not know whether our current or potential customers or the market in general will accept changes to those models, and if it to acceptance, our business and results of operations could be .
If we fail to find an optimal pricing strategy for our products, our business and results of operations may be harmed. If customers do not accept our new purchase plans, we may increasingly have difficulty in attracting new customers, as well as our ability to retain existing customers to the extent we apply new pricing models to existing customer subscriptions. Our pricing model may impact our customer’s pricing decisions and adoption of our subscription plans and negatively impact our overall revenue. In the future we may be required to reduce our prices or develop new pricing models, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow.
Finally, as the market for our products matures, or as new competitors introduce new products or services that compete with ours, we may be unable to attract new customers at the same price or based on the same pricing models as we have used historically.
We face exposure to foreign currency exchange rate fluctuations.
We face exposure to foreign currency exchange rate fluctuations that could adversely affect our revenue, operating expenses, and results of operations. While we have historically transacted primarily in U.S. dollars, we increasingly transact in foreign currencies with customers and vendors and for payroll in foreign jurisdictions where we operate. Our results of operations and cash flows are subject to currency fluctuations primarily in the Indian rupee, British pound, and euro, as the Company is exposed to remeasurement to the U.S. dollar, which is our functional currency. These exposures may change as business practices evolve, economic and political conditions shift, and tax regulations develop. Additionally, fluctuations in foreign currency values could make it more difficult to detect underlying trends in our business and results of operations. Global events and geopolitical developments, including ongoing conflicts, fluctuating commodity prices, trade tariff developments, and inflation, have caused and may continue to cause global economic uncertainty and interest rate volatility, which could amplify currency fluctuation volatility. We enter into foreign exchange forward contracts to hedge a portion of our forecasted foreign currency expenses denominated in Indian rupee, and we may enter into additional hedging transactions if our foreign currency exposure becomes more significant. However, our hedging program is designed to reduce, but does not eliminate, the risk that our earnings and cash flows may be affected by changes in exchange rates, and these risk management efforts may not be .
We derive, and expect to continue to derive, substantially all of our revenue from a limited number of products.
We derive, and expect to continue to derive, substantially all of our revenue from our Freshservice and Freshdesk products. As such, the continued growth in market demand for and market acceptance of these products is critical to our continued success. Demand for our products is affected by a number of factors, some of which are beyond our control, such as the rate of
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adoption of our products within an organization, the timing of development and release of new products by our competitors; the development and acceptance of new features, integrations, and capabilities for our products; price, product, and service changes by us or our competitors; technological changes and developments within the markets we serve; growth, contraction, and rapid evolution of our market; and general economic conditions and trends. If we are unable to continue to meet the demands of users and customers to keep up with trends in preferences for employee and customer experience products, or to achieve more widespread market acceptance of our products, our business, results of operations, and financial condition would be harmed. In addition, some current and potential customers, particularly larger organizations, may develop or acquire their own tools or continue to rely on traditional tools and software for their employee and customer experience needs, which would reduce or eliminate their demand for our products. If demand for our products declines for any of these or other reasons, our business, results of operations, and financial condition would be adversely affected.
If we fail to offer high-quality customer support, our business and reputation will suffer.
While we have designed our products to be easy to adopt and use, once users and customers begin using our products, they rely on our support services to resolve any related issues. The importance of high-quality customer support will increase as we expand our business and pursue new customers. For instance, if we do not help organizations using our products quickly resolve issues, our reputation with existing or potential customers will be harmed. Further, our sales are highly dependent on our business reputation and on positive recommendations from existing customers using our products. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality customer support, could harm our reputation, our ability to sell our products to existing and prospective customers, and our business, results of operations, and financial condition. Additionally, as we continue to expand, we will need to hire additional support personnel to provide efficient product support globally at scale. Any failure to provide such support could our reputation.
We and the third parties with whom we work are subject to stringent and evolving global data privacy and security laws, regulations, contractual obligations, industry standards, and other obligations relating to data privacy or security. Our actual or perceived failure (or that of the third parties with whom we work) to comply with these requirements could result in regulatory investigations, litigation, fines, business disruptions, reputational harm, loss of customers or revenue, and other adverse consequences.
We process sensitive information (including personal information) belonging to users, customers, suppliers, partners, and personnel, subjecting us to numerous federal, state, local, and foreign data protection laws that are changing, subject to differing interpretations, and may be inconsistent among jurisdictions. For example, in the United States, certain comprehensive state consumer privacy laws impose obligations including specific privacy notice disclosures, consumer rights to access, correct, or delete personal information, and opt-out rights for targeted advertising and automated decision-making. These laws allow for statutory fines and, in some cases, private litigation with significant statutory damages. Internationally, regulations such as the EU GDPR, UK GDPR, and India's Digital Personal Data Protection Act impose strict processing requirements with consequences for noncompliance including potential processing bans, significant fines, and private litigation. Additional data privacy and security laws may be proposed or enacted in the jurisdictions in which we, our customers or other third parties with whom we work operate or offer products or services.
We may be unable to transfer personal information from the EU, UK, and other jurisdictions to the United States or other relevant jurisdictions due to data localization requirements or cross-border transfer limitations. While mechanisms such as the EU-U.S. Data Privacy Framework exist, these are subject to legal challenges and regulatory scrutiny. If we cannot lawfully transfer personal information or if compliance requirements become too onerous, we could face adverse consequences such as operational interruptions, the need to relocate business activities to other jurisdictions at significant expense, regulatory actions, substantial fines, and injunctions against data processing necessary to operate our business.
In addition to laws, we are subject to other obligations related to data privacy or security such as contracts, industry standards, and policies. For example, we are bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. We also publish policies, marketing materials, and other statements concerning data privacy, security, and AI. Regulators are increasingly scrutinizing such statements, and if they are found to be inaccurate, misleading, or otherwise deficient we may be subject to regulatory investigations, enforcement actions, or other adverse consequences.
Our use of artificial intelligence, including generative and agentic AI and machine learning (ML) technologies, in products and services presents additional privacy and security risks. AI technologies are subject to increasing regulation (for example, in relation to data privacy and security as well as general consumer protection) in jurisdictions around the globe, including the EU's Artificial Intelligence Act and emerging US state laws. Privacy and data protection laws that regulate automated decision-making and extend consumer rights may be incompatible with our AI/ML use, potentially requiring us to disgorge profits, change business practices, retrain AI systems, and limit AI deployment. If we cannot use AI technologies or such use is
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restricted, our business may be less efficient and we may otherwise be at a competitive disadvantage. Personnel use of generative AI technologies could result in inadvertent disclosure of personal information, creating additional compliance costs and regulatory risks.
Compliance obligations related to data privacy and security continue to evolve and become more stringent. These obligations are subject to differing applications and interpretations across jurisdictions. some of which may be inconsistent. Such obligations have required and will continue to require from us significant resource expenditures, and may limit our ability to develop new services, store and process customer data, or operate our business effectively. Any actual or perceived non-compliance with such obligations by us or by the third parties with whom we work (including our customers) could result in adverse consequences such as governmental enforcement actions, investigations, fines, penalties, audits, litigation including class actions and mass arbitration demands, additional reporting requirements, processing restrictions, orders to destroy data, and potential imprisonment of company officials. Data privacy and security-related claims are increasingly common, with some allowing statutory damages on a per- basis that could result in substantial financial exposure. For example, we have in the past and may in the future experience legal demands related to data privacy or security, such as in relation to our use of digital tracking technologies on our website. Any of these events could have a material effect on our reputation, business, or financial condition, including but not limited to: of customers; or in our business operations; to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to any claim or ; publicity; or substantial changes to our business model or operations.
Additionally, many of our products and services are general-purpose solutions that our customers can configure and deploy for their particular use cases. Depending on the manner in which our customers use our products and services, it could expose us to additional data privacy and security obligations (for example, those related to telemarketing, employment, and AI). Although we maintain measures designed to prohibit customers from using our products and services in unlawful or other harmful ways, customers may attempt (and have at times in the past attempted) to use our products and services in ways that violate our policies, terms or applicable laws, which could lead to adverse consequences for us such as those described above.
Risks Related to International Operations
Our international operations and sales to customers outside the United States expose us to risks inherent in international operations and sales.
We have a significant portion of our operations in India. As of December 31, 2025, approximately 3,600 of our employees reside in India, representing approximately 81% of our total employee population. For the fiscal year ended December 31, 2025, approximately 54% of our revenue was generated from customers outside North America. Besides India and the United States, we have sales and marketing operations primarily in Australia, select countries in the European Union and the United Kingdom. Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States. In addition, we will face risks in doing business internationally that could adversely affect our business and results of operations, including:
• data privacy laws that impose different and potentially conflicting obligations with respect to how personal information is processed or require that customer data be stored in a designated territory;
• difficulties in staffing and managing foreign operations;
• regulatory and other delays and difficulties in setting up and maintaining foreign operations;
• different pricing environments, longer sales cycles, longer accounts receivable payment cycles, and collections issues;
• new and different sources of competition;
• weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights;
• laws and business practices favoring local competitors;
• compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, privacy, and data protection laws and regulations;
• increased financial accounting and reporting burdens and complexities;
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• declines or increases in the values of foreign currencies, primarily the Indian rupee, British pound, and euro, relative to the U.S. dollar;
• restrictions on the transfer of funds;
• potentially adverse tax consequences;
• the cost of and potential outcomes of any claims or litigation;
• future accounting pronouncements and changes in accounting policies;
• changes in tax laws or tax regulations;
• the request to localize and adapt our products for specific countries, including translation into foreign languages and associated expenses;
• public health or similar issues, such as a pandemics or epidemics; and
• regional and local economic and political conditions, including the evolving events in Russia, Ukraine, Israel, Gaza, and/or surrounding regions.
As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these risks. These factors and others could harm our ability to increase international revenue and, consequently, would materially impact our business and results of operations. The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources. Our failure to successfully manage our international operations and the associated risks effectively could limit the future growth of our business.
In particular, the majority of our software development operations are in India. South Asia has from time to time experienced instances of civil unrest, natural disasters, terrorist attacks and hostilities among neighboring countries. To the extent that such interruptions or unrest affects or involves India, our business may be significantly impacted due to the extent of our operations in India. Further, such activities could disrupt communications, make travel more difficult, and create a greater perception that investments in companies with large operations in India involve a higher degree of risk. This, in turn, could have an adverse effect on the market for our Class A common stock.
In addition, following Russia’s military invasion of Ukraine in February 2022, the United States, EU, and other nations announced various sanctions and export restrictions against Russia and Belarus. Such restrictions included blocking sanctions on some of the largest state-owned and private Russian financial institutions, and their removal from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. The Russia-Ukraine conflict and the measures that have been taken, and could be taken in future, by the United States, NATO, and other countries have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could adversely affect our business, including preventing us from performing existing contracts, pursuing new business opportunities, or receiving payments for services already provided to customers.
We are subject to anti-corruption, anti-bribery, and similar laws, and our failure to comply with these laws could subject us to criminal penalties or significant fines and harm our business and reputation.
We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the UK Bribery Act 2010, the India Prevention of Corruption Act, 1988, and other anti-corruption, anti-bribery, and anti-money laundering laws in countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and their employees and agents from promising, authorizing, making, offering, soliciting, or accepting, directly or indirectly, improper payments or other benefits to or from any person whether in the public or private sector. Our risks under these laws may increase as we increase our international sales and business further, especially given our substantial reliance on sales to and through resellers and other intermediaries. with these laws could subject us to , sanctions, settlements, , other enforcement actions, of profits, significant , , other civil and or , media coverage, and other consequences. Such and enforcement actions, regardless of their outcome, could be , time-consuming, to our operations, and to our reputation and business relationships. Additionally, the costs of implementing and maintaining compliance programs, conducting due diligence on third-party partners, and responding to regulatory inquiries continue to increase as these laws evolve and enforcement intensifies globally.
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A substantial portion of our business and operations are located in India, and we are subject to regulatory, economic, social, and policy uncertainties in India. Non-compliance with and changes in such laws may adversely affect our business, results of operations, and financial condition.
A substantial portion of our operations and employees are located in India, including a majority of our software engineering resources. Consequently, our financial performance and the market price of our Class A common stock will be affected by changes in exchange rates and controls, interest rates, changes in labor law, changes in government policies, including taxation policies, and other social and economic developments in or affecting India.
The Government of India and the state governments of India have exercised and continue to exercise significant influence over many aspects of the Indian economy. India has a mixed economy with a large public sector and an extensively regulated private sector. Increased regulation, changes in existing regulations, or significant changes in India’s policy of economic liberalization may require us to change our business policies and practices. If we are unable to comply with such regulations on a timely basis, we may be subjected to sanctions, fines, or other regulatory actions. We may not be able to react to such changes promptly or in a cost-effective manner and therefore such changes may increase the cost of providing services to our customers, which would have an adverse effect on our operations and our financial condition and results of operations.
Additionally, wage increases in India may diminish our competitive advantage against companies located in the United States and European Union and may reduce our profit margins. Our wage costs in India have historically been significantly lower than wage costs in the United States and the EU for comparably skilled professionals, and this has been one of our competitive advantages. However, wage increases in India due to legislation or other factors may prevent us from sustaining this competitive advantage and may negatively affect our financial performance. We may need to increase the levels of our employee compensation more rapidly than in the past to retain talent. Unless we are able to continue to increase the efficiency and productivity of our employees over the long term, wage increases may negatively affect our financial performance.
Further, Government of India introduced (i) the Code on Wages 2019 ("Wages Code"); (ii) the Code on Social Security, 2020 ("Social Security Code"); (iii) the Occupational Safety, Health and Working Conditions Code, 2020; and (iv) the Industrial Relations Code, 2020, which consolidate, subsume and replace numerous existing central labour legislations. Pursuant to notifications issued by Government of India dated November 21, 2025, the Occupational Safety, Health and Working Conditions Code, 2020 and Industrial Relations Code, 2020 have been made fully effective and certain provisions of the Wages Code and Social Security Code have been made effective, each as of November 21, 2025. The effect of these provisions on us including impact on overall employee expenses which in turn may affect our profitability cannot be predicted with certainty at this stage.
We are subject to complex and evolving export control, import, and trade sanctions laws that could impair our ability to compete internationally, result in significant penalties, and adversely affect our business and results of operations.
Our business activities are subject to various export control, import, and trade and economic sanction laws and regulations, including, among others, the U.S. Export Administration Regulations, administered by the Department of Commerce’s Bureau of Industry and Security, U.S. Customs regulations, and economic and trade sanctions regulations maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control, (collectively, Trade Controls). Trade Controls may prohibit or restrict the sale or supply of certain products and services to certain governments, persons, entities, countries, and territories, including those that are the target of comprehensive sanctions. We incorporate encryption technology into certain of our products, which may subject their export outside of the United States to certain export authorization requirements, including licensing, compliance with license exceptions, or other appropriate government authorization. In addition, various other countries regulate the import and export of certain encryption and other technology, including through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our products or could limit the ability of organizations to use our products in those countries.
Although we maintain internal controls reasonably designed to ensure compliance with Trade Controls, our products and services may have in the past been, and could in the future be, provided inadvertently in violation of Trade Controls, despite the precautions we take. Violations of Trade Controls may subject our company, including responsible personnel, to various adverse consequences, including civil or criminal penalties, government investigations, and loss of export privileges.
Finally, changes in our products or future changes in Trade Controls could result in our inability to provide our products to certain customers or decreased use of our products by existing or potential customers with international operations. Any decreased use of our products or mobile applications or increased limitations on our ability to export or sell our products and mobile applications would adversely affect our business, results of operations, and financial condition.
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Restrictive changes to immigration laws may hamper our growth.
The success of our business is dependent on our ability to attract and retain talented and experienced professionals in the jurisdictions in which we operate. Immigration laws in the countries in which we operate are subject to legislative changes, as well as to variations in the standards of application and enforcement due to political forces and economic conditions.
Our business is strengthened by the ability to mobilize employees between India and the United States where we have significant operations. Changes to U.S. immigration laws could make it more difficult to obtain the required work authorizations for our employees. This could in turn have an adverse effect on our operations and the value of our Class A common stock.
Government regulation on e-commerce and foreign investment, including investment in e-commerce in India, is evolving, and unfavorable changes to, or failure by us to comply with, these evolving regulations could adversely affect our business, financial condition, and results of operations.
The ownership of Indian companies by non-residents is regulated by the Government of India and the Reserve Bank of India (RBI).Under its consolidated foreign direct investment policy, 2020 (FDI Policy) and India’s Foreign Exchange Management Act, 1999 and the rules and regulations thereunder, particularly the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, each as amended (FEMA), the Government of India has specific requirements with respect to the level of foreign investment permitted in certain business sectors both without (known as the automatic route) and with (known as the approval route) prior regulatory approval, as well as the pricing of such investments, downstream investments by Indian companies owned or controlled by foreign entities, and the transfer of ownership or control of Indian companies in sectors with caps on foreign investment from resident Indian persons or entities to non-residents of India.
Under the FDI Policy, 100% foreign ownership is allowed under the automatic route (i.e., generally without prior regulatory approval) in companies engaged in business to business (B2B) e-commerce activities. Our current business operations and holding structure comply with these foreign investment restrictions and conditions. However, the Government of India has made and may continue to make revisions to the FEMA and the FDI Policy as regards e-commerce in India, including in relation to inventory, pricing, discounting, and permitted services. The Department of Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India is also in the process of legislating a national e-commerce policy, which will address e-commerce regulation and data protection. The timing or impact of this policy, which remains in draft form, is not yet certain. Such changes may require us to make changes to our business in order to comply with Indian law.
The regulatory framework applicable to e-commerce is constantly evolving and remains subject to change by the Government of India and the RBI. Any failure, or perceived failure, by us to comply with any of these evolving laws or regulations could result in proceedings or actions against us by governmental entities or others. Further, any such framework changes, such as the mandate on recurring credit and debit card payments that went into effect on September 30, 2021, may adversely affect our results of operations.
Risks Related to Intellectual Property
We face risks from intellectual property infringement claims and other litigation that could result in significant costs, operational restrictions, and material adverse effects on our business and results of operations.
Our success depends on developing and commercializing offerings without infringing third-party intellectual property rights. However, we may be subject to claims of infringement, misappropriation of violation of such rights, and competitors or other parties may claim infringement even when we are unaware of their alleged intellectual property coverage. While we maintain policies prohibiting employees from using confidential information of third parties or former employers, we cannot guarantee compliance, and employees may act without our knowledge in contravention of such policies. Additionally, our use of third-party generative AI tools exposes us to copyright infringement and other intellectual property claims, as we may have limited insight into the content used to train these AI systems or the extent to which original works remain in AI outputs.
Intellectual property litigation, regardless of merit, involves considerable costs and diverts management attention and resources, potentially harming our business and results of operations. We may be required to settle litigation on unfavorable terms, obtain licenses that may not be available on reasonable terms or at all, develop alternative non-infringing technology at significant expense, or discontinue certain practices or operations. Adverse judgments could require us to cease operations or pay substantial damages. Our insurance may not cover such claims, provide sufficient coverage, or remain available on acceptable terms, resulting in unanticipated costs and material adverse effects on our business.
We indemnify channel partners and customers against third-party infringement claims, and these obligations may be excluded from contractual liability limitations. Such claims may require us to initiate or defend costly litigation regardless of
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merit, pay damages on behalf of customers and partners, modify products to make them non-infringing, or obtain necessary licenses. If we cannot obtain required licenses on commercially reasonable terms, customers may be forced to stop using our products and channel partners may be forced to stop selling them, adversely affecting our business and results of operations.
If we are unable to protect our intellectual property rights both in the United States and abroad, the value of our brand and other intangible assets may be diminished, and our business may be adversely affected.
We rely and expect to continue to rely on a combination of trademark, copyright, patent, and trade secret protection laws to protect our intellectual property rights and proprietary information both in the United States and abroad. The intellectual property laws and protections offered in countries outside of the United States may not protect proprietary rights to the same extent as laws in the United States. While we have been issued patents for certain aspects of our intellectual property in the United States and have additional patent applications pending in the United States, we have not applied for patent protection in foreign jurisdictions, and may be unable to obtain patent protection for the technology covered in our patent applications. In addition, we cannot ensure that any of the patent applications will be approved or that the claims allowed on any issued patents will be sufficiently broad to protect our technology or products and provide us with competitive advantages. Furthermore, any issued patents may be challenged, invalidated, or circumvented by third parties. Therefore, our efforts to protect our intellectual property may not be adequate and competitors may independently develop similar technology or duplicate our products or services and compete with us in this and other geographies where enforcement of intellectual property rights is less clear than in the United States.
We use trademarks, trade names, and brand names to distinguish our solutions from the products of our competitors, and have registered or applied to register many of these trademarks in the United States and certain countries outside the United States. As we rely in part on brand names and trademark protection to enforce our intellectual property rights, efforts by third parties to oppose trademark applications, limit use of our brand names or trademarks and barriers to the registration of brand names and trademarks in various countries may restrict our ability to promote and maintain a cohesive brand throughout our key markets. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which would result in loss of brand recognition and would require us to devote resources to advertising and marketing new brands.
We also rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology. Additionally, copyright and other intellectual property protection for materials that we develop with the use of AI tools may be limited, if available at all, and we therefore may be unable to obtain protection for such works. To protect our trade secrets and other proprietary information, we require employees, consultants, and independent contractors to enter into confidentiality agreements and invention assignment agreements to control access to and use of our proprietary information and to ensure that any intellectual property developed by such employees, contractors, consultants, and other third parties are assigned to us. We cannot assure you that these agreements will provide meaningful protection for our trade secrets, know-how, or other proprietary information in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how, or other proprietary information. If we are unable to maintain the proprietary nature of our technologies, our business would be materially adversely affected
Furthermore, third parties may knowingly or unknowingly infringe or circumvent our intellectual property rights, and we may not be able to prevent infringement without incurring substantial expense. Litigation brought to protect and enforce our intellectual property rights would be costly, time-consuming, and distracting to management and key personnel, and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. If the protection of our intellectual property rights is inadequate to prevent use or misappropriation by third parties, the value of our brand and other intangible assets may be and competitors may be to more effectively mimic our products and methods of operations. Any of these events would have a material effect on our business, results of operations, and financial condition.
Our use of “open source” and third-party software could impose unanticipated conditions or restrictions on our ability to commercialize our products and could subject us to possible litigation.
A portion of the technologies we use in our products and mobile applications incorporates “open source” software, and we may incorporate open source software in our products and mobile applications in the future. This exposes us to potential claims of ownership by parties of what we believe to be open source software or non-compliance claims as to the applicable open source licensing terms. Some open source licenses require end-users who distribute or make available across a network software and services that include open source software to make available all or part of such software, which in some circumstances could include valuable proprietary code, at no cost, or license such code under the terms of the particular open source license. While we employ practices designed to monitor our compliance with the licenses of third-party open source software and protect our valuable proprietary source code, we may inadvertently use third-party open source software in a
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manner that exposes us to claims of non-compliance with the applicable terms of such license, including claims for infringement of intellectual property rights or for breach of contract. Additionally, if a third-party software provider has incorporated open source software into software that we license from such provider, we could be required to disclose source code that incorporates or is a modification of such licensed software. Furthermore, there is an increasing number of open-source software license types, almost none of which have been tested in a court of law, resulting in a dearth of guidance regarding the proper legal interpretation of such license types. If an author or other third party that distributes open source software that we use or license were to allege that we had not complied with the conditions of the applicable open source license, we could expend substantial time and resources to re-engineer some or all of our software or be required to incur significant legal expenses defending against such and could be subject to significant , from the sale of our products that contained the open source software, and required to comply with the foregoing conditions, including public release of certain portions of our proprietary source code.
In addition, the use of third-party open source software typically exposes us to greater risks than the use of third-party commercial software because open-source licensors generally do not provide warranties or controls on the functionality or origin of the software. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our products. Any of the foregoing could be harmful to our business, results of operations, and financial condition.
We rely on software licensed from third parties to offer our products. In addition, we may need to obtain future licenses from third parties to use intellectual property rights associated with the development of our products, which might not be available on acceptable terms, or at all. Any loss of the right to use any third-party software required for the development and maintenance of our products or mobile applications could result in loss of functionality or availability of our products or mobile applications until equivalent technology is either developed by us, or, if available, is identified, obtained, and integrated. Any errors or defects in third-party software could result in errors or a failure of our products or mobile applications. Any of the foregoing would disrupt the distribution and sale of subscriptions to our products and harm our business, results of operations, and financial condition.
Risks Related to Tax Matters
Our business, results of operations, and financial condition may be harmed if we are required to collect sales or other related taxes for subscriptions to our products in jurisdictions where we have not historically done so.
We collect sales and use, value-added and similar taxes in a number of jurisdictions. One or more states or countries may seek to impose incremental or new sales, use, or other tax collection obligations on us. A successful assertion by a state, country, or other jurisdiction that we should have been or should be collecting additional sales, use, or other similar taxes could, among other things, result in substantial tax payments, create significant administrative burdens for us, discourage potential customers from subscribing to our products due to the incremental cost of any such sales or other related taxes, or otherwise harm our business, results of operations, and financial condition.
Additionally, the application of indirect taxes, such as sales and use tax, value-added tax, GST, business tax, and gross receipt tax, to our business is a complex and evolving issue. Significant judgment is required to evaluate applicable tax obligations, and, as a result, amounts recorded are estimates and are subject to adjustments. In many cases, the ultimate tax determination is uncertain because it is not clear how new and existing statutes might apply to our business. New legislation could require us to incur substantial costs, including costs associated with tax calculation, collection, and remittance and audit requirements, and could adversely affect our business and results of operations.
Our ability to utilize net operating loss carryforwards and other tax attributes to offset taxable income may be limited by ownership changes, evolving tax laws, and utilization restrictions, which could increase our future tax obligations and adversely affect our results of operations.
As of December 31, 2025, we had U.S. federal net operating loss carryforwards of $67.3 million portions of which will begin to expire in 2034 if not utilized. U.S. federal net operating losses arising in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in a taxable year is limited to 80% of taxable income in such year. In addition, we have foreign tax credits of $17.6 million that will begin to expire in 2028. Furthermore, we have state net operating loss carryforwards of $112.0 million, portions of which will begin to expire in 2026. Portions of these net operating loss carryforwards and foreign tax credits could expire unused and be unavailable to offset future income tax liabilities. For state income tax purposes, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
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In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. Our existing net operating losses may be subject to limitations arising from transactions that have occurred since our inception, which may trigger such an ownership change pursuant to Section 382. In the future, we may experience ownership changes as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.
Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations.
Our effective tax rate could increase due to several factors, including:
• changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;
• changes in tax laws, tax treaties, and regulations or the interpretation of them, including the One Big Beautiful Bill Act ("OBBBA");
• changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business;
• the outcome of current and future tax audits, examinations or administrative appeals; and
• limitations or adverse findings regarding our ability to do business in some jurisdictions.
Changes in tax laws or regulations could be enacted or existing tax laws or regulations could be applied to us or our customers in a manner that could increase the costs of our products and harm our business. Further, existing tax laws and regulations could be interpreted, modified or applied adversely to us. For example, the OBBBA, together with prior tax legislation, enacted many significant changes to the U.S. tax laws. Future guidance from the Internal Revenue Service and other tax authorities with respect to any tax legislation may affect us, and certain aspects of such legislation could be repealed or modified or sunset in future years. Changes in corporate tax rates, the realization of net operating losses, and other deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses or future tax reform legislation could have a material impact on the value of our deferred tax assets and could increase our future U.S. tax expense.
Our international operations may subject us to potential adverse tax consequences.
We are expanding our international operations to better support our growth into international markets. Our corporate structure and associated transfer pricing policies contemplate future growth in international markets, and consider the functions, risks and assets of the various entities involved in intercompany transactions. The amount of taxes we pay in different jurisdictions may depend on the application of the tax laws of the various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable nexus, often referred to as a “permanent establishment” under international tax treaties. If such a challenge, disagreement or assertion were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and , which could result in one-time tax charges, higher tax rates, reduced cash flows and lower overall of our operations. Our financial statements could to reflect adequate reserves to cover such a contingency.
Changes in India's taxation system could adversely affect our business, financial condition, and results of operations due to the complex and evolving nature of central and state tax regimes.
Our business, financial condition, and results of operations could be materially and adversely affected by any change in the extensive central and state tax regime in India applicable to us and our business. Tax and other levies imposed by the central and state governments in India that affect our tax liability include central and state taxes and other levies, income tax, turnover tax, goods and service tax, stamp duty, and other special taxes and surcharges, which are introduced on a temporary or
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permanent basis from time to time. This extensive central and state tax regime is subject to change from time to time. The final determination of our tax liability involves the interpretation of local tax laws and related regulations in each jurisdiction, as well as the significant use of estimates and assumptions regarding the scope of future operations and results achieved and the timing and nature of income earned and expenditures incurred.
U.S. and Indian transfer-pricing regulations require that any international transaction involving associated enterprises be at an arm’s-length price. Transactions among us and our subsidiaries may be considered such transactions. Accordingly, we determine the pricing among our entities on the basis of detailed functional and economic analysis involving benchmarking against transactions among entities that are not under common control. If the income tax authorities review any of our tax returns and determine that the transfer price applied was not appropriate, we may incur increased tax liabilities, including accrued interest and penalties.
If the stockholders (being non-residents under Indian tax laws) of the foreign company exit by way of redemption of the shares held by them in the foreign company or by selling the shares in foreign company, the stockholders could be taxed in India where the foreign company derives substantial value from India subject to stockholders being either entitled to small stockholder exemption available under Income Tax Act, 1961 or a benefit under the applicable double taxation avoidance agreement.
Tax laws and regulations are also subject to differing interpretations by various authorities in India. Differing interpretations of tax and other fiscal laws and regulations may exist within governmental ministries, including tax administration and appellate authorities, thus creating uncertainty and potential unexpected results. The degree of uncertainty in tax laws and regulations, combined with significant penalties for default and a risk of aggressive action by the governmental or tax authorities, may result in tax risks in the jurisdictions in which we operate being significantly higher than expected. Unfavorable changes in or interpretations of existing, or the promulgation of new, laws, rules and regulations including foreign investment and stamp duty laws governing our business and operations could result in us being deemed to be in contravention of such laws and may require us to apply for additional approvals. We may incur increased costs and other burdens relating to compliance with such new requirements, which may also require significant management time and other resources, and any failure to comply may adversely affect our business, results of operations and prospects. Uncertainty in the applicability, interpretation or implementation of any amendment to, or change in, governing law, regulation or policy, including by reason of an , or a limited body, of administrative or judicial precedent may be time consuming as well as for us to and may impact the viability of our current businesses or restrict our ability to grow our businesses in the future. We are continually under review by the Indian tax authorities and have not received any assessments to date that would have a material impact to our financial statements.
Our ability to receive dividends and other payouts from our Indian subsidiary is subject to Indian legal restrictions and withholding tax.
Whether our Indian subsidiary will pay us dividends in the future and the amount of any such dividends, if declared, will depend on a number of factors, including future earnings, financial condition and performance, cash flows, working capital requirements, capital expenditures and other factors considered relevant by us and the board of our Indian subsidiary. We may decide to retain a substantial portion or all of our earnings in our Indian subsidiary to finance the development and expansion of our business and, therefore, may not declare dividends.
In the event dividends are declared, the Income Tax Act, 1961, as amended, requires that any dividends paid by an Indian company be subject to tax in the hands of the stockholders at applicable rates, such taxes will be withheld by the Indian subsidiary paying dividends.
Risks Related to Ownership of Our Class A Common Stock
The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.
The trading price of our Class A common stock has been and will likely continue to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our Class A common stock. Factors that could cause fluctuations in the trading price of our Class A common stock include the risk factors set forth in this section as well as the following:
• price and volume fluctuations in the overall stock market from time to time;
• volatility in the trading prices and trading volumes of technology stocks;
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• changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;
• sales of shares of our Class A common stock by us or our stockholders;
• failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors, particularly in light of the significant portion of our revenue derived from a limited number of customers;
• changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed, or significantly exceed securities analyst expectations, particularly in light of the significant portion of our revenue derived from a limited number of customers;
• announcements by us or our competitors of new products, applications, features, or services;
• the public’s reaction to our press releases, other public announcements, and filings with the SEC;
• rumors and market speculation involving us or other companies in our industry;
• actual or anticipated changes in our results of operations or fluctuations in our results of operations;
• actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;
• litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors;
• actual or perceived privacy or data security incidents;
• developments or disputes concerning our intellectual property or other proprietary rights;
• announced or completed acquisitions of businesses, applications, products, services, or technologies by us or our competitors;
• new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
• changes in accounting standards, policies, guidelines, interpretations, or principles;
• any significant change in our management; and
• general political and economic conditions and slow or negative growth of our markets.
In addition, in the past, following periods of volatility in the overall market and in the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. Such litigation has been instituted against us and could result in substantial costs and a diversion of our management’s attention and resources.
The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our stock prior to our initial public offering, including our executive officers, employees, and directors and their affiliates, and limiting your ability to influence corporate matters, which could adversely affect the trading price of our Class A common stock.
Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share. Based on shares of common stock held as of December 31, 2025, our directors, executive officers, and holders of more than 5% of our Class A common stock or Class B common stock, and their respective affiliates held in the aggregate approximately 71.1% of the voting power of our outstanding capital stock, and our former Executive Chairman, Mr. Mathrubootham, controlled approximately 18.3% of the voting power of our outstanding common stock. As a result, these stockholders, acting together, have significant influence over our management and affairs and over all matters requiring stockholder approval, including election of directors and significant corporate transactions, such as a merger or other sale of the company or our assets, for the foreseeable future. Corporate action might be taken even if other stockholders oppose them. This concentration of ownership could also delay or prevent a change of control of us that other stockholders may view as beneficial. Mr. Mathrubootham, our former Executive Chairman controlled approximately 18.3% of the voting power of our outstanding common stock as of December 31, 2025, may continue to have influence over matters requiring stockholder approval.
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In addition, the holders of Class B common stock collectively will continue to be able to control all matters submitted to our stockholders for approval even though their stock holdings represent less than 50% of the outstanding shares of our common stock. Because of the 10-to-1 voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock even when the shares of Class B common stock represent as little as 10% of all outstanding shares of our Class A common stock and Class B common stock. This concentrated control will limit your ability to influence corporate matters for the foreseeable future, and, as a result, the market price of our Class A common stock could be adversely affected.
Future transfers by holders of shares of Class B common stock will generally result in those shares converting to shares of Class A common stock, which will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.
Additional stock issuances could result in significant dilution to our stockholders.
We may issue our capital stock or securities convertible into our capital stock from time to time in connection with a financing, acquisition, investments, or otherwise. Additional issuances of our stock will result in dilution to existing holders of our stock. We expect to grant equity awards to employees, officers, directors and other service providers under our equity incentive plans and to the extent stock options to purchase our stock are exercised or restricted stock units settle, there will be dilution. We continue to reserve 2,850,000 shares of our Class A common stock for donation to a newly formed U.S. charitable foundation in the future, which will result in additional dilution to our existing stockholders. Any such issuances could result in substantial dilution to our existing stockholders and cause the trading price of our Class A common stock to decline.
Our stock repurchase programs subject us to various risks that could materially and adversely affect our business, financial condition, results of operations, and stock price. These risks include market timing and valuation uncertainties, impacts on key financial metrics, liquidity constraints, regulatory limitations, conflicts with strategic objectives, adverse market perceptions, and execution challenges.
In November 2024, our board of directors approved a stock repurchase program for the repurchase of up to $400 million of the Company’s outstanding Class A common stock, which was completed in August 2025.
Our stock repurchase programs are subject to significant market timing and valuation risks that could result in suboptimal capital allocation and adverse impacts on shareholder value. We may repurchase shares at prices that subsequently prove to have been excessive relative to the intrinsic value of our stock, particularly during periods of market volatility or when our stock price is trading at elevated multiples. Market conditions, investor sentiment, and macroeconomic factors beyond our control can cause substantial fluctuations in our stock price, making it difficult to determine optimal timing and pricing for repurchases.
If we execute repurchases when our stock is overvalued, we may destroy shareholder value by paying more for shares than they are ultimately worth, reducing the economic benefit to continuing shareholders. Conversely, if we suspend or reduce repurchases during periods when our stock may be undervalued due to temporary market dislocations, we may miss opportunities to enhance shareholder returns. Our repurchase decisions are based on management's assessment of various factors, including stock price, market conditions, available cash, and alternative investment opportunities, but these assessments may prove incorrect. Additionally, the timing of our repurchases may create unintended signaling effects to the market about management's confidence in the company's prospects, potentially leading to increased volatility or adverse market reactions if our subsequent performance does not meet market expectations established by our repurchase activity.
Substantial future sales of shares of our Class A common stock by existing holders in the public market could cause the market price of our Class A common stock to decline.
Sales of a substantial number of shares of our Class A common stock in the public market, or the perception that these sales might occur, could depress the market price of our Class A common stock.
In addition, certain of our stockholders have registration rights that would require us to register shares owned by them for public sale in the United States. We have also filed registration statements to register shares reserved for future issuance under our equity compensation plans. As a result, subject to the satisfaction of applicable exercise periods and applicable volume and restrictions that apply to affiliates, the shares issued upon exercise of outstanding stock options or upon settlement of outstanding RSU or PRSU awards are available for immediate resale in the United States in the open market.
Sales of our shares could also impair our ability to raise capital through the sale of additional equity securities in the future and at a price we deem appropriate. These sales could also cause the trading price of our Class A common stock to fall and make it more difficult for you to sell shares of our Class A common stock.
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Our Class A common stock market price and trading volume could decline if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business.
The trading market for our Class A common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, the price of our securities would likely decline. If one or more of the analysts who cover us cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the price and trading volume of our Class A common stock to decline.
We incur and will continue to incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, which may harm our business.
As a public company listed in the United States, we incur and will continue to incur significant additional legal, accounting, and other expenses. In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and Nasdaq, may increase legal and financial compliance costs and make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts, we fail to comply with new laws, regulations, and standards, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
Failure to comply with these rules might also make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events would also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors, or as members of senior management.
General Risks
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to the useful lives and carrying values of long-lived assets, allowance for doubtful accounts, stock-based compensation expense, the benefit period of deferred contract acquisition costs, the fair value of our employee defined benefit and other compensation liabilities, and valuation of deferred tax assets. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.
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 are subject to interpretation by the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.
A failure to maintain an effective system of disclosure controls and internal control over financial reporting, could adversely affect our ability to produce timely and accurate financial statements or comply with applicable regulations.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable Nasdaq listing standards. We expect that the requirements of these rules and regulations will continue to increase
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our legal, accounting, and financial compliance costs, make some activities more difficult, time consuming, and costly, and place significant strain on our personnel, systems, and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act, is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal controls over financial reporting. For example, we have worked to improve the controls around our key accounting processes and our quarterly close process, and we have hired additional accounting and finance personnel to help us implement these processes and controls. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and investments to strengthen our accounting systems.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems, and controls to accommodate such changes. We have limited experience with implementing the systems and controls that are necessary to operate as a public company. Additionally, if these new systems, controls, or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of internal control over financial reporting. Moreover, our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise.
Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our consolidated financial statements for prior periods. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.
We are required, pursuant to Section 404 Sarbanes-Oxley Act (Section 404), to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm is required to formally attest to the effectiveness of our internal control over financial reporting and any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports that will be filed with the SEC. Our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed, or operating. Our compliance with Section 404 requires that we incur substantial accounting expense and expend significant management efforts. Any failure to maintain disclosure controls and internal control over financial reporting could our business, results of operations, and financial condition and could cause a in the trading price of our Class A common stock.
We are currently planning and designing information systems enhancements, and problems with the design or implementation of these enhancements could interfere with our business and operations.
We are currently in the process of significantly enhancing our information systems, have recently implemented a new enterprise resource planning system and new human capital management platform. The implementation of significant enhancements to information systems is frequently disruptive to the underlying business of an enterprise, which may especially be the case for us due to the size and complexity of our businesses. The implementation of significant enhancements to information systems is frequently disruptive to the underlying business of an enterprise, which may especially be the case for us due to the size and complexity of our businesses. The implementation process has required, and will continue to require, the investment of significant personnel and financial resources. We may not be able to successfully implement these enhancements to information systems without experiencing further delays, increased costs and other difficulties. Any disruptions relating to our systems , particularly any impacting our operations during the design or implementation periods, could affect our ability to process customer orders, provide products and support to our customers, invoice and collect from our customers, fulfill contractual obligations, and otherwise run our business. Data or other issues may
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also be discovered during or as a result of the implementation which, if not corrected, could impact our business or financial results. If we are unable to successfully design and implement our information system enhancements, our financial position, results of operations and cash flows could be negatively impacted. Additionally, if we do not effectively implement the information system enhancements as planned or the information systems do not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess those controls adequately could be further delayed.
We have in the past and may in the future engage in merger and acquisition activities, which require significant management attention, and could disrupt our business, dilute stockholder value, and adversely affect our business, results of operations, and financial condition.
As part of our business strategy to expand our product offerings and grow our business in response to changing technologies, customer demand, and competitive pressures, we have in the past and may in the future make investments or acquisitions in other companies, products, or technologies. The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to complete acquisitions on favorable terms, if at all. These acquisitions may not ultimately strengthen our competitive position or achieve the goals of such acquisition, and any acquisitions we complete could be viewed negatively by customers or investors. We may encounter difficult or unforeseen expenditures in integrating an acquisition, particularly if we cannot retain the key personnel of the acquired company. Existing and potential customers may also delay or reduce their use of our products due to concerns that the acquisition may decrease effectiveness of our products (including any newly acquired product). In addition, if we to integrate such acquisitions, or the assets, technologies, or personnel associated with such acquisitions, into our company, the business and results of operations of the combined company would be affected. For example, we may have with transitioning the acquired technology onto our existing platforms and customer acceptance of multiple platforms on a temporary or permanent basis. In addition, we may face converting the acquired company’s revenue recognition policies and forecasting the related revenues, including subscription-based revenues and term software license revenue, as well as appropriate allocation of the customer consideration to the individual deliverables.
Acquisitions may disrupt our ongoing operations, divert management from their primary responsibilities, subject us to additional liabilities, increase our expenses, subject us to increased regulatory requirements, cause adverse tax consequences or unfavorable accounting treatment, expose us to claims and disputes by stockholders and third parties, and adversely impact our business, financial condition, and results of operations. We may not successfully evaluate or utilize the acquired technology or accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may have to pay cash for any such acquisition which would limit other potential uses for our cash. If we incur debt to fund any such acquisition, such debt may subject us to material restrictions in our ability to conduct our business, result in increased fixed obligations, and subject us to covenants or other restrictions that would decrease our operational flexibility and impede our ability to manage our operations. If we issue a significant amount of equity securities in connection with future acquisitions, existing stockholders’ ownership would be diluted.
Increased government scrutiny of the technology industry could negatively affect our business.
The technology industry is subject to intense media, political, and regulatory scrutiny, which exposes us to government investigations, legal actions, and penalties. Various regulatory agencies, including competition, consumer protection, and privacy authorities, have active proceedings and investigations concerning multiple technology companies. Although we are not currently subject to any such investigations, if investigations targeted at other companies result in determinations that practices we follow are unlawful, including practices related to use of machine- and customer-generated data or generative AI, we could be required to change our products and services or alter our business operations, which could harm our business. Legislators and regulators also have proposed new laws and regulations intended to restrain the activities of technology companies. If such laws or regulations are enacted, they could have an impact on us, even if they are not intended to affect our company. In addition, the introduction of new products, expansion of our activities in certain jurisdictions, or other actions that we may take may subject us to additional laws, regulations, or other government . The increased of certain acquisitions in the technology industry also could affect our ability to enter into strategic transactions or to acquire other businesses. Compliance with new or modified laws and regulations could increase our cost of conducting the business, limit the to increase our revenue, or prevent us from offering products or services.
We also could be harmed by government investigations, litigation, or changes in laws and regulations directed at our business partners, or suppliers in the technology industry that have the effect of limiting our ability to do business with those entities or that affect the services we can obtain from them. There can be no assurance that our business will not be materially adversely affected, individually or in the aggregate, by the outcomes of such investigations, litigation or changes to laws and regulations in the future.
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We may need additional capital, and we cannot be sure that additional financing will be available.
Historically, we have financed our operations and capital expenditures primarily through sales of our capital stock and debt securities that are convertible into our capital stock. In the future, we may raise additional capital through additional equity or debt financings to support our business growth, to respond to business opportunities, challenges, or unforeseen circumstances, or for other reasons. On an ongoing basis, we are evaluating sources of financing and may raise additional capital in the future. Our ability to obtain additional capital depends on our development efforts, business plans, investor demand, operating performance, the condition of the capital markets, and other factors. We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to the rights of existing stockholders, and existing stockholders may experience dilution. Further, if we are unable to obtain additional capital when required, or are unable to obtain additional capital on satisfactory terms, our ability to continue to support our business growth or to respond to business , , or circumstances would be affected.
Additionally, our India subsidiary is subject to Indian foreign exchange controls that regulate borrowing in foreign currencies. Such regulatory restrictions limit our financing sources and could constrain our ability to obtain financing on competitive terms. In addition, we cannot assure you that the required approvals will be granted to us without onerous conditions, or at all. Limitations on incurring or raising debt may have an adverse impact on our business growth, financial condition, results of operations, and cash flows.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash dividends for the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our capital stock will be at the discretion of our board of directors. Accordingly, stockholders must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:
• any derivative claim or cause of action brought on our behalf;
• any claim or cause of action for a breach of fiduciary duty owed by any of our current or former directors, officers, or other employees to us or our stockholders;
• any claim or cause of action against us or any of our current or former directors, officers or other employees arising out of or pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our bylaws (as each may be amended from time to time);
• any claim or cause of action seeking to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws (as each may be amended from time to time, including any right, obligation, or remedy thereunder);
• any claim or cause of action as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; and
• any claim or cause of action against us or any of our current or former directors, officers, or other employees governed by the internal-affairs doctrine.
This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. In addition, our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act of 1933, as amended, including all causes of action asserted against any defendant to such complaint. For the avoidance of doubt, this provision is intended to benefit and
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may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering.
While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Additionally, our amended and restated certificate of incorporation provides that any person or entity holding, owning, or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions.
Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management or hinder efforts to acquire a controlling interest in us, and the market price of our Class A common stock may be lower as a result.
There are provisions in our amended and restated certificate of incorporation and amended and restated bylaws (as each may be amended from time to time) that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control was considered favorable by our stockholders, such as:
• establishing a classified board of directors so that not all members of our board of directors are elected at one time;
• permitting the board of directors to establish the number of directors and fill any vacancies and newly created directorships;
• providing that directors may only be removed for cause;
• prohibiting cumulative voting for directors;
• requiring super-majority voting to amend some provisions in our certificate of incorporation and bylaws;
• authorizing the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
• eliminating the ability of stockholders to call special meetings of stockholders;
• prohibiting stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; and
• our dual class common stock structure as described above.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibit a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Any provision in our amended and restated certificate of incorporation or our amended and restated bylaws (as each may be amended from time to time) 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 Class A common stock and could also affect the price that some investors are willing to pay for our Class A common stock.
Catastrophic events, including climate change, natural disasters and other events beyond our control, may disrupt our business.
Natural disasters or other catastrophic events may cause damage or disruption to our employees, operations, international commerce, and the global economy, and thus could harm our business. Our business operations are subject to interruption by natural disasters such as earthquakes, monsoons, cyclones, tsunamis, floods, extreme heat, and other effects of climate change, pandemics, and other catastrophic events such as fire, power loss, terrorism, political unrest, telecommunications failure, vandalism, cyberattacks, geopolitical instability, war, and other events beyond our control. The majority of our research and development activities, customer service operations, IT systems, and other critical business operations are located in India. Although we maintain response plans, such events could require significant time to resume operations to deliver our services to our customers, could decrease demand for our services, could cause us to incur substantial expense and may cause reputational , in our sales efforts, in our products’ development, of data security, and of
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data, all of which would harm our business, results of operations, and financial condition. Acts of terrorism would also cause disruptions to the internet or the economy as a whole. In addition, the insurance we maintain would likely not be adequate to cover our losses resulting from disasters or other business interruptions. Our disaster recovery plan may not be sufficient to address all aspects or any unanticipated consequence or incident, and our insurance may not be sufficient to compensate us for the losses that could occur.
In addition, the impacts of climate change on the global economy and the technology industry are rapidly evolving and unclear. While we seek to partner with organizations that mitigate their business risks associated with climate change, we recognize that there are inherent climate-related risks wherever business is conducted. Any of our primary locations may be vulnerable to the adverse effects of climate change. For example, our California headquarters has experienced, and may continue to experience, climate-related events at an increasing frequency and severity, including drought and air quality impacts and power shutoffs associated with wildfires and our India office has experienced, and may continue to experience, climate-related events, including cyclones, flooding, and heat waves. Climate-related events, including the increasing frequency of extreme weather events and their impact on the United States, India, Europe, and other major regions’ critical infrastructure, have the potential to disrupt our business, our third-party suppliers and/or the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations. Regulatory developments, changing market dynamics and stakeholder expectations regarding climate change may impact our business, financial condition and results of operations. Furthermore, we may be subject to increased costs, regulations, reporting requirements, standards or expectations regarding the environmental impacts of our business.
Failure to effectively and efficiently address ESG matters could adversely impact us.
There is continuing debate among certain investors, regulators, customers, employees, and other stakeholders concerning environmental, social, and governance ("ESG") matters. Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to ESG are not in line with their philosophy. We may also face reputational damage in the event that we do not meet the ESG standards set by various constituencies.
As ESG best practices and reporting standards continue to develop, we may incur increasing costs relating to ESG monitoring and reporting and complying with ESG initiatives. For example, proposed or adopted climate and other ESG reporting regulations from the SEC, California, and other jurisdictions may increase our compliance costs. Our disclosures on ESG matters or a failure to meet evolving stakeholder expectations for ESG practices and reporting may potentially harm our reputation and customer relationships. Due to new regulatory standards and market standards, certain new or existing customers, particularly those in the EU, may impose stricter ESG guidelines or mandates for, and may scrutinize relationships more closely with, their counterparties, including us, which may lengthen sales cycles or increase our costs.
Furthermore, if our competitors’ ESG performance is perceived to be better than ours, potential or current investors may elect to invest with our competitors instead. In addition, in the event that we communicate certain initiatives or goals regarding ESG matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. At the same time, anti-ESG sentiment has gained momentum among certain groups in the United States, and the federal and state governments have enacted or proposed “anti-ESG” policies. In addition, the U.S. Supreme Court’s ruling striking down race-based affirmative action in higher education has increased scrutiny of private sector employment practices, and activist groups and state attorneys general have begun to analogize the outcome of that case to private employment matters, asserting that certain corporate practices are discriminatory and unlawful. Such anti-ESG related policies, legislation, initiatives and scrutiny could us to the risk of or result in legal costs and reputational . If we to the expectations of investors, customers, employees and other stakeholders or our initiatives are not executed as planned, our business, financial condition, results of operations, and prospects could be affected.
