Item 1A. Risk Factors
Our business, operations, and financial condition are subject to various risks and uncertainties, including those described below, that could materially adversely affect our business, results of operations, financial condition, growth prospects, and the trading price of our Class A common stock. The following factors, among others not currently known by us or that we currently do not believe are material, could cause our actual results to differ materially from historical results and those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors, and oral and other statements. You should carefully consider the following risks and uncertainties, together with all of the other information contained in this Annual Report on Form 10-K, including the sections titled “Special Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.
Risks Related to Our Business, Industry, and Operations
Our rapid growth makes it difficult to evaluate our future prospects and increases the risk that we will not continue to grow at or near historical rates.
We have been growing rapidly over the past several years. As a result, our ability to forecast our future results of operations is subject to a number of uncertainties, including our ability to effectively plan for and model future growth. Many factors may contribute to declines in our revenue growth rate, including increased competition, slowing demand for our solution from existing and new customers, a failure by us to continue capitalizing on growth opportunities, terminations or downsizing of contracts, full or partial non-renewals of contracts or product returns by our existing customers, the maturation of our business, and macroeconomic factors, among others. Our recent and historical growth should not be considered indicative of our future performance. Even if our revenue continues to increase over the long term, we expect that our revenue growth rate will continue to decline in the future as a result of a variety of factors, including the maturation of our business. We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies in a rapidly changing environment. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, our growth rates may slow and our business, financial condition, and results of operations could be harmed.
We have a history of losses and may not be able to achieve our profitability targets in the future.
Prior to the third quarter of fiscal year 2026, we had incurred net losses in each period since our incorporation. We may not achieve or sustain profitability in future periods and may incur net losses in future periods. We incurred a net loss of $9.1 million for the fiscal year ended January 31, 2026. As a result, we had an accumulated deficit of $1,619.1 million as of January 31, 2026. We anticipate that our expenses will increase substantially in the foreseeable future as we continue to enhance our Connected Operations Platform, broaden our customer base, expand our sales and go-to-market activities, including expanding our sales team and customer outcomes team, expand our operations, hire additional employees, invest in emerging technologies, and continue to develop our technology. These efforts may prove more expensive than we currently anticipate, or we may not succeed in increasing our revenue sufficiently, or at all, to offset these higher expenses. Revenue growth may slow, or revenue may decline, for a number of possible reasons, including demand for our Connected Operations Platform or increasing competition, among other reasons. Any to increase our revenue as we grow our business could prevent us from our targets, which would cause our business, financial condition, and results of operations to .
Additionally, we have granted restricted stock units (“RSUs”) to certain of our employees and non-employees. Our future operating expenses will include a significant amount of stock-based compensation expense with respect to these RSUs, as well as any other equity awards we have granted and may grant in the future, which will impact our profitability levels.
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We face risks associated with the growth of our business in new use cases.
Historically, most of our revenue has been derived from sales of subscriptions to our Applications for use in connection with customers’ fleets. In recent periods, we have increased our focus on Applications for use in connection with customers’ equipment, sites, and frontline workers. We have expanded and plan to continue to expand the use cases of our solution, including those where we may have limited operating experience, and may be subject to increased business, technology, and economic risks that could affect our financial results. Entering new use cases and expanding in the use cases in which we are already operating with new Applications will continue to require significant resources, and there is no guarantee that such efforts will be successful or beneficial to us. Historically, sales to a new customer have often led to additional sales to the same customer or similarly situated customers. To the extent we expand into and within new use cases that are heavily regulated, we will likely face additional regulatory scrutiny, risks, and burdens from the governments and agencies which regulate those markets and industries. While our strategy of building Applications for use in connection with customers’ fleets has proven successful in the past, it is uncertain that we will achieve the same penetration and organic growth with respect to Applications for customers’ sites, equipment, frontline workers, or any other use cases that we pursue. Any to do so may our reputation, business, financial condition, and results of operations.
If we are unable to attract new customers, our future revenue and results of operations will be harmed.
Our future success depends, in part, on our ability to sell subscriptions to access our Connected Operations Platform to new customers. Our ability to attract new customers will depend in part on the perceived benefits and pricing of our solution and the effectiveness of our sales and go-to-market efforts. Other factors, many of which are out of our control, may now or in the future impact our ability to attract new customers, including:
• potential customers’ inexperience with or reluctance to adopt software and cloud-based solutions in their physical operations or our failure to adequately demonstrate the return on investment ROI of our solution;
• potential customers’ commitments to or preferences for their other vendors;
• actual or perceived switching costs;
• the adoption of new, or the amendment of existing, laws, rules, regulations, executive orders, or directives that negatively impact the utility of, or that require difficult-to-implement changes to, our solution, including deregulation that reduces the need for compliance functionality provided by our Connected Operations Platform;
• our ability to deliver compliance functionality offered by our solution;
• our failure to expand, retain, and motivate our sales, product, and engineering personnel;
• our failure to successfully expand into new international markets;
• our failure to develop or expand relationships with existing channel or OEM partners or to attract new channel or OEM partners;
• our failure to develop our application ecosystem and integrate with new third-party and customer software applications and devices used by potential customers;
• our failure to help potential customers successfully deploy and use our solution;
• technology developments that minimize the demand for our solution, such as the use of AI to internally develop software solutions instead of procuring them; and
• general macroeconomic conditions, including elevated inflation and interest rates, financial distress caused by volatility in the global banking sector and other recent financial, economic, and political events that may impact our customers and the industries in which they operate.
If our efforts to attract new customers are not successful, our business, financial condition, and results of operations will suffer.
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If we are unable to retain and expand our relationships with existing customers, our financial position and results of operations will be harmed.
To maintain or improve our results of operations, it is important that our customers renew their subscriptions to our Connected Operations Platform when existing contract terms expire and that we expand our commercial relationships with our existing customers. Our contracts are typically for an initial subscription term of three to five years. However, our customers have no obligation to renew their subscriptions after the initial terms expire, and our customers might not renew any or all of their subscriptions for a similar contract period, at the same price, on the same payment terms, with the same or greater number of Applications and IoT devices, or at all. In the past, some of our customers have elected not to renew their subscriptions with us, and it is difficult to accurately predict long-term customer retention. Customers may choose to not renew their subscriptions or to downsize their subscriptions in full or in part for many reasons, including the belief that our solution is no longer required for their business needs or is otherwise not as cost-effective as initially anticipated, a desire to reduce discretionary spending in response to macroeconomic or other factors, our discontinuation of a desired application or of applicable regulatory certifications, a with their overall customer experience, a belief that our competitors’ offerings provide value, or a belief that they can internally develop alternative solutions. Additionally, our customers might not renew for reasons entirely out of our control, such as mergers and acquisitions that affect our customer base, the of their business or business unit utilizing our solution, or an economic affecting their industry. A decrease in our renewal rate would have an effect on our business, financial condition, and results of operations.
A part of our growth strategy is to sell additional subscriptions to Applications and expand use cases with our existing customers. Our ability to sell subscriptions will depend in significant part on our ability to anticipate industry evolution, practices, and standards. Additionally, we will need to continue to enhance existing Applications and introduce new Applications and features on a timely basis to keep pace with technological developments both within our industry and in related industries, and to remain compliant with any federal, state, local, or foreign regulations that apply to us or our customers. However, we may prove unsuccessful either in developing new Applications or features or in expanding the set of third-party applications and devices with which our Applications integrate, particularly as we expand our solution into use cases that have not been our historical focus and as we continue to refine our efforts to hire, develop, and retain engineering talent. In addition, the success of any enhancement or new Application depends on several factors, including the timely development, market introduction, and market acceptance of the enhancement or Application. Any new Applications we develop or acquire might not be introduced in a timely or cost-effective manner and might not the broad market acceptance necessary to generate significant revenue, particularly with respect to use cases that have not been our historical focus. If any of our competitors implements new technologies before we can implement them or anticipates the and integration in related industries, our business may be affected.
Another part of our growth strategy is to sell additional subscriptions to existing customers as they increase their number of connected assets, such as vehicles, machinery, warehouses, and factories, or connected employees. However, our customers may shrink or choose to not grow and expand their fleet and physical operations, or may opt not to purchase additional subscriptions from us to cover their broader or expanded operations. A decrease in our ability to sell additional subscriptions to our Connected Operations Platform to our existing customers could have an adverse effect on our business, financial condition, and results of operations.
We rely heavily on direct sales to sell subscriptions to access our Connected Operations Platform.
We market and sell subscriptions to access our Connected Operations Platform primarily through a direct sales model, and we must expand our sales organization to increase our sales to new and existing customers. We expect to continue expanding our direct sales force, both domestically and internationally, particularly our direct sales organization focused on sales to large organizations. We also expect to dedicate significant resources to sales programs that are focused on these large organizations. Once a new customer begins using our Connected Operations Platform, our sales team will need to continue to expand use of our Connected Operations Platform by that customer, including increasing the number of our IoT devices and Applications used by that customer and expanding their deployment of our Applications across other use cases. All of these efforts will require us to invest significant financial and other resources. We have also experienced turnover in our sales and marketing and supporting teams, including within the senior leadership of those teams, which often results in costly training, operational inefficiency, and potential execution risks. If we are unable to expand and successfully onboard our sales force and new sales leaders at sufficiently high levels, our ability to attract new customers may be , and our business, financial condition, and results of operations would be affected. In addition, we may not anticipated revenue growth from expanding our sales if we are to hire, develop, integrate, and retain talented and sales personnel (including by to effectively market and sell our Connected Operations Platform, including our IoT devices, Applications, and other products, to prospects and customers and to effectively differentiate our platform from competitor offerings), if our new and existing sales personnel are to productivity levels in a reasonable period of time, if our sales programs are not , or if we are not to accurately account for the impact of sales personnel leaves of .
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In order to increase our revenue, we expect we will need to further build our direct sales capacity while also developing channel partners who will require training, support, and integration into our sales process. Additionally, our entry into any new markets and use cases will require us to develop appropriate internal sales capacity or channel partners and to train internal or external sales teams to effectively address these markets. If we are unsuccessful in these efforts, our ability to grow our business will be limited, and our business, results of operations, prospects, and financial condition will be adversely affected.
Our current system of direct sales may not prove effective in maximizing sales of subscriptions to access our Connected Operations Platform. Our solution is complex and certain sales can require substantial effort and outlay of cost and resources, either by us or our channel partners. It is possible that our sales team members or channel partners will be unable or unwilling to dedicate appropriate resources to support those sales. If we are unable to develop and maintain effective sales incentive programs for our internal sales team members and channel partners, we may not be able to incentivize these parties to sell our solution to customers, particularly large organizations. The loss of one or more of our sales team members or channel partners in a given geographic area could harm our results of operations within that area, as sales team members and channel partners typically require extensive training and take several months to achieve acceptable productivity.
The length of our sales cycle can be unpredictable, particularly with respect to sales to larger customers, and our sales efforts may require considerable time and expense.
It is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. Customers with substantial or complex organizations may choose to deploy our solution in large increments on a periodic basis. Accordingly, customers may purchase subscriptions for significant dollar amounts on an irregular and unpredictable basis. Because of the nature of our business, we cannot predict the timing or cost of these sales and deployment cycles. Variations in the sales cycles among our customers based on the size and complexity of their operations, as well as the possibility that customers may purchase new subscriptions sporadically with short lead times, may adversely impact our ability to anticipate the timing and amount of ARR, revenue, and contract value from new customers, or from increased sales to existing customers.
In particular, part of our strategy is to target sales to larger customers. Sales to larger customers involve risks that may not be present or that are present to a lesser extent with sales to smaller organizations, such as longer and less predictable sales cycles (which typically last several months and, in some cases, have exceeded one year), more complex customer product requirements and expectations related to invoicing and payment and other commercial and contractual terms, substantial upfront sales costs. For example, larger customers often require considerable time to evaluate and test our solution prior to purchasing subscriptions. A number of factors influence the length and variability of our sales cycle, or even if a sale will occur, including the need to educate potential customers about the uses and benefits of our solution, the discretionary nature of purchasing and budget cycles, election cycles, macroeconomic factors, the competitive nature of evaluation and purchasing approval processes, the customer’s contemplated use cases, the specific deployment plan of each customer, the complexity of the customer’s organization and contracting procedures (for example, procurement requirements and budgetary, approval, signature, and other relevant policies and procedures), and the difficulty of such deployment, as well as whether a sale is made directly by us or through resellers or other partners. Moreover, larger customers often begin to deploy our solution on a limited basis but nevertheless may require a greater level of support from our customer support personnel and negotiate higher pricing discounts, which increases our upfront investment in the sales effort and could reduce the potential of our contracts with those customers. If we to effectively manage these risks associated with sales cycles, sales timing uncertainty, and collection of payment from our customers, our business, financial condition, and results of operations may be affected.
Our ability to achieve customer renewals and increase sales of subscriptions to our solution is dependent on the quality of our customer outcomes team, and our failure to offer high quality support would have an adverse effect on our business, reputation, and results of operations.
Our customers depend on our customer outcomes team to resolve issues and realize the full benefits relating to our Connected Operations Platform, including the IoT devices and Applications used by our customers. If we do not succeed in helping our customers quickly resolve post-deployment issues, providing effective ongoing support and education on our Connected Operations Platform, effectively marketing and selling our Connected Operations Platform to customers and effectively differentiating our platform from competitor offerings, or facilitating a smooth renewal or expansion process, including with respect to any relevant required or desired changes to the customer contract, our ability to sell additional subscriptions to, or renew subscriptions with, existing customers or expand the value of existing customers’ subscriptions would be adversely affected and our reputation with our customers could be damaged. Many larger customers have more complex IT environments and require higher levels of support than smaller customers. If we fail to meet the requirements of these larger customers, it may be more to grow sales with them.
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Additionally, it can take several months to recruit, hire, and train qualified engineering-level customer support employees, especially in geographic markets in which we do not have extensive prior operating experience. We may not be able to hire such employees fast enough to keep up with demand, particularly if the sales of subscriptions to our solution exceed our internal forecasts. To the extent that we are unsuccessful in hiring, training, and retaining adequate customer support employees, our ability to provide adequate and timely support to our customers, and our customers’ satisfaction with our solution, will be adversely affected. Our failure to provide and maintain high-quality support services would have an adverse effect on our business, reputation, and results of operations.
If we fail to effectively manage our growth, our business, financial condition, and results of operations could be harmed.
Rapid revenue growth has placed, and may continue to place, significant demands on our management, operational, and financial resources and systems. In addition, we operate globally and sell subscriptions to our solution to customers in many countries, and we plan to continue to expand our operations internationally in the future. We have also experienced significant growth in the number of customers, IoT devices and connected assets, and data supported by our solution and our associated infrastructure, which has placed additional demands on our resources, systems, and operations. To manage our current and anticipated future growth effectively, we must continue to maintain and enhance our business processes, systems, and controls. We must also attract, develop, and retain a significant number of qualified personnel without undermining our culture of focusing on customer success, building for the long term, adopting a growth mindset, being inclusive, and winning as a team that has been central to our growth. We will require significant expenditures and the allocation of management resources to grow and change in these areas. If we fail to successfully manage our anticipated growth, the quality and security of our Connected Operations Platform and internal operations may , which could affect our brand and reputation, our ability to retain and attract customers, and impact our business, financial condition, and results of operations.
We face intense and increasing competition, and we may not be able to compete effectively, which could reduce demand for our solution and adversely affect our business, revenue growth, and market share.
The markets in which we compete are new and rapidly evolving. Our historical competition has been specific to the individual solution sets that we target, or specific to operational groupings like fleets or facilities. For example, certain of our Applications compete with vendors like Avigilon, CalAmp, Fleet Complete, Geotab, Lytx, Masternaut, Michelin, Motive, Nauto, Netradyne, Omnitracs, Orbcomm, Platform Science, Skybitz, Spireon, TrackUnit, Verizon Connect, Webfleet, and Zonar.
Competition in these markets is based on several factors, including the comprehensiveness of a solution; feature set breadth and extensibility; analytical capability; ease of adoption; platform reliability, security and scalability; customer support; ability to realize cost savings and return on investment; brand awareness and reputation; and the strength of sales and go-to-market efforts and channel partnerships.
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Some of our competitors may have greater financial resources, greater brand recognition, larger and more effective sales forces and marketing resources, and broader distribution networks than us. Large corporations, as well as OEMs, may be able to utilize their distribution networks and existing relationships to offer solutions that compete with our Connected Operations Platform, in addition to solutions in other verticals already being provided to customers. We expect additional competition as our market grows and rapidly changes, and we may choose to enter or expand into new markets as well. For example, we rely upon Amazon for AWS web hosting, and we do not currently have an alternative provider. If Amazon decided to compete with us and did not allow us to renew our commercial agreement, this may have a significant impact on our solution and would require that we allocate time and expense to setting up our Connected Operations Platform on an alternative hosting service. We expect competition to increase as other established and emerging companies, such as Netradyne, Platform Science, and Verkada, enter the markets in which we compete, as customer requirements evolve, as the regulatory landscape evolves, and as new products and services and technologies are introduced. Certain of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing, distribution, professional services, or other resources and name recognition than we do. Some of our competitors have engaged in, and may in the future engage in, business practices that we consider to be . For example, we previously filed lawsuits Motive that they have engaged in patent , advertising, , computer and , competition, and theft of trade secrets, and we may take further action to protect our intellectual property rights and business interests. Responding to this and similar may be and time-consuming and may management from other business priorities. In addition, certain of our current and potential competitors have relationships with current and potential customers and extensive knowledge of industries with physical operations. Other current and potential competitors may be to more effectively leverage new technologies, such as AI, to develop and market new products with comparable or functionality to our solution. As a result, our current and potential competitors may be to respond more quickly and effectively than we can to new or changing , technologies, standards, or customer requirements or devote resources than we can to the development, promotion, and sale of their products and services. Moreover, certain of these companies are bundling their products and services into larger deals or subscription renewals, often at significant discounts as part of a larger sale. In addition, some current and potential competitors may offer products or services that address one or a limited number of functions at lower prices or with depth than our solution. As a result, we may experience reduced margins, longer sales cycles, less payment terms, and of market share. This could lead us to decrease prices, implement alternative pricing structures, or introduce products and services available for free or a nominal price in order to remain competitive. We may not be to compete current and future competitors, and our business, financial condition, and results of operations will be if we to meet these competitive pressures.
Moreover, current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with others, including our current or future channel partners, OEM partners, integration partners, and other strategic technology companies. By doing so, these competitors may increase their ability to meet the needs of our existing or potential customers. In addition, our current or prospective indirect sales channel partners may establish cooperative relationships with our current or future competitors. These relationships may limit our ability to sell our solution through specific distributors, technology providers, and distribution channels and allow our competitors to rapidly gain significant market share. These developments could limit our ability to obtain revenue from existing and new customers. If we are unable to compete successfully against current and future competitors, our business, financial condition, and results of operations would be harmed.
Our dependence on a limited number of joint design manufacturers and suppliers of manufacturing services and critical components within our supply chain for our IoT devices may adversely affect our ability to sell subscriptions to our Connected Operations Platform, our margins, and our results of operations.
Our IoT devices are made using a primarily outsourced manufacturing business model that utilizes joint design manufacturers. We depend on a limited number of joint design manufacturers and suppliers, and in some instances, a single joint design manufacturer or supplier, to allocate sufficient capacity to meet our needs, to produce IoT devices, or components and materials thereof, of acceptable quality at acceptable yields, and to deliver those devices or components to us on a timely basis. We are subject to the risk of shortages and long lead times in the supply of these devices, components, and materials. In addition, the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules. We have in the past experienced and may in the future experience component shortages, and the availability of these components may be unpredictable. For example, for several fiscal years, there was an ongoing global silicon component shortage, which resulted in increases in the cost of devices and components and delays in shipments of goods across many industries, including components used in our IoT devices. Global transportation and freight networks were also strained as a result of global health , geopolitical , labor , and other factors, which caused freight shipping costs and lead times to increase. Increases in the cost of devices or components, or freight to transport those items, could impact our results of operations.
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Our manufacturers and suppliers will continue to face the risk of temporary or permanent disruptions in their manufacturing operations due to component or material shortages, cost increases (such as increases in the cost of memory, storage and computing), equipment breakdowns, labor strikes or shortages, natural disasters, disease outbreaks and resulting lockdowns, energy crises and power outages, geopolitical tension, civil unrest, hostilities or wars, trade policies, tariffs, acquisitions, insolvency, changes in legal or regulatory requirements, or other similar problems. Our manufacturers, suppliers, and sub-tier suppliers have a large presence in China and Taiwan. Any increase in tensions between China and Taiwan, including threats of military actions or escalation of military activities, could adversely affect our suppliers’ and joint design manufacturers’ operations in Taiwan and secondary locations in Asia. Although we have extended our supply orders to the latest quoted lead times, qualified additional components, and have in the past made preemptive spot purchases to build out our inventory, we cannot guarantee that we will have sufficient inventory for our needs or that future to our supply of IoT devices or materials will not occur. Any in the shipment of IoT devices or any other necessary materials our ability to recognize revenue for subscriptions purchased by our customers.
In addition, some of our suppliers, joint design manufacturers, and logistics providers may have more established relationships with larger-volume device manufacturers, and as a result of such relationships, such suppliers may choose to limit or terminate their relationship with us. Developing suitable alternate sources of supply for these devices and components may be time-consuming, difficult, and costly, and we may not be able to source these devices and components on terms that are favorable to us, or at all, which may adversely affect our ability to meet our requirements or provide our customers with needed IoT devices in a timely or cost-effective manner. Because our customers often must install IoT devices before being able to fully utilize our Connected Operations Platform, any interruption or delay in the supply of any of these devices or components, or the inability to obtain these devices or components from alternate sources at acceptable prices and within a reasonable amount of time, would our ability to onboard new customers.
Evolving trade policies, including the imposition of tariffs and other trade barriers by the United States and other countries, can have the effect of increasing production costs and creating disruptions and delays in supply chains. We expect that the occurrence of these developments in regions where we operate, such as North America and Europe, would likely increase the cost of our devices, disrupt supply chain logistics, and affect our ability to efficiently transport, store, and deliver our IoT devices to customers, which could negatively impact our revenue growth and operating margins. Our efforts to optimize our supply chain and manufacturing practices in light of evolving trade policies, component, production, and transportation costs, and other factors can be expensive, time-consuming, ineffective, and disruptive to our business and results of operations and may not succeed.
Managing the supply of our IoT devices is complex. Insufficient supply and inventory may result in lost sales opportunities or delayed revenue, while excess inventory may harm our results of operations.
Our third-party manufacturers and suppliers procure components for our IoT devices based on our forecasts, and we generally do not hold significant inventory for extended periods of time. These forecasts are informed by historical trends, market analysis, and anticipated demand for our solutions; however, their accuracy cannot be guaranteed. In order to reduce manufacturing lead times and plan for adequate component supply, from time to time we may issue forecasts for components and products that are non-cancelable and non-returnable.
Our inventory management systems and related supply chain visibility tools may be inadequate to enable us to accurately forecast and effectively manage supply of our IoT devices. These systems and tools also rely on the availability, accuracy, and timeliness of data from third parties, and any disruptions, inaccuracies, or delays in such data could impair our ability to effectively forecast demand and manage inventory. We may not succeed in maintaining supply levels that are sufficient to ensure competitive lead times while also avoiding obsolescence of our inventory because of rapidly changing technology and end-customer requirements. If we ultimately determine that we have excess and obsolete supply, we may have to record a reserve for excess material costs, or reduce our prices and write-down inventory, either of which in turn could result in lower margins. Alternatively, insufficient supply levels may lead to shortages that result in revenue or of sales altogether as potential end customers are to access our Connected Operations Platform and, as a result, turn to competitors’ products that are readily available. Additionally, any increases in the time required to manufacture our IoT devices or ship these devices could result in supply . If we are to effectively manage our supply and inventory, our results of operations could be affected.
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We may not be able to successfully execute our strategic initiatives or meet our long-term financial goals.
A significant part of our business strategy is to focus on long-term growth over short-term financial results. For example, for the fiscal year ended January 31, 2026, we increased our operating expenses to $1,294.7 million as compared to $1,140.9 million for the fiscal year ended February 1, 2025. We expect to continue making significant expenditures on hiring, sales and go-to-market efforts, and investments to develop new features, integrations, capabilities, and enhancements to our solution and further expand the use cases addressed by our Applications. We have been engaged in strategic initiatives to expand the scope of our core business to increase long-term stockholder value, to improve our cost structure and efficiency, and to increase our selling efforts and develop new business, and we expect to continue making significant expenditures in pursuit of these initiatives. We may not be able to successfully execute these or other strategic initiatives or deliver these initiatives on our expected timetable. If we are not successful in executing on our strategic initiatives, our business, financial condition, and results of operations could be harmed.
If we are not able to develop and timely introduce new technologies for our Connected Operations Platform that achieve market acceptance, keep pace with technological developments, and meet existing and emerging regulatory requirements, our business, financial condition, and results of operations would be harmed.
Our ability to attract new customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our existing offerings and to introduce compelling new technologies that reflect the changing nature of our customers’ needs and the regulations to which they are subject. The success of any enhancement to our Connected Operations Platform depends on several factors, including timely completion and delivery, competitive pricing, adequate quality testing, integration with existing technologies and our platform, and overall market acceptance. Factors outside of our control, such as developing laws and regulations, regulatory orders, competitive product offerings, rising AI infrastructure costs, and changes in demand for our solution may also materially impact the successful implementation of new Applications. Any new features or products that we develop may not be introduced in a timely or cost-effective manner, may contain bugs or other defects, or may not achieve the market acceptance necessary to generate significant revenue.
Further, the development and introduction of new technologies can be difficult, time-consuming, and costly. There are inherent risks and uncertainties associated with offering new technologies, especially when new markets are not fully developed, related technology standards are not mature, or when the laws and regulations regarding a new technology are evolving. If we are unable to successfully develop and timely introduce new Applications, enhance our existing Connected Operations Platform to meet customer requirements, or otherwise gain market acceptance, our business, financial condition, and results of operations would be harmed.
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If we experience a security breach or incident affecting our customers’ assets or data, our data or IoT devices, our Data Platform, or other systems, our Connected Operations Platform may be perceived as not being secure or safe, our reputation may be harmed, and our business, financial condition, and results of operations could be materially and adversely affected.
As part of our business, we process, store, and transmit our customers’ information and data as well as our own, including in our platform, devices, networks, and other systems, and we also rely on third parties that are not directly under our control to do so. We and many of our third-party partners, including our subprocessors and service providers, have security measures and disaster response plans in place that are designed to help protect our customers’ data, our data, our solution, and other systems against unauthorized access. However, we cannot assure that these security measures and disaster response plans will be adequate or effective against all security threats, including those from malicious insiders, ransomware and other malware, denial of service, supply chain, and other attacks; and natural disasters and other sources of disruptions, to the operation of our Connected Operations Platform, our devices, or our or our third-party partners’ operations, including power , telecommunications, and other . Our internal and third-party partners’ systems and security measures have in the past been and may in the future be or otherwise compromised, , or disabled, including as a result of actions by insiders or third parties (including nation-state actors, such as those acting in connection with ongoing geopolitical tensions), such as by computer hackers, phishing (including impersonating us by using domain names that are similar to ours), and other means of social engineering, including inducement of employees or customers to usernames, passwords, or other sensitive information, and employee or contractor or . For example, as a result of the ongoing between Russia and Ukraine, the U.S. government issued a “Shields Up” alert in 2022 and other for American organizations noting the potential for Russia’s on the Ukrainian government and infrastructure organizations to impact organizations in the United States. More generally, we and other American organizations may face increased risk of related to geopolitical tensions and events such as the Russia-Ukraine and the in the Middle East. If such were to occur and were to impact us or our third-party partners, the relevant systems and security measures might provide protection. In addition, technological (including with AI) or other developments may introduce novel cybersecurity vectors, or may result in becoming more sophisticated and more to detect and protect . Any , , compromise, or of, or impacting, our systems or those of our third-party partners could result in the , , or of our or our customers’ data; of intellectual property; someone obtaining access to, modifying, exfiltrating, or otherwise processing without authorization our customers’ data or our data; or someone or obtaining access to our Connected Operations Platform or other systems. Because a security or could materialize and techniques used by actors continue to evolve, we and our third-party partners may be to anticipate security or and implement adequate preventative measures. We incur costs in our efforts to detect and prevent security and other security-related and we expect to incur additional costs in connection with to our systems and processes in ongoing efforts to prevent such and . In the event of a future or , we could be required to expend additional significant capital and other resources to prevent further or , which may require us to substantial resources. Moreover, we could be required or otherwise find it appropriate to notify regulators, customers, and/or impacted third parties of, and otherwise address, the or and its root cause. In the United States, for example, the SEC has adopted rules for mandatory disclosure of material cybersecurity experienced by public companies, as well as cybersecurity governance and risk management practices. Complying with these obligations could cause us to incur substantial costs and could increase publicity surrounding any that compromises sensitive data. Any or perceived by us to comply with these laws may also subject us to enforcement action or , any of which could our business.
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Third parties may also conduct attacks designed to temporarily deny customers access to our Connected Operations Platform or disrupt or otherwise impede such access or our platform’s performance. They may also conduct attacks designed to interfere with the operation of our AI models or the accuracy of our data insights. Our presence in the IoT industry with offerings of telematics products and services, including vehicle telematics, could also increase our exposure to potential costs and expenses and reputational harm in the event of cyberattacks or vulnerabilities impacting our solution. For example, in July 2020, the U.S. Federal Bureau of Investigation issued a private industry notification alerting industry participants to cyber-threats targeted at ELDs. Compromise of our IoT devices could pose a health and safety hazard if a malicious actor a that allows for control of or with the operation of our customers’ equipment. Any actual or perceived security or affecting our platform or other aspects of our systems, networks, or operations, such as any compromise of our IoT devices, any of service attack, or any other to our Connected Operations Platform, affecting data we or our service providers process or maintain, or affecting our customers’ equipment or operations, could result in a of customer confidence in the security, , or safety of our solution and to our brand and reputation; reduce the demand for our solution; our normal business operations; require us to spend material resources to correct the or and otherwise respond to it; us to legal liabilities, including and by private parties, regulatory and other proceedings, , , and indemnity obligations; and materially and affect our business, financial condition, and results of operations. These risks will increase as we continue to grow the scale and functionality of our Connected Operations Platform and as we store, transmit, and otherwise process increasingly large amounts of information and data, which may include proprietary, sensitive or confidential data, or personal or identifying information. Our liability in connection with any security , , , or other to our solution or operations may not be covered by insurance, and such events may result in an increase in our costs for insurance or insurance not being available to us on economically feasible terms, or at all. Insurers may also us coverage for any future claim. Any of these results could our growth prospects, financial condition, business, results of operations, and reputation.
Abuse or misuse of our internal platform controls and system tools could cause significant harm to our business and reputation.
In order to provide real-time support to our customers and improve and develop our products, we have created internal platform and system tools that are used by our employees to access data. If our employees were to intentionally or negligently abuse or misuse these tools, for example, by interfering with or altering our IoT devices or our customers’ connected assets and accessing our customers’ data, or otherwise violate company policies, our customers could be significantly harmed. For example, our employees have historically had broad access to customers’ video footage and other customer data, and although we have implemented access controls, such controls may not ensure that our employees’ access to and use of customer data is in all cases appropriate. Additionally, some of our Applications have features allowing them to control large industrial assets or interact with some operations of vehicles; any abuse or misuse of these capabilities could cause substantial disruption or to our customers. Any or by our employees of our internal platform and system tools, even if , could result in potential legal liability and reputational to our customers, our partners, and us. Accordingly, any conduct, or , or otherwise, of our platform and system tools could significantly and our business and reputation.
We are continuing to implement enhanced access controls to our platform controls and system tools in an effort to further improve security and reduce the risk of human error or malfeasance. If it becomes necessary to further restrict the availability or use of our platform and system tools by our employees in response to any abuse or misuse, our ability to deliver high-quality and timely customer support could be harmed.
Business disruptions or performance problems associated with our technology and infrastructure, including interruptions, delays, or failures in service from our third-party data center hosting facilities and other third parties, could adversely affect our business, financial condition, and results of operations.
Continued adoption of our solution depends in part on the ability of our existing and potential customers to access our solution within a reasonable amount of time. We have experienced, and may in the future experience, disruptions, data loss, data corruption, outages, and other performance problems with our solution and infrastructure due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints, or security-related incidents. If our solution is unavailable, corrupted, or if our users and customers are unable to access or trust our solution within a reasonable amount of time, or at all, we may experience a decline in renewals, damage to our brand, or other harm to our business. The impact upon our customers may be further heightened by the nature of our solution connecting to their physical infrastructure, which may or their fleet, equipment, sites, or other physical operations. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology and business needs, our business, financial condition, and results of operations could be affected.
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A significant portion of our critical business operations are concentrated in the United States and are supported by third-party hosting facilities located in Oregon. We are a highly automated business, and a disruption or failure of our systems, or of the third-party hosting facilities and other third-party services that we use, could cause delays in completing sales and providing services. For example, from time to time, our data center hosting facilities have experienced outages. The causes for such disruptions or failures could also include a major earthquake, blizzard, fire, cyberattack, act of terrorism, or other catastrophic event, a decision by one of our third-party service providers to close facilities that we use without adequate notice, or other unanticipated problems with the third-party services that we use, including a failure to meet service standards.
Interruptions or performance problems with either our technology and infrastructure or our data center hosting facilities could, among other things:
• result in the destruction or disruption of any of our critical business operations, controls, or procedures or IT systems;
• severely affect our ability to conduct normal business operations;
• result in a material weakness in our internal control over financial reporting;
• result in our issuing credits or paying penalties or fines;
• cause our customers to terminate their subscriptions;
• harm our brand and reputation;
• adversely affect our renewal rates or our ability to attract new customers; or
• cause our solution to be perceived as not being secure.
Any of the above could adversely affect our business, financial condition, and results of operations.
We rely on third-party software for certain essential financial and operational services, and a failure or disruption in these services could materially and adversely affect our ability to manage our business effectively.
We rely on third-party software to provide many essential financial and operational services to support our business, including enterprise resource planning, customer relationship management, AI efficiency enhancements, and human capital management. Many of our vendors are less established and have shorter operating histories than traditional software vendors. Moreover, many of these vendors provide their services to us via a cloud-based model instead of software that is installed on our premises. We depend upon these vendors to provide us with services that are always available and are free of errors, security vulnerabilities, or defects that could cause disruptions in our business processes. Any failure by these vendors to do so, or any disruption in our ability to access the internet, would materially and adversely affect our ability to effectively manage our business.
If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or changing customer needs, requirements or preferences, our Connected Operations Platform may become less competitive.
The industries in which we operate are subject to rapid technological change. The introduction of new technologies will continue to have a significant effect on the competitive conditions to which we are subject. In order to continue to provide value for our customers, we must offer innovative Applications that allow our customers to track and manage their fleets, equipment, sites, and other connected assets on a timely basis. Certain technologies and industry or regulatory developments, such as autonomous vehicles with closed software ecosystems, electric vehicles that may have non-standard ports or may not be subject to regulations that benefit us, and vehicles that already include technology similar to ours, may negatively impact our ability to compete within certain industries. Even if such software ecosystems were not entirely closed to our solution, these vehicles may reduce the overall demand for vehicular Applications that provide safety and compliance functionality. If we are unable to develop new Applications that provide utility to our customers and provide enhancements and new features for our existing Applications that keep pace with rapid technological and regulatory changes, our revenues and results of operations could be affected.
To keep pace with technological and competitive developments, we have in the past invested, and may continue to invest, in complementary businesses, technologies, products, services, and other assets that expand the Applications that we can offer our customers. We may make these investments without being certain that they will result in products or enhancements that will be accepted by existing or prospective customers or that they will achieve market acceptance. If we are unable to successfully enhance our Connected Operations Platform to meet evolving customer requirements, increase adoption and use cases of our solution, and develop new Applications and features, then our business, financial condition, and results of operations would be adversely affected.
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We rely on industry standards and technology developed and maintained outside of our control. For example, many of our Applications depend on cellular, satellite, Bluetooth, Wi-Fi, and AI technology and are built upon such technologies. We do not control the development of such technologies, and so it may be possible in the future that the components of the underlying technologies that interface with or are built into our solution develop in ways that are not beneficial to our growth and technological capabilities. If these technologies do not continue to be improved or are replaced with alternative technologies that we do not effectively adapt to, our ability to innovate may be diminished and our market appeal and value to customers may be harmed.
Issues and uncertainty in the development, deployment, and use of AI in our solution, in our business, and by our customers may subject us to liability and may harm our reputation and operating results.
We are investing significantly in AI technology. We are increasingly innovating and expanding offerings on our Connected Operations Platform by integrating AI into our technology and systems. We are also developing and incorporating AI solutions and features into our operations to help drive future growth and efficiency. As with many developing technologies, AI presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. AI algorithms may be flawed. Datasets may be insufficient or of poor quality or contain biased information. Inappropriate or controversial data practices by third parties, data scientists, engineers, and end users of our systems could impair the acceptance of AI solutions. If the recommendations, forecasts, content, or analyses that AI applications assist in producing are or are alleged to be deficient or inaccurate, we could be to competitive , potential legal liability, and brand or reputational . Our, or our vendors’, use of AI technologies could lead to the disclosure of sensitive, proprietary, or confidential information and could lead to new potential methods for third parties or be used to increase the frequency or intensity of . The impact of AI technology on intellectual property ownership and licensing rights, including copyright, has not been fully addressed by relevant courts or other laws or regulations, and the use of third-party AI technologies in connection with our solution and operations may result in exposure to of copyright or other intellectual property , or a reduced ability to protect our intellectual property. We may choose to invest in the development and maintenance of proprietary data sets and training models and the development of appropriate protections, safeguards, and policies for handling the processing of data, including of customer data extraction and usage in training models, with our AI features, which may be and subject us to legal liability. There can be no assurance that we will realize the or anticipated benefits from our investments in AI technology in a timely or cost- manner.
Some AI scenarios may also present ethical issues. If we enable or offer AI features that are controversial because of their perceived or real impact on human rights, privacy, employment, or other social issues, we may experience brand or reputational harm.
Additionally, jurisdictions around the world are developing and passing new regulations that apply specifically to the use of AI. Government regulation related to AI use and ethics may expose us to legal liability and/or increase the burden and cost of research and development in this area, and failure to properly remediate AI usage or ethics issues may cause public confidence in AI to be undermined, which could slow adoption of AI in our solution. For example, the European Union Artificial Intelligence Act (“EU AI Act”) imposes a series of legal and technical obligations and restrictions on companies’ use, and development of, AI with varying enforcement dates. Under the EU AI Act, fines can reach up to the greater of €35 million and 7% of global annual turnover. Other countries, including the United States, have begun considering and implementing AI regulations. For example, the Federal Trade Commission (“FTC”) adopted streamlined procedures for AI-related investigations in November 2023; and several bills involving AI have been introduced in Congress. Several states, such as Colorado, have also passed legislation or established study commissions regulating, or that could lead to the regulation of, the development and use of AI at the state level.
In addition, our competitors, customers, or other third parties may incorporate AI more successfully than us, and their AI solutions may achieve higher market acceptance than ours, which may result in decreased demand for our solution and us failing to recoup our investments in developing AI-powered offerings. Uncertainty around new and emerging AI technologies may require significant additional investment in these technologies. Any challenges in deploying our AI-based technologies, or the ability of our competitors to do so more effectively, may impair our ability to compete effectively, result in reputational harm, and have an adverse impact on our operating results.
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Our Connected Operations Platform relies on cellular and satellite networks and any disruption, failure, or increase in costs of these networks could adversely affect the functionality of our solution, impede our profitability, and harm our results of operations.
Two critical links in our current Applications are between IoT devices and cellular networks and IoT devices and satellite networks, both of which allow us to obtain location and other operational data and transmit that data to our platform. Service outages occurring in the satellite and/or cellular networks upon which our Connected Operations Platform relies or a lack of coverage in certain locations have affected and may in the future adversely affect the functionality of our solution. Moreover, technologies, such as GPS, that rely on satellites depend on the use of radio frequency bands, and any modification of the permitted uses of these bands may adversely affect the functionality of these technologies and, in turn, our solution.
Additionally, increases in the fees charged by cellular carriers or satellite networks for data transmission, changes to the conditions by which our cellular carriers or satellite networks provide service on their or their partners’ networks, or changes in the cellular or satellite networks themselves, such as a cellular carrier discontinuing support of the network currently used by our or our customers’ IoT devices, could increase our costs and impact our profitability. Mobile carriers deprecate outdated radio frequency technologies to repurpose spectrum for newer, more efficient wireless standards. If we are unable to design our solution into new technologies, our business, financial condition, and results of operations could be harmed.
If we do not develop IoT devices that are compatible with third-party hardware, software, and infrastructure, including the many evolving wireless industry standards, our ability to introduce and sell new subscriptions to access our Connected Operations Platform, or to renew existing subscriptions, could suffer.
In order to support customers’ adoption of our Connected Operations Platform, we develop IoT devices that are compatible with a wide variety of hardware, software, and infrastructure. Not only must we ensure our IoT devices are compatible with third-party software applications and technologies developed by our partners and vendors, but we must also ensure that our IoT devices can interface with third-party hardware, software, or infrastructure that our customers may choose to adopt. Third parties may choose not to support our solution, for example, if they were to develop software applications or IoT devices that compete with ours. In particular, our ability to interface with vehicles and equipment from a variety of manufacturers or accurately anticipate evolving wireless technology standards and ensure that our IoT devices comply with these standards in relevant respects is critical to the functionality of our IoT devices. Any failure of our IoT devices to be compatible or comply with the hardware, software, or infrastructure—including wireless communications standards—utilized by our customers could prevent or delay their implementation of our Connected Operations Platform and require costly and time-consuming engineering changes. Additionally, if an insufficient number of wireless operators or subscribers adopt the standards to which we design our IoT devices, our ability to introduce and sell subscriptions to our Connected Operations Platform, or to renew existing subscriptions, would be .
The competitive position of our Connected Operations Platform depends in part on its ability to operate with a wide variety of data sources and infrastructure, and if we are not successful in maintaining and expanding the compatibility of our solution with such data sources and infrastructure, our business, financial condition, and results of operations could be adversely impacted.
The competitive position of our Connected Operations Platform depends in part on its ability to operate with a wide array of physical sensors and devices, including IoT devices manufactured by us and by third parties, other software and database technologies, and communications, networking, computing, and other infrastructure. As such, we must continuously modify and enhance our Connected Operations Platform to be compatible with evolving hardware, software, and infrastructure that are used by our current and potential partners, vendors, and customers. In the future, one or more technology companies may choose not to support the interoperation of their hardware, software, or infrastructure with solutions such as ours, or our solution may not otherwise support the capabilities needed to operate with such hardware, software, or infrastructure. We intend to facilitate the compatibility of our Connected Operations Platform with a wide variety of hardware, software, and infrastructure by maintaining and expanding our business and technical relationships. If we are not successful in achieving this goal, our business, financial condition, and results of operations could be adversely impacted.
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Our ability to grow our business is dependent in part on strategic relationships we develop and maintain with third parties.
We believe that our ability to increase our sales depends in part on maintaining and strengthening relationships with parties such as channel partners, OEM partners, integration partners, installation partners, financing partners, and other strategic technology companies or technology partners. Once a relationship is established, we likely will dedicate significant time and resources to it in an effort to advance our business interests. There is no assurance that any strategic relationship will achieve our business purposes or that the resources we use to develop the relationship will be cost-effective, and we may decide to exit or terminate the relationship. Parties with whom we establish strategic relationships may offer competing products and/or services or also work with companies that compete with us. We have limited, if any, control as to whether these parties devote adequate resources to our strategic relationships or adequately or appropriately deliver on their responsibilities or commitments, including to us or our customers, and from time to time are contractually required to take liability for the actions of our partners. Failure of such third parties to deliver on their responsibilities or commitments to us or our customers could result in or to our business, as well as reputational . Further, companies with whom we maintain strategic relationships may de-emphasize their dealings with us, become competitors in the future, or be to agree to our preferred partnership terms and conditions. We also have limited, if any, control as to other business activities of these parties, and we could experience reputational because of our association with such parties if they to execute on business initiatives, are of the law, or reputational for other reasons. All of these factors could materially and impact our business and results of operations.
We may not be able to maintain and expand our business if we are not able to hire, retain, and manage qualified personnel, and in particular, our key personnel.
Our success in the future depends in part on the continued contribution of our executive, technical, engineering, sales, marketing, operations, and administrative personnel, particularly Sanjit Biswas, our Chief Executive Officer and co-founder, and John Bicket, our Chief Technology Officer and co-founder, as well as our ability to attract and retain additional qualified management and employees. Recruiting and retaining skilled personnel in the industries in which we operate, including engineers and other technical staff and skilled sales and marketing personnel, is highly competitive. In response to competition, labor shortages, elevated inflation rates, and other market conditions, we may need to adjust employee cash compensation, which would affect our operating costs and our margins. In addition, we have adjusted and may in the future need to adjust employee equity compensation as a result of these factors, including by issuing retention grants and other additional equity awards, which would affect our outstanding share count, cause dilution to existing shareholders, and affect our results of operations.
Although we may enter into employment agreements with members of our senior management and other key personnel, these arrangements are at-will and do not prevent any of our management or key personnel from leaving the Company. If we are not able to attract or retain qualified personnel in the future, or if we experience delays in hiring required personnel, particularly qualified technical and sales personnel, we may not be able to maintain and expand our business. In addition, the success of any future acquisitions depends in part on our retention and integration of key personnel from the acquired company or business.
Further, we rely in part on direct sales employees to sell subscriptions to our solution in the United States and internationally. We are focused on increasing the size and effectiveness of our sales force, marketing activities, sales management team, and corporate infrastructure, as well as exploring further relationships with third-party resellers and channel partners. We intend to continue increasing the size of our current direct sales organization and to more efficiently leverage our expanded sales force to increase sales coverage for our solution. We cannot assure you that we will be able to attract and retain the additional personnel necessary to grow and expand our business and operations. Further, we expect that the onboarding of new sales and marketing personnel will take considerable time to enable employees to ramp up to full productivity. If we are unable to expand our sales force at sufficiently high levels and onboard new sales personnel successfully, our ability to attract new customers may be harmed, and our business, financial condition, and results of operations would be affected. In addition, any to train our employees on how to communicate the uses and benefits of our solution to potential and existing customers may prevent us from increasing our market share and revenue. If we to identify, attract, retain, and motivate these highly skilled personnel, we will be to our growth expectations, and our business, financial condition, and results of operations may be .
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To attract and retain key personnel, we use various measures, including an equity incentive program. As we continue to mature, the incentives to attract, retain, and motivate employees provided by our programs or by future arrangements may not be as effective as in the past. We have numerous current employees who hold equity in our company or whose equity awards have substantially or fully vested. As a result, it may be difficult for us to retain and motivate these employees, and the value of their holdings could affect their decisions about whether or not they continue to work for us. Further, our ability to attract, retain, and motivate employees may be adversely affected by actual or expected declines in our stock price. If we issue significant equity to attract employees or to retain our existing employees, we will incur substantial additional stock-based compensation expense and the ownership of our existing stockholders would be further diluted.
If we cannot maintain our company culture, our success and our business and competitive position may be harmed, and our attempts to operate under a flexible work model may not be successful and may adversely impact our business.
We believe that our success to date has been driven in large part by our company’s values of focusing on customer success, building for the long term, adopting a growth mindset, being inclusive, and winning as a team. As we mature and scale, we may find it difficult to maintain these important aspects of our culture. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively focus on and pursue our corporate objectives. As a result, if we fail to maintain our company culture, our business and competitive position may be harmed.
If we are not able to maintain, enhance, and protect our brand, our business, financial condition, and results of operations may be harmed.
We believe that maintaining, enhancing, and protecting our reputation as a differentiated and category-defining company is critical to our relationships with our existing customers and to our ability to attract new customers. We also believe the importance of brand recognition will increase as competition in our market increases, and that brand and reputation are particularly important in the physical operations industry given the potential impact of any failure of our solution on the physical operations of our customers. The successful promotion and protection of our brand depends on a number of factors, including our and our channel partners’ marketing efforts, our ability to continue to develop high-quality solutions, our ability to successfully differentiate our Applications from those of competitors, and our ability to obtain and maintain intellectual property and other protections related to our brand. In addition, users of our solution, independent industry analysts, and other media commentators provide reviews of our solution and our competitors’ products, which could influence the perception of the relative value of our Connected Operations Platform in the marketplace. If these reviews are negative, or less positive as compared to those of our competitors’ products, our reputation and brand may be .
The promotion of our brand requires us to make substantial expenditures, and we anticipate the expenditures will increase as our market becomes more competitive, as we expand into new markets, and as more sales are generated through our channel partners. Our brand promotion activities may not generate customer awareness or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand. If we do not successfully maintain and enhance our brand, our business may not grow, we may have reduced pricing power relative to competitors, and we could lose customers or fail to attract potential customers, any of which would harm our business, financial condition, and results of operations.
We typically provide service-level commitments under our subscription agreements and may provide product performance obligations, warranties or commitments to larger customers. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service or other remedies, or face subscription termination with prorated refunds of prepaid amounts or breach of contract claims, which could lower our revenue, require personnel time or company resources to remedy the issue, and harm our reputation, business, financial condition, and results of operations.
Our subscription agreements typically contain service-level commitments, and our agreements with larger customers may carry higher service-level commitments and/or product performance obligations, warranties, or commitments than those provided to customers generally. If we are unable to meet these requirements, including failure to meet the uptime, response time, and/or resolution time requirements under our customer subscription agreements, we may be contractually obligated to provide these customers with service credits or other remedies, which could significantly affect our revenue in the periods in which the failure occurs and the credits are applied. We could also face subscription terminations, breach of contract claims, and a reduction in renewals, which could significantly affect both our current and future revenue and/or require personnel time and company resources to remedy the issue. We offer multiple tiers of subscriptions to our solution and, as such, our service-level commitments will increase if more customers choose higher tier subscriptions. Although our historical service credits have not been significant, any future service-level failures and/or failure to meet our product performance obligations, warranties, or commitments could also our reputation, which could also affect our business, financial condition, and results of operations.
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A real or perceived defect, security vulnerability, error, or performance failure in our Connected Operations Platform could cause us to lose revenue, damage our reputation, and expose us to liability, and our product liability insurance may not adequately protect us.
Our Connected Operations Platform and IoT devices are inherently complex and, despite extensive testing and quality control, have in the past contained and may in the future contain defects or errors, especially when features and Applications are in testing phases, first introduced, or not performing as contemplated. These defects, security vulnerabilities, errors, performance or related failures could cause damage to our reputation, loss of customers or revenue, loss of applicable regulatory certifications, order cancellations, service terminations, or lack of market acceptance of our solution. Our customers within the physical operations industry are particularly sensitive to the reliability of our solution because a failure or in our solution could have a significant impact on their business or employees, including to with applicable regulations, bodily , or death. For example, customers of our Applications for connected sites may have heightened expectations in connection with the security provided by such Applications, given our access to video feeds of their work environments. Moreover, because customers use some of our Applications for compliance functions, or in such Applications may customers to liability or regulatory enforcement. As the use of our solution, including features and Applications that were recently developed, continues to expand to even more sensitive, secure, or mission- uses by our customers, we will be subject to increased , potential reputational risk, or potential liability should our solution to perform as intended in such deployments. We have in the past needed, and may in the future need, to issue corrective releases or hardware to fix these , security , or performance , which could require us to allocate significant research and development and customer support resources to address these . When required to correct issues to our IoT devices, we have implemented over-the-air firmware updates to devices that are deployed in the field, created workaround solutions, or deployed new or updated hardware. If such solutions do not perform as anticipated, they may and performance and otherwise impact our reputation and relationship with our customers. Additionally, an configured or deployed update, or our to develop and deploy updated technology, may cause performance or security issues or disable certain devices in the field, as has occurred in the past. Such an could require us to fix or replace such devices and may our relationship with the impacted customer or customers. Fixing or replacing such devices is and would have an impact on our results of operations.
In addition, any data that we license from third parties for use in our solution may contain errors or defects, which could negatively impact the analytics that our customers perform on or with such data. This may have a negative impact on how our solution is perceived by our current and potential customers and could materially damage our reputation and brand.
The sale and support of our solution entail the risk of liability claims, which could be substantial in light of the use of our solution in enterprise-wide environments. We may not have adequate contractual protections in place with our customers, users, joint-design manufacturers, third-party vendors, service providers, and partners to protect against costs and liabilities resulting from defects in our solution or components therein. Any limitation of liability, warranty disclaimers, or indemnity provisions that may be contained in these agreements may not be enforceable, adequate, or effective, including as a result of existing or future applicable laws or unfavorable judicial decisions, and they may not function to limit our liability or otherwise protect against costs arising from defects or errors, regulatory enforcement, or otherwise.
In addition, our insurance against liability may not be adequate to cover a potential claim and may be subject to exclusions, including the possibility that the insurer will deny coverage as to any future claim or exclude from our coverage such claims in policy renewals. The denial of our claims by our insurers or the successful assertion of claims by others against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, financial condition, results of operations, and reputation. Further, there are no assurances that adequate product liability insurance will continue to be available to us in the future on commercially reasonable terms or at all.
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Challenges in implementation or incorrect use of, or failure to update, our solution could result in customer dissatisfaction and negatively affect our business and growth prospects.
Our solution is often operated in large scale, distributed IT environments, including across a wide array of IoT devices and connected assets. Implementing our solution in such environments can be a complex and lengthy process, particularly for certain of our customers who are less experienced with respect to the implementation of hardware and/or cloud-based platforms such as ours. On occasion, some of our customers and partners have encountered challenges in implementing our solution, leading them to require training and experience in the proper use of and the benefits that can be derived from our solution to maximize its potential. If our solution is not implemented, used, or updated appropriately, then inadequate performance, exposure of customer data and/or security vulnerabilities can result. Because our customers rely on our software and hardware to manage a wide range of operations, the incorrect implementation or use of, or failure to update, our software and hardware or our failure to train customers on how to use our solution productively may result in customer dissatisfaction, negative publicity and , which may affect our reputation and brand. to effectively provide training and implementation services to our customers could result in for follow-on sales to these customers, decreased subscriptions by new customers, and returns or customer concessions, which would affect our business and growth prospects.
We may be subject to product liability, warranty, and recall claims that may increase the costs of doing business and adversely affect our business, financial condition, and results of operations.
We are subject to the risk of product liability and warranty claims if our Connected Operations Platform and our IoT devices actually or allegedly fail to perform as expected or result, or are alleged to result, in bodily injury and/or property damage. Certain technologies incorporated in our IoT devices, such as batteries (including lithium batteries), behavior detection, in-cab audio alerts, and immobilizing technologies, may increase the risk profile of such devices. While we maintain what we believe to be reasonable insurance coverage to appropriately respond to such liability exposures, large product liability claims, if made, could exceed our insurance coverage limits and insurance may not continue to be available on commercially acceptable terms, if at all. There can be no assurance that we will not incur significant costs to defend these claims or that we will not experience any product liability losses in the future. In addition, we generally provide our customers a hardware warranty for the entire term of their subscription to our Connected Operations Platform. If any of our IoT devices are, or are to be, , we may be required to participate in and exchanges of such devices or customer us. The future cost associated with providing product warranties and/or bearing the cost of repair or replacement of our solution, or a refund of customer expenses, could exceed our historical experience and have a material effect on our business, financial condition, and results of operations.
Our current operations are international in scope, and we plan further geographic expansion, creating a variety of operational and regulatory challenges.
A component of our growth strategy involves the further expansion of our operations and customer base internationally. We are continuing to adapt to and develop strategies to address international markets, but there is no guarantee that such efforts will have the desired effect. For example, we anticipate that we will need to establish relationships with new partners in order to expand into certain countries, and if we fail to identify, establish, and maintain such relationships, we may be unable to execute on our expansion plans. We intend to increase the scope of our international activities as we continue to pursue opportunities in existing and new international markets, which will require significant dedication of management attention and financial and other resources.
Our current and future international business and operations involve a variety of risks, including:
• challenges in recruiting, training, and retaining qualified employees, particularly in markets in which we have little or no experience operating;
• slower than anticipated availability and adoption of our solution by existing or potential customers in our target geographies;
• challenges in operating in a specific country’s or region’s political or legal and regulatory environment, including responding to changes that result from elections and other governmental changes, political instability, and political disputes;
• the economic environment or conditions in each country or region in which we operate;
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• disruptions from human-caused or natural disasters (including public health crises) or extreme weather (including as a result of climate change), geopolitical events (including the conflict between Russia and Ukraine, the conflicts in the Middle East, or heightened tensions between China and Taiwan) and security issues (including terrorist attacks, armed hostilities, and political conflicts), labor or trade disputes, tariff and trade policy changes contemplated and implemented by the U.S. government (including export quotas, custom duties, or other trade restrictions), and similar events;
• the need to adapt and localize our solution and go-to-market, finance, legal, regulatory, and compliance practices for specific countries;
• greater difficulty collecting accounts receivable, longer sales and payment cycles, different pricing environments, and different risks associated with country- and region-specific legal, regulatory, and compliance requirements and environments, including related to privacy, data protection, and fraud;
• new, evolving, potentially inconsistent, and often more stringent regulations relating to privacy, data protection and cybersecurity, and the unauthorized use of, or access to, commercial, biometric, and/or personal information, particularly in Europe and across the United States;
• differing labor regulations, including with respect to wage and hour laws, that make it harder to do business in certain regions;
• challenges inherent in efficiently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs that are specific to each jurisdiction;
• difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems;
• increased travel, real estate, infrastructure, legal, and compliance costs associated with international operations;
• increased financial accounting and reporting burdens and complexities;
• currency exchange rate fluctuations and the resulting effect on our financial results and operating metrics, such as revenue, ARR, and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future;
• limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;
• new and different sources of competition;
• laws and business practices favoring local competitors or general market preferences for local vendors, including recent efforts by foreign governments to reduce dependence on America-based technology providers;
• limited or insufficient intellectual property protection or difficulties obtaining, maintaining, protecting, or enforcing our intellectual property rights, including our trademarks and patents, or obtaining necessary intellectual property licenses from third parties;
• exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”), U.S. domestic bribery laws, the UK Bribery Act of 2010, and similar laws and regulations in other jurisdictions;
• burdens of complying with U.S. and non-U.S. export control laws and regulations, including Export Administration Regulations (“EAR”);
• burdens of complying with laws and regulations related to taxation; and
• regulations, adverse tax burdens, and foreign exchange controls that could make it difficult to repatriate earnings and cash.
If we invest substantial time and resources to further expand our international operations and are unable to do so successfully and in a timely manner, our business and results of operations will suffer.
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Risks Related to Our Intellectual Property
Failure to identify and protect our proprietary technology and intellectual property rights could substantially harm our business and results of operations.
Our success is tied to our ability to identify and protect our proprietary technology, methodologies, know-how, and branding. We rely on a combination of trademarks, copyrights, patents, trade secrets and other intellectual property laws, contractual restrictions, and technical organizational security and confidentiality procedures to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property rights, including our efforts in building out our patent portfolio or asserting our intellectual property rights against other parties, may be limited or inadequate. For instance, we will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property rights, or unauthorized or unlawful use of our software, technology, or intellectual property rights. We also cannot guarantee that our intellectual property rights will provide competitive advantages to us, that our ability to assert our intellectual property rights against potential competitors or to settle current or future will be unobstructed by our relationships with third parties, that any of our pending or future patent applications will have the coverage originally sought, or that we will not the ability to assert our intellectual property rights or to license our technology to others and collect royalties or other payments. Further, the laws of some countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be .
In addition, despite our precautions, it may be possible for unauthorized third parties to copy our solution, use information that we regard as proprietary to create offerings that compete with ours, or infringe upon or misappropriate our intellectual property. Some of our competitors have engaged in, and may in the future engage in, business practices that we consider to be unlawful. For example, in January 2024, we filed claims against Motive alleging, among other things, that they engaged in patent infringement, false advertising, fraud, computer fraud and abuse, and unfair competition. Although we were issued an award in that case with respect to certain claims, not all will result in a similar outcome, and it is possible that such awards might not otherwise account for the full we have sustained. See Note 14, “Subsequent Event,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. As another example, in November 2024, we filed an additional lawsuit Motive that they have our trade secrets in a case that remains pending. There is also no guarantee that third parties will abide by the terms of our agreements or that we will be to enforce our contractual rights. We may also be to prevent third parties from acquiring or using domain names or trademarks that are similar to, upon, or the value of our trademarks and other proprietary rights, thereby our ability to build brand identity and possibly to potential in the market and to our reputation and business.
If we fail to identify and protect our intellectual property rights adequately, our competitors or other third parties may gain access to our proprietary technology and our business may be harmed. In addition, defending our intellectual property rights might entail significant resources and expenses and might distract management from other business priorities.
There can be no assurance that our intellectual property rights are enforceable or otherwise will be upheld as valid, or that our applications will be granted.
Any patents, trademarks, or other intellectual property rights that we have obtained or may obtain may be challenged by others or invalidated, circumvented, abandoned, or lapse. In addition, there can be no assurance that our patent or trademark applications will result in issued patents or trademarks. Even if we continue to seek patent or trademark protection in the future, we may be unable to obtain further patent protection for our technology or trademark protection for our brand. There can also be no assurance that our patents or trademarks will be equally enforceable or otherwise protected by the laws of non-U.S. jurisdictions.
In addition, given the costs, effort, risks, and downsides of obtaining patent protection, including the requirement to ultimately disclose an invention to the public, we may choose not to seek patent protection for certain innovations; however, such patent protection could later prove to be important to our business. Further, any patents may not provide us with competitive advantages, or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain.
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Confidentiality agreements with employees and others may not adequately protect our intellectual property rights and proprietary technology or prevent the disclosure of trade secrets.
To protect our trade secrets, confidential information and distribution of our proprietary information, we generally enter into confidentiality, non-compete, proprietary, and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with other parties, including our potential and actual customers, users, joint-design manufacturers, third-party vendors, service providers and channel, integration, or other partners. We also have entered into confidentiality agreements to protect our confidential information delivered to third parties for research and other purposes. No assurance can be given that these agreements will be effective in controlling access to trade secrets, confidential information and distribution of our proprietary information, including agreements with contracting counterparties who do business with our competitors, especially in certain U.S. states and non-U.S. jurisdictions that are less willing to enforce such agreements. Further, these agreements may not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our solution. In addition, others may independently discover our trade secrets and confidential information, and in such cases we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade secret rights and related confidentiality and provisions, and to obtain or maintain trade secret protection, or our competitors’ obtainment of our trade secrets or independent development of unpatented technology similar to ours or competing technologies, could affect our competitive business position.
In order to protect our intellectual property rights and proprietary technology, we may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation has been and may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Further, our efforts to enforce our intellectual property rights have been and may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our intellectual property rights and proprietary technology against unauthorized copying or use, as well as any costly litigation or of our management’s attention and resources, could further sales or the implementation of our solution, the functionality of our solution, introductions of new products, result in our substituting or more technologies into our solution, or our brand and reputation.
We may become subject to additional intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business.
Third parties have claimed and may in the future claim that our operations and Applications infringe their intellectual property rights, and such claims have resulted and may result in legal claims against and legal liability for our customers, our channel, integration, or other partners, and us. These claims, as well as claims that we may bring against other parties, may damage our brand and reputation, harm our customer and channel partner relationships, and result in liability for us. We expect the number of such claims will increase as the number of Applications and the level of competition in our market grows, the functionality of our solution overlaps with that of other products and services, and the volume of issued patents and patent applications continues to increase. Our patents may be, and in some instances currently are, subject to validity challenges, including inter partes review and other post‑grant proceedings, and to in . An outcome in any such proceeding could result in narrowed or , reduce the scope of protection for key technologies, or embolden competitors to enter our markets using similar solutions. For example, in January 2024, we filed a lawsuit Motive that they have engaged in patent , advertising, , computer and , and competition. Although we were issued an award in that case with respect to certain , not all will result in a similar outcome, and it is possible that such awards might not otherwise account for the full we have sustained. See Note 14, “Subsequent Event,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Motive responded to our by filing a copycat that Samsara has engaged in patent , advertising, and trade secret , among other things. Motive is currently seeking unspecified and an . In November 2024, we filed an additional lawsuit Motive that they have our trade secrets. The scope and outcome of ongoing matters are uncertain. Responding to these matters and similar matters may be and time-consuming and may management from other business priorities. We have agreed in certain contracts with customers, channel partners, and other partners, to indemnify customers and channel or other partners, and have accepted tenders for indemnification from certain of such customers, for expenses or liabilities they incur as a result of third-party intellectual property associated with our solution. To the extent that any claim arises as a result of third-party technology we use in our solution, we may be to recover from the appropriate third party any expenses or other liabilities that we incur.
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Companies in the software and technology industries, including some of our current and potential competitors, own patents, copyrights, trademarks, and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. In addition, many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them than we do. Furthermore, standard essential patent holders, patent holding companies, non-practicing entities, and other patent owners that are not deterred by our existing intellectual property protections may seek to assert patent claims against us or extract costly license payments from us. Third parties may assert patent, copyright, trademark, or other intellectual property rights us, our channel partners, our technology partners, or our customers. We have received notices and been subject to (and we may be subject to in the future) that we have , , or other parties’ intellectual property rights, and, to the extent we market visibility, we face a higher risk of being the subject of intellectual property , which is not uncommon with respect to IoT devices and the enterprise software market. These and other possible , including that we may bring other parties, could lead to in the research, development, or commercialization of our systems, or could require or result in and time-consuming that may not be decided in our favor. Any such event could materially and affect our financial condition and results of operations.
There may be third-party intellectual property rights in the United States and internationally, including issued or pending patents, that cover significant aspects of our technologies or business methods. In addition, if we acquire or license technologies from third parties, we may be exposed to increased risk of being the subject of intellectual property infringement claims due to, among other things, our lower level of visibility into the development process with respect to such technology and the care taken to safeguard against infringement risks. These claims may damage our brand and reputation, harm our customer relationships, and create liability for us.
Any intellectual property claims, with or without merit, could be very time-consuming, could be expensive to settle or litigate, and could divert our management’s attention and other resources. These claims could also subject us to significant liability for damages, potentially including treble damages if we are found to have willfully infringed patents or copyrights, and may require us to indemnify our customers and channel partners for liabilities they incur as a result of such claims. These claims could also result in our having to stop importing, making, offering to sell, selling, or using technology found to be in violation of a third party’s rights. We might be required to seek a license for the intellectual property, which may not be available on reasonable terms or at all. Even if a license were available, we could be required to pay significant royalties, which would increase our operating expenses. Alternatively, we could be required to develop alternative non- technology, which could require significant time, effort, and expense, and may affect the performance or features of our solution. If we cannot license or develop alternative non- substitutes for any technology used in any aspect of our business, we would be to limit or stop sales of our solution and may be to compete effectively. Any of these results would affect our business, financial condition, and results of operations.
Our exposure to risks associated with the use of intellectual property may be increased as a result of any future acquisitions we may complete.
Our exposure to risks associated with the use of intellectual property may be increased as a result of any future acquisitions we may complete, as we will have a lower level of visibility into the development process with respect to acquired technology or the care taken to safeguard against infringement risks. Third parties may make infringement and similar or related claims after we have acquired technology that had not been asserted prior to our acquisition. Any of these results would harm our business, results of operations and financial condition. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.
Our use of open source software could negatively affect our ability to sell subscriptions to our Connected Operations Platform and subject us to possible litigation.
Our Connected Operations Platform, Applications, and device endpoints incorporate open source software, and we expect to continue to incorporate open source software in the future. Many licenses applicable to open source software have not been interpreted by courts, and there is a risk that any open source licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our solution or other products we may develop in the future. We cannot be certain that developers will comply with our review processes or not incorporate software code made available under certain open source licenses into our proprietary code base. Increased use of artificial intelligence-based developer tools may increase the amount of open source software incorporated into our products and the associated licensing risks that accompany the open source software.
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We may be found to have incorporated open source software in our software in a manner that is inconsistent with the terms of the applicable license or our current policies and procedures. For example, certain kinds of open source licenses may require that any person who creates a product or service that contains, links to, or is derived from software that was subject to an open source license must also make their own product or service subject to the same open source license. If these requirements are found to apply to our products and we fail to comply with them, we may be subject to certain requirements, including requirements that we offer additional portions of our solution for no cost, that we make available additional source code for modifications or derivative works we create based upon, incorporating or using the open source software, and that we license such modifications or derivative works under the terms of applicable open source licenses.
If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our products that contained the open source software, or required to comply with onerous conditions or restrictions on these products, which could disrupt the distribution and sale of these products. In addition, there have been claims challenging the ownership rights in open source software against companies that incorporate open source software into their products, and the licensors of such open source software provide no warranties or indemnities with respect to such claims. Moreover, we cannot you that our processes for controlling our use of open source software in our solution will be . Third parties may also change their open source offerings to commercial products. In any of these events, we, our customers, and our channel or other partners could be required to seek licenses from third parties in order to continue offering our solution, to re-engineer our solution, or to the sale of subscriptions to our solution in the event re-engineering cannot be on a timely basis. We, our customers, and our channel or other partners may also be subject to suits by parties , , or due to the reliance by our solution on certain open source software, and such could be for us to or subject us to an .
Open source projects are often provided on an “as-is” basis and may have known or unknown vulnerabilities and architectural instabilities which, if used in our solution and not properly addressed, could negatively affect the security or performance of our solution. Any of the foregoing could require us to devote additional research and development resources to re-engineer our solution, could result in customer dissatisfaction, and may adversely affect our business, financial condition, and results of operations.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, misappropriation, or violation and other losses.
Our agreements with customers, channel or other partners, and other third parties have in some cases included indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, intellectual property misappropriation or violation, security incidents or breaches, damages caused by us or subcontractors or partners to property or persons, breaches of our confidentiality, security, or other contractual obligations, violations of applicable privacy or other law, or other liabilities relating to or arising from our solution or other contractual obligations. Large indemnity payments could harm our business, financial condition, and results of operations. Pursuant to certain agreements, we do not have a cap on our liability for these indemnity obligations, and any payments under such agreements would our business, financial condition, and results of operations. Although we normally contractually limit our liability with respect to some of these indemnity obligations, we may still incur substantial liability related to them. Any with a customer or channel partner with respect to such obligations could have effects on our relationship with that customer or channel partner and other existing customers, new customers, and channel partners and our business and results of operations.
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We rely on the availability of licenses to third-party technology that may be difficult to replace or that may cause errors or delay implementation of our solution should we not be able to continue or obtain a commercially reasonable license to such technology.
Our Connected Operations Platform, Applications, and devices rely on software or other intellectual property licensed from third parties. It may be necessary in the future to renew licenses relating to various aspects of these solutions or to seek new licenses for existing or new Applications. There can be no assurance that the necessary licenses would be available on commercially acceptable terms, if at all. Third parties may terminate their licenses with us for a variety of reasons, including actual or perceived failures or breaches of contractual commitments, or they may choose not to renew their licenses with us. In addition, we may be subject to liability if third-party software that we license is found to infringe, misappropriate, or otherwise violate intellectual property or privacy rights of others. The loss of, or inability to obtain, certain third-party licenses or other rights, the inability to obtain such licenses or rights on favorable terms, or the need to engage in regarding these matters, could result in product roll-backs or in product releases until equivalent technology can be identified, licensed or developed, if at all, and integrated into our solution, and it may have a material effect on our business, financial condition, and results of operations. Moreover, the use by our solution of software or other intellectual property licensed from third parties on a nonexclusive basis could limit our ability to differentiate our solution from products of our competitors and could inhibit our ability to provide the current level of service to existing or prospective customers.
Changes in or the loss of third-party licenses could lead to our solution becoming inoperable or the performance of our solution being materially reduced, resulting in the potential need to incur additional research and development costs to ensure continued performance of our solution or a material increase in the costs of licensing, and we may experience decreased demand for our solution.
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Risks Related to Government Regulation
Federal and other governments and independent standards organizations have implemented and may implement in the future significant regulations or standards that could adversely affect our ability to produce, market, or sell subscriptions to our solution.
Our solution is subject to a wide variety of laws and regulations in the United States and other jurisdictions, and may become subject to additional laws and regulations, and we devote considerable resources to the analysis of their applicability to our solution and its compliance with applicable laws and regulations. Failure to comply with applicable laws and regulations could require us to incur significant compliance, research and development, and other costs, penalties, and fines; adversely impact our business reputation and customer relationships; and otherwise adversely affect or make impossible our ability to produce, market, and sell subscriptions to our solution. For example, some of our IoT devices are required to obtain product certifications or comply with other requirements in certain jurisdictions, and failure to comply with those requirements would prevent or limit our ability to operate in those jurisdictions. The United States and other countries have enacted regulations related to ELDs and HOS or similar requirements, and some of our customers use our solution to comply with such regulations. Failure to comply ourselves, to such compliance by our customers, or to obtain and maintain any required certifications would prevent current and potential customers from using our solution for such compliance purposes and would have an impact on our ability to renew and sell subscriptions to our solution, our business reputation, and our customer relationships. For example, in the United States, to the extent our Applications and/or IoT devices function as ELDs, they are subject to regulation by the FMCSA and similar regulations in other countries in which they are used. The FMCSA requires that ELD manufacturers register and self-certify that each ELD model and version they offer for sale has been sufficiently tested to meet certain functional requirements. Among other , compliance with ELD regulations often requires reading and interpreting diagnostic information from commercial motor vehicle engines, which is given the diversity of commercial motor vehicles in our customers’ fleets, the continuous release of vehicles of new makes, models, and years with potentially different diagnostic communication protocols, and the of standardization of diagnostic communication protocols across OEMs. Our ability to design, develop, and sell subscriptions to our solution will continue to be subject to these rules and regulations, as well as many other federal, state, local, and foreign rules and regulations, for the foreseeable future. For example, from time to time, we have received and expect to continue to receive inquiries from FMCSA relating to our self-certified ELD Application in the United States. These inquiries could put our self-certification of our ELD Application at risk or require changes to our ELD functionality that could make our ELD Application less to existing and potential customers. Further, as another example, on January 1, 2023, Canada began enforcement of its ELD technical standard, mandating that motor carriers and drivers subject to HOS requirements in Canada use ELDs that have been tested and certified by an accredited, third-party certification body. We have obtained certification for all of our ELD models in Canada. However, to obtain certification for future ELD models, or to maintain the existing certification for our certified ELD models, would prevent current and potential customers from using our ELD Application for compliance purposes in Canada and could impact the reputation and goodwill of our ELD offering in the United States. Furthermore, our solution may transmit radio frequency waves, the transmission of which is governed by the rules and regulations of the Federal Communications Commission, as well as other regulatory bodies.
In addition, our Connected Operations Platform may become subject to independent industry standards or similar customer requirements. The implementation of unfavorable regulations, industry standards, or similar customer requirements, or unfavorable interpretations of existing regulations by courts or regulatory bodies, could require us to incur significant compliance costs, cause the development of our solution to become impractical, or otherwise adversely affect our ability to produce, market, and sell subscriptions to our solution. The adoption of new industry standards or similar customer requirements applicable to our solution may require us to engage in rapid product development efforts that would cause us to incur higher expenses than we anticipated. In some circumstances, we may not be able to comply with such standards or requirements, which could materially and adversely affect our ability to generate revenues through the sale of subscriptions to our solution.
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Reductions in regulation of our customers’ physical operations may adversely impact demand for our solution by reducing the necessity for, or desirability of, certain of our Applications.
Regulatory compliance and reporting are driven by legislation, regulatory requirements, and related guidance, which are often subject to change from regulatory authorities in nearly every jurisdiction globally. With respect to our Applications that are used for customers’ compliance purposes, changes in underlying regulations may reduce or eliminate our customers’ continued demand for Applications that address those regulations. For example, in the United States, fleet operators face numerous complex regulatory requirements, including, among others, electronic logging requirements; compliance, safety, and accountability driver safety scoring; limitations on HOS; and compliance and fuel tax and emissions reporting. If these regulatory requirements were reduced or eliminated as part of the current U.S. government’s general push for deregulation, our Applications for the fleet use case would have reduced utility to our customers. Accordingly, the reduction in regulation of markets addressed by our Applications could materially and adversely affect our business, financial condition, and results of operations.
Failure to comply with laws, regulations, executive orders, and directives applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business, financial condition, and results of operations.
Our business is subject to regulation by various federal, state, local, and foreign governmental agencies, including agencies responsible for monitoring and enforcing compliance with various legal obligations, covering topics including privacy and data protection, telecommunications, intellectual property, employment and labor, workplace safety, the environment, consumer protection, governmental trade duties and sanctions, import and export controls, anti-corruption and anti-bribery, securities, competition, and tax. In certain jurisdictions, these regulatory requirements may be more stringent than in the United States. These laws, regulations, executive orders, directives, and enforcement priorities impose added costs on our business, and our compliance policies, procedures, training, and controls may not be sufficient to prevent, detect, or remediate all violations. Actual or perceived noncompliance with applicable regulations or requirements could subject us to:
• investigations, enforcement actions, and sanctions;
• mandatory changes to our solution;
• disgorgement of profits, fines, and damages;
• civil and criminal penalties or injunctions;
• corporate monitorship;
• claims for damages by our customers, partners, or other third parties;
• termination of contracts;
• reputational harm;
• loss of intellectual property rights; and
• temporary or permanent debarment from sales to government organizations.
If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, financial condition, and results of operations could be adversely affected. In addition, responding to any action will likely result in a significant diversion of our management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could materially harm our business, financial condition, and results of operations.
Additionally, companies in the technology industry have recently experienced increased regulatory scrutiny and evolving laws and enforcement priorities across jurisdictions. Any reviews by regulatory agencies or legislatures may result in substantial regulatory fines, changes to our business practices, and other penalties, which could negatively affect our business and results of operations. Changes in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may cause us to change our business practices. Further, our expansion into a variety of new use cases and geographies for our solution could also raise a number of new regulatory issues. These factors could materially and adversely affect our business, financial condition, and results of operations.
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We are subject to stringent and changing laws, regulations, standards, and contractual obligations related to privacy, data protection, and cybersecurity. Any actual or perceived failure to comply with such obligations could harm our business.
We receive, collect, store, process, transfer, and use personal information and other data relating to users of our solution, our employees and contractors, and other persons. For example, one of our Applications collects video of the worksites of our customers, and certain of our Applications interact with facial recognition data, which is subject to heightened sensitivity and regulation. An example of that heightened sensitivity is the May 18, 2023 U.S. FTC policy statement regarding biometric information, which identifies numerous risks the FTC considers key, outlines relevant practices the FTC plans to scrutinize, and affirms the FTC’s commitment to addressing deceptive and unfair practices involving the collection and use of biometric information. We have legal and contractual obligations regarding the protection of confidentiality and appropriate use of certain data, including biometric information and other personal information. We are subject to numerous federal, state, local, foreign, and international laws, directives, and regulations regarding privacy, data protection, and cybersecurity and the collection, storing, sharing, use, processing, transfer, disclosure, retention, and protection of personal information and other data, the scope of which are changing, subject to differing interpretations, and may be inconsistent across jurisdictions or conflict with other legal and regulatory requirements. We are also subject to certain contractual obligations to third parties related to privacy, data protection, and cybersecurity. We strive to comply with our applicable policies and applicable laws, regulations, contractual obligations, and other legal obligations relating to privacy, data protection, and cybersecurity to the extent possible. However, the regulatory framework for privacy, data protection, and cybersecurity worldwide is, and is likely to remain for the foreseeable future, uncertain and complex, and it is possible that these or other actual or obligations may be interpreted and applied in a manner that we do not anticipate or that is from one jurisdiction to another and may with other legal obligations or our practices. Further, any significant change to applicable laws, regulations or industry practices regarding the collection, use, retention, security or disclosure of data, or their interpretation, or any changes regarding the manner in which the approval, authorization, agreement, and/or consent of users or other data subjects for the collection, use, retention, or disclosure of such data must be obtained or complied with, could increase our costs and require us to modify our Applications, possibly in a material manner, which we may be to complete, and may limit our ability to store and process user data or develop new Applications and features.
We also expect that there will continue to be new laws, regulations, executive orders, directives, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions. For example, the data protection landscape in Europe is currently evolving, resulting in possible significant operational costs for internal compliance and risks to our business. The EU adopted the GDPR, which became effective in May 2018, and contains numerous requirements and changes from previously existing EU laws, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. Among other requirements, the GDPR regulates the transfer of personal data subject to the GDPR to “third countries” that have not been found to provide adequate protection to such personal data, including the United States, Mexico, Colombia, Taiwan, and India. We have undertaken certain efforts to conform transfers of personal data subject to the GDPR from the European Economic Area (“EEA”) to the United States and other relevant jurisdictions based on our understanding of current regulatory obligations and the guidance of data protection authorities, including the use of SCCs approved by the European Commission; however, international data transfers may still be challenged in countries that have not received “adequacy” status from the European Commission. For example, in the Schrems II decision issued by the Court of Justice of the European Union (“CJEU”) on July 16, 2020, the CJEU, among other things, imposed additional obligations on companies when relying on the SCCs. EEA regulators since have provided guidance regarding use of the SCCs, and on June 4, 2021, the European Commission issued new SCCs that are required to be implemented where appropriate. The European Commission subsequently adopted an adequacy decision that also covers transfers of personal data to the United States under an alternative mechanism called the EU-U.S. Data Privacy Framework. The EU-U.S. Data Privacy Framework is the successor to the EU-U.S. Privacy Shield and allows participating entities to transfer personal data to the United States. As we continued to participate in Privacy Shield, we transitioned automatically to the EU-U.S. Data Privacy Framework, as well as a UK Extension to the EU-U.S. Data Privacy Framework and the Swiss-U.S. Data Privacy Framework, which are designed to allow personal data transfers from the United Kingdom and Switzerland, respectively, to the United States. The Swiss-U.S. Data Privacy Framework was granted an adequacy decision from Switzerland’s Federal Data Protection and Information Commissioner that became on September 15, 2024. There is no guarantee that any of these frameworks will survive any legal and therefore, in light of this uncertainty, we will need to continue monitoring and taking appropriate steps to mitigate the impact on us with respect to the transfers of relevant personal data outside of the EEA, United Kingdom, and Switzerland. Additionally, the EU’s Data Act became applicable on September 12, 2025 and, among other things, introduces new obligations related to data portability and services switching, which introduces operational and contractual complexities, and may increase our compliance and operational costs.
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The United Kingdom has enacted the UK DPA, which substantially implement the GDPR and provide for substantial penalties in a manner similar to the GDPR (up to the greater of £17.5 million and 4% of global annual turnover for the preceding financial year for the most serious violations). The United Kingdom also has adopted, in addition to the UK Extension to the EU-U.S. Data Privacy Framework, new data transfer mechanisms (namely, the UK International Data Transfer Agreement and the UK international data transfer addendum to the SCCs) addressing the cross-border transfer of personal data outside the United Kingdom that became effective as of March 21, 2022, and which are required to be implemented as necessary. While the EU has deemed the United Kingdom to be an “adequate country” to which personal data could be exported from the EEA, this decision may be modified, or revoked. If the United Kingdom loses its adequacy status, we will then need to rely upon alternative data transfer mechanisms for any exports from the EEA to the United Kingdom. It is unclear how United Kingdom data protection laws or regulations will continue to develop in the medium to longer term and therefore how data transfers to and from the United Kingdom will continue to be regulated. Further, some jurisdictions and/or particular sectors also are considering or have enacted regulations or standards requiring local storage and processing of data that could increase the cost and complexity of delivering our services.
In light of these and other developments, we may, in addition to other impacts, experience additional costs associated with increased compliance burdens and be required to engage in new contract negotiations with third parties that aid in processing personal data on our behalf or localize certain personal data, and we may be required to implement additional contractual and technical safeguards for the lawful transfer of personal data. We may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data from the relevant countries and/or geographic areas (e.g., the EEA, Switzerland, and the United Kingdom), and may experience hesitancy, reluctance, or refusal by customers to use our solution due to the potential risk exposure to such customers as a result of sentiment, e.g., within the EEA, Switzerland, and the United Kingdom regarding international data transfers and data protection obligations imposed on them. Failure to comply with the relevant laws and regulations like the GDPR could result in penalties for noncompliance (including possible fines e.g., up to the greater of €20 million and 4% of our global annual turnover for the preceding financial year for the most under the GDPR, as well as the right to compensation for financial or non-financial claimed by individuals under Article 82 of the GDPR).
Various United States privacy laws are potentially relevant to our business, including the Federal Trade Commission Act, Controlling the Assault of Non-Solicited Pornography and Marketing Act, and the Telephone Consumer Protection Act. Any actual or perceived failure to comply with these United States privacy laws could result in a costly investigation or other proceedings by regulatory authorities or litigation by governmental authorities or private parties, each of which may result in potentially significant liability, loss of trust by our customers, and a material and adverse impact on our reputation and business.
Additionally, in June 2018, California passed the CCPA, which provides new data privacy rights for California consumers and new operational requirements for covered companies. Specifically, the CCPA requires that covered companies must provide new disclosures to California consumers and afford such consumers new data privacy rights that include the right to request a copy from a covered company of the personal information collected about them, the right to request deletion of such personal information, and the right to request to opt-out of certain sales of such personal information. The CCPA became operative on January 1, 2020. The California Attorney General can enforce the CCPA, including seeking an injunction and civil penalties for violations. The CCPA also provides a private right of action for certain data breaches that is expected to increase data breach litigation. The CPRA, which amended the CCPA, was approved by California voters in the November 3, 2020 election and went into effect on January 1, 2023. The CPRA significantly modified the CCPA, resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. A number of other states have implemented, or are considering implementing, their own versions of privacy legislation. The U.S. Department of Justice issued its final rule on the Bulk Transfer of Sensitive U.S. Personal and Governmental Data to Countries and Persons of , which places additional restrictions on certain data transactions that may impact companies’ business activities such as vendor engagements, sale or sharing of data, employment of certain individuals, and investor agreements. Furthermore, the U.S. federal government also is contemplating federal privacy legislation. These laws and other evolving legislation may require us to modify our data practices and policies and to incur substantial costs and expenses in an effort to comply. Numerous differing state privacy and cybersecurity requirements could increase our potential liability and cause us to incur substantial costs and expenses in an effort to comply and otherwise affect our business. Some of those laws, including Illinois’ Biometric Information Privacy Act, also provide consumers with a private right of action for certain and large potential statutory awards. Recent around these laws has ’ attorneys to bring additional actions other targets, and because our solution employs technology that may be perceived as subject to these laws, we and our customers have been, and may in the future become, subject to , and we may also become subject to government enforcement actions, , and under these laws, which could affect our business, results of operations, and our financial condition.
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Any failure or perceived failure by us to comply with our posted privacy policies, our obligations to users or other third parties, or any other contractual or legal obligations, regulatory requirements, or other actual or asserted obligations relating to privacy, data protection, or cybersecurity, may result in governmental investigations or enforcement actions, litigation, claims, or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation and business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, other obligations, and policies that are applicable to the businesses of our users may limit the adoption and use of, and reduce the overall demand for, our solution. Additionally, if third parties we work with violate applicable laws, regulations, or contractual obligations, such violations may put our users’ data at risk, could result in governmental or enforcement actions, , , , or public statements us by consumer advocacy groups or others and could result in significant liability, cause our users to trust in us, and otherwise materially and affect our reputation and business. Further, public of, or about, technology companies or their data handling or data protection practices, even if unrelated to our business, industry or operations, may lead to increased of technology companies, including us, and may cause government agencies to enact additional regulatory requirements, or to modify their enforcement or activities, which may increase our costs and risks.
Failure to comply with anti-corruption and anti-money laundering laws, including the FCPA and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences.
We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act of 2010, and possibly other anti-bribery and anti-money laundering laws in countries where we conduct activities. We face significant risks if we fail to comply with the FCPA and other anti-corruption laws that prohibit companies and their employees and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties, and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person, or securing any improper advantage. Some of these laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. Anti-corruption and anti-bribery laws are interpreted broadly.
While we have policies and procedures to address such laws, we cannot assure you that none of our employees or third-party intermediaries will take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. In many foreign countries, particularly in countries with developing economies, it may be customary or common practice for businesses to engage in practices that are prohibited by the FCPA or other applicable laws and regulations. In addition, we use third parties to sell subscriptions to our solution and conduct our business abroad. We or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities, and we can be held liable for any corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. Similarly, some of our customers may be state-owned, exposing us to additional potential risks.
Any violation of the FCPA, other applicable anti-corruption laws, or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, government enforcement investigations, criminal and/or civil sanctions, and suspension or debarment from government contracts, which could have an adverse effect on our reputation, business, financial condition, results of operations, and prospects. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.
A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks.
Sales to government entities are subject to a number of risks. Selling to government entities can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate a sale. Despite our efforts, we may not be able to obtain the requisite certifications, establish the appropriate relationships with desired or required resellers, cooperative purchasing programs, contracting vehicles, channel partners, lobbyists, or other partners, or otherwise meet particular requirements to sell to certain government entities, and government certification or other requirements for products like ours may change, thereby restricting our ability to sell to the U.S. federal government, state and local governments, education entities, or non-U.S. government sectors until we have attained the appropriate certification or otherwise met their particular requirements. Government demand and payment for our solution may be affected by public sector budgetary cycles, election cycles, funding authorizations, and shutdowns, with funding reductions or delays adversely affecting public sector demand for our solution. For example, we have seen political volatility increase in the United States and abroad, with rapid changes in governments and increased partisanship affecting many aspects of government, including the ability to approve budgets and make commitments. Such budgetary constraints or shifts in spending priorities of government entities may affect sales of our products and services to such entities. Additionally, any actual or perceived privacy, data protection, AI , or cybersecurity , or even any perceived with regard to our practices or measures in these areas, may impact public sector demand for our solution.
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Some government entities have statutory, contractual, or other legal rights to terminate contracts with us or our resellers, cooperative purchasing programs, contracting vehicles, channel partners, or other partners for convenience, for lack of appropriation of funds, due to a default or failure to meet particular requirements, or due to other contractual or legal rights, and any such termination may adversely affect our future results of operations. Governments routinely investigate and audit government contractors, and any unfavorable investigation or audit outcome could result in the government refusing to continue buying our subscriptions, a reduction of revenue, or fines or civil or criminal liability if the investigation or audit uncovers or activities, which could materially and affect our business, financial condition, and results of operations.
Failure to comply with laws, regulations, policies, or contractual provisions applicable to our business could cause us to lose government customers or our ability to contract with the U.S. and other governments.
As a government contractor and subcontractor, we must comply with laws, regulations, policies, contractual provisions, and other requirements relating to the procurement, formation, administration, and performance of government contracts and their inclusion in government contract vehicles, which affect how we and our resellers, channel partners, lobbyists, and other partners do business with government agencies and which require significant investment of time and resources to provide appropriate training to our personnel and direction to our partners. As a result of actual or perceived noncompliance with government contracting laws, regulations, policies, contractual provisions, or other requirements, we or our partners may be subject to audits and internal investigations which may prove costly to our business financially, divert management time, or limit our ability to continue selling subscriptions to our solution to our government customers. These laws, regulations, and policies may impose other added costs on our business, and failure to comply with these or other applicable regulations and requirements, including non-compliance in the past, could lead to claims for damages from our channel partners or the government, , and of contracts and or from contracting with government agencies for a period of time. Any such , , , or in our ability to do business with a government could materially and impact our business, results of operations, financial condition, public perception, and growth prospects.
We are required to comply with governmental export control, economic sanctions, and import laws and regulations. Our failure to comply with these laws and regulations could have an adverse effect on our business, financial condition, and results of operations.
Exports, reexports and certain transfers of our solution, including the underlying technology, data, source code, and products, may be subject to governmental export control and economic sanctions laws and regulations, including those of the United States, the United Kingdom, and the European Union (“EU”). U.S. export control laws and regulations and economic sanctions include various restrictions and license requirements, including prohibiting the shipment of certain products, technology, software, and services to countries, governments, and persons embargoed or sanctioned by the United States. Export control and economic sanctions laws may apply extraterritorially and may conflict with local laws or contractual obligations in certain jurisdictions, which could limit our ability to conduct business or require us to modify our operations in those markets. Complying with export control, economic sanctions, and import laws and regulations for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. While we take precautions to prevent our platform, solution, services, technology, data, and software from being exported, reexported, or transferred in violation of these laws, if we were to fail to comply with U.S. export laws, U.S. Customs regulations and import regulations, U.S. economic sanctions, and other countries’ import and export laws, we could be subject to substantial civil and , including for the Company and for responsible employees and managers, and the possible of export privileges.
Additionally, the export control laws and regulations impose licensing, filing, and reporting requirements on encryption and products, technologies, and software that incorporate or use certain encryption. We incorporate encryption technology into certain of our products and our products, software, and technology may require export authorization including by license, a license exception, or other appropriate government authorization for export, reexport, or transfer outside of the United States. In addition, various countries regulate the import of certain encryption technology, including import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our solution or could limit our customers’ ability to implement our solution in those countries. We cannot assure you that inadvertent violations of such laws have not occurred or will not occur in connection with the distribution of our solution and services despite the precautions we take. Governmental regulation of encryption technology and regulation of imports or exports, or our failure to obtain any required import or export approval for our solution, technology, software, services, or platform, could harm our international sales and adversely affect our results of operations.
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Further, if our channel or other partners fail to obtain any appropriate import, export, or reexport licenses or permits, we may also be harmed, become the subject of government investigations or penalties, and incur reputational harm. In addition, access to our supply chain in China may be further restricted by U.S. actions taken against China, such as Chinese suppliers being targeted by U.S. sanctions or being added to lists of denied persons maintained by the U.S. Department of Commerce Bureau of Industry and Security (“BIS”). For example, the United States has imposed restrictions on the export of U.S.-regulated products and technology to certain Chinese technology companies and adopted controls on certain transactions involving items for semiconductor manufacturing end uses and advanced computing integrated circuits destined for China. If we were to identify a need to obtain export approval for any such transaction, it could adversely affect our operations. Changes in our platform, solution, services, technology, and software, changes in export or import laws or regulations, economic sanctions, or related legislation, shifts in the enforcement or scope of existing laws and regulations, or changes in the countries, governments, persons, or technologies targeted by such laws and regulations may require further product modifications, create in the introduction of or reductions in the use of our platform in international markets, prevent our customers with international operations from deploying our platform globally or, in some cases, prevent the export or import of our platform to certain countries, governments, or persons altogether. Any decreased use of our platform, solution, services, technology, and software or on our ability to export or sell our platform would likely our business, financial condition, and results of operations.
Our failure to comply with the requirements of applicable environmental legislation and regulation could have a material adverse effect on our revenue and profitability.
Production, marketing, and selling of our products in certain jurisdictions may subject us to environmental regulations or market expectations, requiring registration, reporting, labeling, disclosure, or limiting or eliminating the use of certain substances or components in our products or packaging. In addition, certain states and countries may pass new regulations requiring our solution to meet certain requirements to use environmentally-friendly components in our products and packaging. For example, the EU has issued directives relating to chemical substances in electronic products. One directive is the Waste Electrical and Electronic Equipment Directive, which makes producers of certain electrical and electronic equipment financially responsible for the collection, reuse, recycling, treatment, and disposal of equipment placed in the EU market. Another directive is the Restriction of Hazardous Substances Directive, which bans the use of certain hazardous materials in electrical and electronic equipment which are put on the market in the EU. In the future, various countries, including the United States or state or local governments, may adopt further environmental compliance programs and requirements. If we fail to comply with these regulations in connection with our IoT devices, we may face regulatory fines and other , and may not be to sell our IoT devices in jurisdictions where these regulations apply, which could have a material effect on our revenue and .
Regulations related to conflict minerals may cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of our products.
We are subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that require us to conduct due diligence on and disclose whether our products contain conflict minerals as defined under these provisions. The implementation of these requirements could adversely affect the sourcing, availability, and pricing of the materials used in the manufacture of components used in our IoT devices. In addition, we incur additional costs to comply with the disclosure requirements, including costs related to conducting reasonable diligence procedures to determine the sources of minerals that may be used in or necessary for the production of our IoT devices and, if applicable, potential changes to IoT devices, processes, or sources of supply as a consequence of such due diligence activities. It is also possible that we may face reputational harm or negative customer sentiment for not determining or asserting that each of our IoT devices contain only conflict-free minerals or if we are unable to alter our products, processes, or sources of supply to avoid materials not determined to be conflict-free. Future changes in minerals regulations or the adoption of similar or more expansive supply chain or sourcing requirements in the United States or other jurisdictions could further increase our compliance costs or affect the availability or cost of materials used in our products.
We may face fines, penalties, or other costs, either directly or vicariously, if any of our partners, resellers, contractors, vendors, or other third parties fail to adhere to their compliance obligations under our policies and applicable law.
We use a number of third parties to perform services or act on our behalf in areas like sales, network infrastructure, administration, research, AI, and marketing. It may be the case that one or more of those third parties fail to adhere to our policies or violate applicable federal, state, local, and international laws, including but not limited to those related to taxation, corruption, bribery, economic sanctions, and export/import controls. Despite our significant efforts in asserting and maintaining control of and compliance by these third parties, we may be held liable for third parties’ actions as if they were a direct employee of ours. Such liabilities may create harm to our reputation, inhibit our plans for expansion, or lead to extensive liability either to private parties or government regulators, which could adversely impact our business, financial condition, and results of operations.
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Risks Related to Finance, Accounting, and Tax Matters
Our results of operations and our business metrics have fluctuated and are likely to fluctuate significantly in future periods and may not fully reflect the underlying performance of our business, which makes our future results difficult to predict and could cause our results of operations to fall below expectations.
Our results of operations and business metrics have fluctuated from period-to-period in the past and may continue to vary significantly in the future so that period-to-period comparisons of our results of operations and business metrics, such as ARR, may not be meaningful. Accordingly, our financial results in any one period should not be relied upon as indicative of future performance.
We recognize subscription revenue from customers ratably over the term of their subscriptions. Consequently, any increase or decline in new sales or renewals to these customers in any one period may not be immediately reflected in our revenue for that period. Any such change, however, may affect our revenue in future periods. Accordingly, the effect of downturns or upturns in new sales and potential changes in our rate of renewals may not be fully reflected in certain of our financial performance measures until future periods. We may also be unable to reduce our cost structure and expenditures in line with a significant deterioration in sales or renewals. Our subscription model also makes it more difficult for us to rapidly increase our revenue through additional sales in any period, as subscription revenue from new customers must be recognized over the applicable subscription term. By contrast, a majority of our costs are expensed as incurred. As a result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of certain of our customer contracts. Additionally, the timing of our cash expenditures fluctuates and may be . Accordingly, we may not generate sufficient revenue to maintain cash flow from operations or our targets.
Our results of operations and business metrics may fluctuate as a result of a variety of factors, many of which are outside of our control, may be difficult to predict, and may or may not fully reflect the underlying performance of our business. Factors that may cause fluctuations in our financial results and our business metrics include but are not limited to:
• Our ability to attract new customers, particularly large customers;
• Our ability to retain and expand our relationships with existing customers;
• Our ability to successfully expand our business domestically and internationally;
• Our ability to gain new channel partners and retain existing channel partners;
• Our ability to attract, retain, and develop key employees and other qualified personnel;
• Fluctuations in the growth rate of the overall markets that our solution addresses;
• Supply chain, freight, and shipping costs;
• Our ability to effectively manage our growth;
• The pricing and payment terms in our customer contracts and the timing of invoices issued to our customers and payments to us made by our customers;
• The timing of payments to our vendors, suppliers, and other parties;
• The amount and timing of operating expenses related to the maintenance and expansion of our business and operations, including continued investments in sales and marketing, research and development, and general and administrative resources;
• The timing and magnitude of customer terminations, which may lead to one-time revenue recognition and subsequent impacts to ARR;
• Product quality issues, network outages or performance degradation of our cloud service;
• Security breaches and incidents;
• General economic, industry, and market conditions, including global supply chain challenges, elevated inflation and interest rates, monetary policy changes, lower consumer confidence, and volatile equity markets;
• Changes in law and regulations affecting our and our customers’ businesses or product requirements;
• Seasonality in customer purchasing trends;
• Increases or decrease s in the number of subscriptions or pricing changes upon any renewals of customer agreements;
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• Changes in the mix of revenue attributable to subscriptions, professional services, or other non-subscription revenue;
• Changes in our pricing policies or those of our competitors;
• The budgeting cycles and purchasing practices of customers;
• Decisions by potential customers to return products purchased from us and/or purchase alternative solutions from other vendors;
• Insolvency or credit difficulties confronting our customers, which could adversely affect their ability to purchase or pay for a subscription to use our solution;
• The cost and potential outcomes of future litigation or other disputes;
• Future accounting pronouncements or changes in our accounting policies;
• Our overall effective tax rate, including impacts caused by any reorganization in our corporate tax structure and any new legislation or regulatory developments;
• The amount and timing of equity awards and the related expenses;
• The impact of political elections in the United States and abroad, particularly trade protection measures (such as tariffs and duties) and import or export licensing requirements;
• Fluctuations in foreign currency exchange rates;
• Fluctuations or impairments in the market values of our marketable debt securities portfolio or strategic investments, or in interest rates;
• Fluctuations in the cost of hardware components, particularly memory and computing, and our ability to mitigate such costs through pricing or supply chain management;
• Our timing and success in introducing new features and Applications to the market, including integrations of our solution with additional third-party software, IoT devices, and other connected assets;
• The actions of our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic partners;
• The provision of fleet management solutions or asset management solutions from cellular carrier-controlled or OEM-controlled channels from which we may be excluded;
• The impact of the Russia-Ukraine conflict, the conflicts in the Middle East, geopolitical tensions involving China, and related macroeconomic events on our and our customers’ and partners’ respective operations;
• Our ability to successfully manage and realize the anticipated benefits of any future acquisitions of businesses, solutions, or technologies;
• The timing of expenses related to the development or acquisition of businesses, solutions, or technologies and potential future charges for impairment of goodwill from acquired companies;
• The length of a specific fiscal period; and
• Other risk factors described in this Annual Report on Form 10-K.
Seasonality may cause fluctuations in our results of operations and financial position.
We have experienced, and expect to continue to experience in the future, seasonality in our business, including with respect to the timing of our bookings, expenses, and cash flows, which has affected and may in the future affect our operating results and financial condition. For example, we believe that the bookings-related seasonality we experience is in part due to our customers’ procurement cycles, as many customers look to spend the unused portions of their budgets prior to the end of their fiscal years, as well as the timing and structure of our internal sales incentive and compensation programs. As a result, we have historically seen higher demand for our solution in the fourth fiscal quarter of the year. We expect that this seasonality will continue to affect our results of operations in the future and might become more pronounced as we continue to target larger enterprise customers.
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If we are unable to achieve and sustain a level of liquidity sufficient to support our operations and fulfill our obligations, our business, financial condition, and results of operations could be adversely affected.
We actively monitor and manage our cash, cash equivalents, and marketable debt securities so that sufficient liquidity is available to fund our operations and other corporate purposes. In the future, increased levels of liquidity may be required to adequately support our operations and strategic initiatives, fulfill tax withholding obligations related to the settlement of equity awards, and to mitigate the effects of business challenges or unforeseen circumstances. If we are unable to achieve and sustain such increased levels of liquidity, we may suffer adverse consequences, including reduced investment in our research and development or sales and go-to-market efforts, difficulties in executing our business plan and fulfilling our obligations, and other operational challenges. Any of these developments could adversely affect our business, financial condition, and results of operations.
We may require additional capital to fund our business and support our growth, and any inability to generate or obtain such capital may adversely affect our business and financial condition.
In order to support our growth and respond to business opportunities and challenges, such as developing new Applications or enhancing existing Applications for our Connected Operations Platform to stay competitive, acquiring new technologies, expanding our sales and go-to-market activities, and improving our infrastructure, we have made significant financial investments in our business and we intend to continue to make such investments. As a result, we may need to engage in additional equity or debt financings to provide the funds required for these investments and other business endeavors. If we raise additional funds through equity or convertible debt issuances, our existing stockholders may suffer significant dilution, and these securities could have rights, preferences, and privileges that are superior to that of holders of our Class A common stock. If we obtain additional funds through debt financing, the terms of such indebtedness may involve restrictive covenants, making it difficult to engage in capital raising activities and pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms to us when we require it, our ability to continue to support our business growth and to respond to business could be significantly limited and our business and financial condition may be affected.
Our business is exposed to risks related to third-party financing of our customers’ subscriptions to our Connected Operations Platform.
Some of our customers have relied, and may in the future rely, on third parties to finance their purchase of subscriptions to our Connected Operations Platform. This need to arrange third-party credit may lengthen our sales cycles or otherwise lengthen the amount of time required to negotiate customer agreements. We occasionally provide customers seeking financing with contact information for lenders that are known to us through their financing of other customers’ subscriptions. These arrangements can create challenging dynamics for us when disputes arise between a customer and a lender to whom we have introduced a customer, or between us and that lender. If financing is not available to those of our customers who require it, on commercially reasonable terms or at all, or if lenders alter their policies or decisions around financing or take longer than usual to make approval decisions, we could experience reduced sales, extended sales cycles, and reduced retention of existing customers. Any inability of a third-party financing company to make payments on a customer’s behalf would prevent us from collecting amounts due under the customer’s subscription agreement. In the event of a dispute between a customer and a lender, we could suffer reputational harm and to our relationships with customers and those that provide financing to our customers. The cost of financing may increase as a result of increases in interest rates. Developing and maintaining relationships with new third-party financing partners in the United States and abroad is , and to effectively do so may impact our customers’ purchasing decisions. The occurrence of any of these would impact our business, financial condition, and results of operations.
Changes in our subscription or pricing models could adversely affect our business, financial condition, and results of operations.
Making pricing determinations requires significant judgment and assessment of multiple factors, particularly under economic conditions characterized by high inflation or in a recessionary or uncertain economic environment. As the market for our solution has evolved, we have changed our prices and pricing model from time to time and expect to continue to do so in the future. As we expand our offerings, as the markets for our solution mature, as competitors introduce new solutions or services that compete with ours, as we enter new international markets, and as macroeconomic conditions evolve, we may be unable to attract and retain customers at the prices or terms we set. If we do not optimally adjust pricing or our pricing model, our revenue and margins, as well as our ability to acquire and retain customers, may be negatively impacted.
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The sales price we charge our customers may decline for a variety of reasons, including competitive pricing pressures, discounts, anticipation of the introduction of new Applications and features, removal of or changes to Applications and features, changes in our pricing models (including changes as to the timing of customers’ payments over the course of their subscriptions) or promotional programs. Our competitors, including new entrants to our market, may reduce the price of offerings that compete with ours or may bundle them with other offerings and provide them for free. Any decrease in our pricing, without a corresponding decrease in costs or increase in sales volume, would adversely affect our overall profitability and results of operations.
We may also have difficulty determining the appropriate price structure for new or existing Applications. Regardless of the pricing model used, larger customers may demand higher price discounts than have been given in the past, or are given to other customers. As a result, we may be required to reduce our prices, offer shorter contract durations, offer alternative pricing models, or make other commercial concessions. Furthermore, if our production costs increase, our margins and profitability would be adversely affected absent further changes to our pricing structure. If we do not maintain our prices at levels that will allow us to achieve our profitability targets, our business, financial condition, and results of operations will be harmed.
We recognize certain revenue streams over the term of our subscription contracts. Consequently, downturns in new sales may not be immediately reflected in our results of operations and may be difficult to discern.
We recognize subscription revenue from customers ratably over the terms of their contracts. As a result, a significant portion of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to subscription agreements entered into during previous quarters. Consequently, a decline in new or renewed subscriptions in any single quarter may only have a small impact on our revenue results 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 Connected Operations Platform, and potential changes in our pricing policies or rate of customer expansion or retention, may not be fully reflected in our results of operations until future periods. Our subscription revenue also makes it more difficult for us to rapidly increase our revenue through additional sales in any period, as subscription revenue from new customers must be recognized over the applicable subscription term. We may also be unable to reduce our cost structure in line with a significant deterioration in sales or renewals. In addition, a majority of our costs are expensed as incurred. As a result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of certain of our customer contracts. Additionally, the timing of our cash expenditures fluctuates and may be .
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could expose us to greater than anticipated tax liabilities.
The tax laws applicable to our business, including the laws of the United States and other jurisdictions, are subject to interpretation and certain jurisdictions may aggressively interpret their laws in an effort to raise additional tax revenue. The tax authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology, intercompany arrangements, or our revenue recognition policies, which could increase our worldwide effective tax rate and harm our financial position and results of operations. It is possible that tax authorities may disagree with certain positions we have taken, and any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. Further, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are transactions where the ultimate tax determination is uncertain. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our consolidated financial statements and may materially affect our financial results in the period or periods for which such determination is made.
In addition, tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied, and any such changes could adversely affect our tax liability. For example, in July 2025, the U.S. government enacted the One Big Beautiful Bill Act, which includes several changes to U.S. federal income tax law, including the temporary and permanent extension of expiring provisions of the Tax Cuts and Jobs Act of 2017. In addition, many countries, as well as organizations such as the Organisation for Economic Cooperation and Development (the “OECD”) have enacted or proposed changes to existing tax laws, including a 15% global minimum tax (“Pillar 2”). The OECD and participating jurisdictions have agreed to a “side-by-side” solution that would exempt U.S. parented multinational corporations from certain provisions of Pillar 2 for fiscal years beginning on or after January 1, 2026. These and other changes to applicable tax laws could increase our overall tax liabilities, and our business, financial condition, or results of operations may be adversely impacted.
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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 tax 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. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall of our operations. Our financial statements could to reflect adequate reserves to cover such a contingency.
If currency exchange rates fluctuate substantially in the future, the results of our operations, which are reported in U.S. dollars, could be adversely affected.
As we continue to expand our international operations, we become more exposed to the effects of fluctuations in currency exchange rates. Our international customer contracts are denominated in currencies other than the U.S. dollar. For ARR, international customer contracts are translated into U.S. dollars using the currency exchange rate as of the effective date of the contract. Because our contract terms are typically several years, changes in currency exchange rates over the course of customers’ contract terms may have different impacts on the amount of revenue that we recognize from a customer or on the ARR we report from period to period, even in the absence of changes to that customer’s subscription, and therefore may also have different impacts on our revenue and ARR growth rates. Additionally, currency fluctuations in certain countries and regions may negatively impact actual prices that customers and partners are willing to pay in those countries and regions. Further, we incur expenses for employee compensation and other operating expenses at our non-U.S. locations in the local currency. Fluctuations in the exchange rates between the U.S. dollar and other currencies could result in the dollar equivalent of such expenses also fluctuating, leading to unpredictability and potentially impacts on our results of operations. Although we may in the future decide to undertake foreign exchange hedging transactions to cover a portion of our foreign currency exchange exposure, we currently do not engage in hedging transactions to limit our exposure to foreign currency exchange risks.
Our marketable debt securities portfolio is subject to credit, liquidity, market, and interest rate risks that could cause its value to decline and materially adversely affect our business, financial condition, results of operations, and prospects.
We maintain a portfolio of marketable debt securities through professional investment advisors. The investments in our portfolio are subject to our corporate investment policy, which focuses on the preservation of capital, fulfillment of our liquidity needs, and maximization of investment performance within the parameters set forth in our corporate investment policy and subject to market conditions. These investments are subject to general credit, liquidity, market, and interest rate risks. In particular, the value of our portfolio may decline due to changes in interest rates, instability in the global financial markets that reduces the liquidity of securities in our portfolio, and other factors, including unexpected or unprecedented events. As a result, we may experience a decline in value or loss of liquidity of our investments, which could materially adversely affect our business, financial condition, results of operations, and prospects. We attempt to mitigate these risks through diversification of our investments and continuous monitoring of our portfolio’s overall risk profile, but the value of our investments may nevertheless decline. To the extent that we increase the amount of these investments in the future, these risks could be .
We could be required to collect additional sales, use, value added, digital services, withholding, or other similar taxes or be subject to other liabilities that may increase the costs our customers would have to pay for our Applications and adversely affect our results of operations.
We collect sales, value added, withholding, and other similar taxes in a number of jurisdictions. One or more U.S. states or municipalities, as well as other countries, may seek to impose incremental or new sales, use, value added, digital services, or other tax collection obligations on us. There can be no assurance that tax authorities in jurisdictions where we conduct business will not assert that we are subject to additional taxes or required to collect additional taxes or impose additional taxes in the future. An expansion by a U.S. state or local government, or other country or jurisdiction of sales, use, value added, digital services, or other similar taxes could, among other things, result in additional tax liabilities for us or our customers and/or create additional administrative burdens for us.
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Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
As of January 31, 2026, we had U.S. federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $2,232.7 million, $2,135.3 million, and $5.6 million, respectively, which may be utilized against future income taxes. Limitations imposed by the applicable jurisdictions on our ability to utilize NOL carryforwards, including with respect to the NOL carryforwards of companies that we have acquired or may acquire in the future, could cause income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause such NOL carryforwards to expire unused, in each case reducing or eliminating the benefit of such NOL carryforwards. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change federal NOL carryforwards and other pre-change tax attributes, such as research tax credits, to offset its future post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. In the event we experience one or more ownership changes as a result of future transactions in our stock, then we may be further limited in our ability to use our NOL carryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn in the event that we . Our NOL carryforwards may also be subject to under state law. For example, California legislation enacted in June 2024 limits the use of state NOL carryforwards for tax years beginning on or after January 1, 2024 and before January 1, 2027. Furthermore, we may not be to generate sufficient taxable income to utilize our NOL carryforwards before they expire. If any of these events occur, we may not derive some or all of the expected benefits from our NOL carryforwards.
If our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could be adversely affected, resulting in a decline in our stock price.
The preparation of our financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make judgments, estimates, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. 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 which 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. 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. Significant judgments, estimates, and assumptions used in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition, the period of benefit for connected device costs and deferred commissions, collectibility of receivables, inventory valuation, capitalization and useful lives of internal-use software costs, timing and amount of legal contingencies, and valuation of deferred income taxes and uncertain tax positions.
Risks Related to the Ownership of Our Class A Common Stock
Sales or distributions of substantial amounts of our Class A common stock in the public markets, or the perception that they might occur, could cause the market price of our Class A common stock to decline.
The market price of our Class A common stock could decline as a result of sales or distributions of a large number of shares of our Class A common stock in the market or the perception that these sales or distributions could occur, including following sales by our founders or distributions-in-kind by our early investors.
Certain of our employees, executive officers, and directors have entered or may enter into Rule 10b5-1 trading plans providing for sales of shares of our Class A common stock from time to time. Such sales of shares into the market could cause the market price of our Class A common stock to decline.
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Certain holders of our common stock also have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Further, we have filed and expect to file in the future registration statements to register shares reserved for future issuance under our equity compensation plans. Subject to the satisfaction of applicable exercise or vesting periods, the shares issued upon exercise of outstanding stock options or upon settlement of outstanding RSU awards will be available for immediate resale in the United States in the open market as a result of being issued under such registration statement or pursuant to other securities law exemptions. Additionally, to fund the tax withholding and remittance obligations arising in connection with the vesting or settlement of RSUs, we have primarily used and may in the future use a “sell-to-cover” option for our equity award holders, in which the holders of such RSUs may use a broker to sell a portion of such shares into the market on the applicable settlement date, with the proceeds of such sales to be delivered to us for remittance to the relevant taxing authorities. To the extent we use a sell-to-cover method (as opposed to a net share settlement), the occurrence of these transactions could cause the market price of our Class A common stock to decline on our RSU settlement dates.
Sales of our shares as restrictions end or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate. Sales or distributions of substantial amounts of our Class A common stock in the public markets, or the perception that sales or distributions might occur, also could cause the trading price of our Class A common stock to decline and make it more difficult for investors to sell shares of our Class A common stock.
Our stock price may be volatile and may decline significantly and rapidly regardless of our operating performance, resulting in substantial losses for investors.
The market price of our Class A common stock may fluctuate significantly in response to numerous factors in addition to the ones described elsewhere in this “Risk Factors” section, many of which are beyond our control, including:
• actual or anticipated fluctuations in our financial condition, results of operations, or key business metrics and non-GAAP financial measures;
• the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections;
• failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
• announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, results of operations, or capital commitments;
• changes in stock market valuations and operating performance of other technology companies generally, or those in our industry in particular;
• price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
• changes in our Board of Directors, management, or personnel;
• sales or distributions of large blocks of our Class A common stock, including sales by our executive officers and directors or distributions by our early investors, as well as any sales in connection with our RSU settlements to cover tax withholding and remittance obligations;
• actual or perceived privacy or security incidents affecting our solution or otherwise affecting us;
• lawsuits threatened or filed against us;
• anticipated or actual changes in laws, regulations, or government policies applicable to our business or our customers’ businesses, including tariff policies;
• changes in the anticipated future size or growth rate of our addressable markets;
• changes in our capital structure, such as future issuances of debt or equity securities;
• short sales, hedging, and other derivative transactions involving our capital stock, and the publication of short seller and similar reports;
• general economic conditions, including economic slowdowns, the occurrence or expectation of recessions, financial distress caused by volatility in the global banking sector, elevated inflation and interest rates, and tightening of credit markets;
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• other events or factors, including those resulting from geopolitical disputes (including but not limited to the ongoing conflict between Russia and Ukraine, the conflicts in the Middle East, and geopolitical tensions involving China), public health crises, incidents of terrorism, or responses to any of these events; and
• the other factors described in this “Risk Factors” section and the section titled “Special Note Regarding Forward-Looking Statements” of this Annual Report on Form 10-K.
The stock market experiences extreme price and volume fluctuations from time to time. The market prices of securities of companies, particularly technology companies, have experienced fluctuations that have often been unrelated or disproportionate to their results of operations. Market fluctuations could result in extreme volatility in the price of shares of our Class A common stock, which could cause a decline in the value of our common stock. Price volatility may be greater if the public float and trading volume of shares of our Class A common stock remain low, including as a result of the concentration of ownership of our outstanding common stock among our existing executive officers, directors, and principal stockholders. Furthermore, in the past, stockholders have sometimes instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Any similar litigation against us could result in substantial costs, divert management’s attention and resources, and our business, financial condition, and results of operations. In addition, because we award RSUs to our employees as part of their total compensation package, and the value of those RSUs depends directly on our stock price, a sharp or in our stock price may make it more for us to hire and retain our employees or may result in us granting more awards in the aggregate to hire and retain our employees.
The multi-class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial public offering.
Our Class B common stock has 10 votes per share, our Class A common stock, which is the stock we have listed on the New York Stock Exchange, has one vote per share, and our Class C common stock has no voting rights, except as otherwise required by law. Because of the ten-to-one voting ratio between our Class B and Class A common stock, holders of our Class B common stock collectively control a majority of the combined voting power of our common stock and therefore are able to control all matters submitted to our stockholders for approval. This concentrated control will limit or preclude the ability of holders of Class A common stock to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other corporate transactions requiring stockholder approval. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that Class A common stockholders may feel are in their best interest as one group of our stockholders.
Future transfers by holders of shares of Class B common stock will generally result in those shares converting to Class A common stock, except for certain transfers permitted by our amended and restated certificate of incorporation, including (i) estate planning or other transfers among our co-founders and their family members, (ii) transfers to a bona fide trust primarily for the benefit of the transferor, such transferor’s family members, or a charitable organization, (iii) transfers to an investment retirement account, pension, profit sharing, stock bonus, or other type of plan where dispositive power and voting control with respect to the transferred shares of Class B common stock are retained by or granted solely to the transferor and/or permitted transferees, (iv) transfers to a corporation, partnership, or limited liability company in which the transferor and/or permitted transferees hold dispositive power and voting control, or (v) transfers to charitable organizations, foundations, or similar entities established, directly or indirectly, by a transferor in which the transferor and/or permitted transferees hold dispositive power and voting control. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those individual holders of Class B common stock who retain their shares in the long term.
Further, all shares of Class B common stock will be converted into shares of Class A common stock following the earliest to occur of (i) the date specified by the affirmative vote or consent of (a) the holders of a majority of the outstanding Class B common stock and (b) each of Mr. Biswas and Mr. Bicket to the extent he (together with his permitted assigns) then holds at least 25% of the Class B common stock held by him and his permitted assigns immediately prior to the completion of our initial public offering (“IPO”) and is not then deceased or disabled, (ii) nine months following the death or disability of the later to die or become disabled of Messrs. Biswas and Bicket, which period may be extended to 18 months upon the consent of a majority of the independent directors then in office, and (iii) such date fixed by our Board of Directors following the date that the total number of shares of Class B common stock held by Messrs. Biswas and Bicket (together with their permitted assigns) equals less than 25% of the Class B common stock held by them immediately prior to the completion of our IPO.
In addition, because our Class C common stock carries no voting rights (except as otherwise required by law), if we issue Class C common stock in the future, the holders of Class B common stock may be able to elect all of our directors and to determine the outcome of most matters submitted to a vote of our stockholders for a longer period of time than would be the case if we had issued Class A common stock rather than Class C common stock in such future transactions.
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Our multi-class structure may negatively affect the decision by certain institutional investors to purchase or hold shares of our Class A common stock.
The holding of low-voting stock, such as our Class A common stock, may not be permitted by the investment policies of certain institutional investors or may be less attractive to the portfolio managers of certain institutional investors. For example, certain index providers have announced restrictions on including companies with multiple class share structures in certain of their indices. Under those policies, our multi-class capital structure likely makes us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track such indices may not invest in our stock. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.
An active and liquid market for our Class A common stock may not be sustained, which may make it difficult for investors to sell the Class A common stock they purchase.
We cannot predict if an active and liquid trading market for our Class A common stock will be sustained. If an active and liquid trading market for our Class A common stock is not sustained, you may have difficulty selling any of our Class A common stock at a price at or above the price at which you purchased your stock, or at all. If an active and liquid trading market for our Class A common stock is not sustained, our ability to raise capital to fund our operations by selling shares and our ability to acquire other companies or technologies by using our common stock as consideration may suffer.
Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans, or otherwise will dilute all other stockholders.
We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors, and consultants under our equity incentive plans and issue shares of our Class A common stock under our employee stock purchase plan. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in companies, products, or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our Class A common stock to decline.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.
The trading market for our Class A common stock depends, to some extent, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly or accurately publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
We do not intend to pay dividends for the foreseeable future.
We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Moreover, any debt we may incur in the future may restrict our ability to pay dividends. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock. As a result, stockholders must rely on sales of their Class A common stock after price appreciation as the only way to realize any future gains on their investment.
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The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of the New York Stock Exchange, and other applicable securities rules and regulations. Compliance with these rules and regulations has increased and will continue to increase our legal and financial compliance burden, make some activities more difficult, time-consuming, or costly, and place significant strain on our personnel, systems, and resources. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet these standards, significant resources and management oversight is required. We are required to disclose changes made in our internal control and procedures on a quarterly basis and we are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be from other business , which could affect our business and results of operations. Although we have hired additional employees and have engaged third-party consultants to assist us in complying with these requirements, we may need to hire more employees in the future or engage additional third-party consultants, which will increase our operating expenses.
In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial 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 our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be adversely affected.
Being a public company subject to the aforementioned rules and regulations may make it more expensive for us to maintain director and officer liability insurance, and in the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
As a result of disclosure of information in our filings with the SEC, our business and financial condition have become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and results of operations.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of the New York Stock Exchange.
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. 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 significant management oversight. The effectiveness of our disclosure controls and internal control over financial reporting depends in part on the availability of qualified personnel and our ability to manage changes associated with growth, organizational complexity, or personnel turnover.
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Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Our disclosure controls and internal control over financial reporting also rely on the effective operation of information systems, applications, and services provided by third parties, and any failures, limitations, or disruptions in such systems or services could adversely affect the effectiveness of our controls. 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, any difficulties encountered in their implementation or improvement, or any intentional circumvention of those controls could harm our results of operations or cause us to to meet our reporting obligations and may result in a of our financial statements for prior periods. Any to implement and maintain internal control over financial reporting also could 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 will eventually be required to include in our periodic reports that will be filed with the SEC. disclosure controls and procedures and internal control over financial reporting could also cause investors to confidence in our reported financial and other information and could materially and affect our business, financial condition, and results of operations and could cause a in the trading price of our Class A common stock. In addition, if we are to continue to meet these requirements, we may not be to remain listed on the New York Stock Exchange.
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 certificate of incorporation and bylaws 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 provisions include:
• our amended and restated certificate of incorporation provides for a multi-class common stock structure, which provides our pre-IPO stockholders, including certain of our executive officers, employees, directors, and their affiliates, with significant influence over matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets;
• our amended and restated certificate of incorporation requires approval of the holders of at least two-thirds of the outstanding shares of our Class B common stock voting as a separate class for certain corporate actions including (i) any direct or indirect amendment to the amended and restated certificate of incorporation that is inconsistent with or alters the voting, conversion or other rights, powers, preferences, privileges, or restrictions of the Class B common stock, (ii) reclassification of Class A common stock or Class C common stock into shares having rights as to dividends or liquidation that are senior to that of the Class B common stock, (iii) an increase to the voting power of the Class A common stock or Class C common stock, (iv) authorization or issuance of shares of any class or series of capital stock (other than Class B common stock) having more than one vote per share, and (v) issuance of additional shares of Class B common stock, with certain exceptions;
• our amended and restated certificate of incorporation and amended and restated bylaws authorize only our Board of Directors to fill vacant directorships, including newly created seats, and the number of directors constituting our board of directors will be permitted to be set only by a resolution adopted by a majority vote of our entire Board of Directors;
• until the first date on which the outstanding shares of our Class B common stock represent less than a majority of the total voting power of the then outstanding shares entitled to vote generally in the election of directors, our stockholders will be able to take action by consent only if such action is first recommended or approved by our Board of Directors;
• a special meeting of our stockholders may only be called by the chairperson of our board of directors, our Chief Executive Officer, or a majority of our entire Board of Directors;
• our amended and restated certificate of incorporation does not provide for cumulative voting;
• certain litigation against us can only be brought in Delaware;
• our amended and restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued without further action by our stockholders; and
• advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
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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 15% or more of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Any provision in our certificate of incorporation or our bylaws 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.
Our business could be impacted as a result of actions by activist shareholders or others.
We may be subject, from time to time, to legal and business challenges in the operation of our company due to actions instituted by activist shareholders or others. Responding to such actions could be costly and time-consuming, may not align with our business strategies, and could divert the attention of our Board of Directors and senior management from the pursuit of our business strategies. Perceived uncertainties as to our future direction as a result of shareholder activism may lead to the perception of a change in the direction of the business or other instability and may affect our relationships with our end-customers, prospective and current employees, and others.
Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, stockholders, officers, or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws, or (iv) any action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state court in Delaware or the federal district court for the District of Delaware), in all cases, subject to the court having jurisdiction over the claims at issue and the indispensable parties, provided that the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws also provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America are the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
Any person or entity purchasing, holding, or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to the foregoing bylaw provisions. Although we believe these exclusive forum provisions benefit us by providing increased consistency in the application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, stockholders, or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, officers, stockholders, or other employees. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder as a result of our exclusive forum provisions. Further, in the event a court finds either exclusive forum provision contained in our amended and bylaws to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could our results of operations.
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General Risk Factors
Our business may be materially and adversely impacted by U.S. and global market, political, and economic conditions, including elevated inflation rates and evolving trade policies.
We generate our revenue from selling subscriptions to our Connected Operations Platform to industries that depend on physical operations. These industries include transportation, construction, wholesale and retail trade, field services, logistics, manufacturing, utilities and energy, government, healthcare and education, food and beverage, and others. Given the concentration of our business activities in these industries and their susceptibility to disruption in times of economic uncertainty, we will be particularly exposed to macroeconomic pressures and downturns. U.S. and global market and economic conditions have been, and continue to be, disrupted and volatile due to many factors, including evolving global trade policies (including the imposition of, and threatened imposition of, tariffs and other trade barriers by the United States and other countries), component shortages and related supply chain challenges (including rising memory and computing costs), financial distress caused by in the global banking sector, potential or actual of the United States federal government, geopolitical developments (such as the between Russia and Ukraine, the in the Middle East, and geopolitical tensions involving China), elevated inflation rates and the responses by central banking authorities to control such inflation, public health , and other changes in legislation, regulations, enforcement priorities, or other economic and monetary policies of the governments in the jurisdictions in which we operate. Other general business and economic conditions that could affect us and our customers include fluctuations in economic growth, liquidity of the global financial markets, foreign currency fluctuations, the availability and cost of credit, investor and consumer confidence, and the of the economies in which we and our customers operate.
This economic uncertainty and the associated macroeconomic conditions make it extremely difficult for businesses to accurately forecast and plan future business activities, and have caused and may continue to cause businesses to cease or slow spending on IT products, which has also caused, and could continue to cause, delays in and lengthening of sales cycles. Furthermore, during uncertain economic times, our potential and existing customers have faced issues gaining timely access to sufficient credit on acceptable terms, which has from time to time resulted in, and in the future may result in an impairment of their willingness to purchase subscriptions to our solution or their ability to make timely payments to us. As a result, operational challenges and these volatile economic conditions have presented and may in the future present difficulties in our ability to timely collect accounts receivables from our customers due to their deteriorating financial condition. In addition, our existing customers may be acquired by or merged into other entities that use our competitors’ products, they may decide to their relationships with us for other reasons, or they may declare or otherwise go out of business. It is and in most cases for us to anticipate the occurrence of these events, each of which would have an effect on our results of operations. Additionally, competitors may respond to market conditions by lowering prices and attempting to lure away our customers, which could affect our business.
We have limited experience operating our business at the current scale under economic conditions characterized by high inflation or in a recessionary or uncertain economic environment. We cannot predict the timing, strength, or duration of any economic slowdown or any subsequent recovery generally, or any industry in particular. If the conditions in the general economy and the markets in which we operate worsen from present levels, our business, financial condition, and results of operations could be materially and adversely affected.
Our estimates of market opportunity and market share, and our forecasts of market growth may prove to be inaccurate.
Market opportunity and market share estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate or that may change due to macroeconomic conditions or other unexpected trends. Our estimates and forecasts relating to the size and expected growth of our target markets may prove to be inaccurate. Even if the markets in which we compete meet our size estimates and growth forecasts, we may not successfully penetrate these markets and our business could fail to grow at a similar pace, if at all.
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Fluctuating expectations and attitudes towards environmental, social, and governance issues by shareholders, customers, regulators, and other stakeholders may impose additional risks and costs on our business.
Environmental, social, and governance (“ESG”) matters have become an area of mixed focus and debate among certain stakeholders, including investors, customers, employees, regulators, and the general public in the United States and abroad. In particular, companies face evolving rules, regulations, and expectations with respect to their practices, disclosures, and performance in relation to corporate responsibility, climate change, diversity, equity and inclusion, human capital management, data privacy and security, cybersecurity, and supply chains (including human rights issues), among other topics. This has resulted in, and is likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. For example, developing and acting on ESG initiatives and collecting, measuring, and reporting ESG information and metrics can be costly, difficult, and time-consuming and are subject to evolving reporting standards, including climate and ESG-related disclosure requirements promulgated by the EU and the state of California, among others. These initiatives and related reporting requirements may present operational, reputational, financial, legal, and other risks, which could have a material impact on us.
Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our business, financial condition, and results of operations.
We have in the past and may in the future seek to acquire or invest in businesses, joint ventures, and technologies that we believe could complement or expand our Connected Operations Platform, enhance our technology, expand our personnel base and geographic reach, or otherwise offer growth opportunities. Any such acquisitions or investments may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable opportunities, whether or not the transactions are completed, and may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties or incur significant costs assimilating or integrating the businesses, technologies, products, personnel, or operations of any acquired companies, particularly if the key personnel of an acquired company choose not to work for us, their software is not easily adapted to work with our solution, or we have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise. Any such transactions that we are to complete may not result in the synergies or other benefits we expect to , which could result in substantial charges, or may impact our financial condition or results of operations, which could affect the price of our Class A common stock. These transactions could also result in dilutive issuances of equity securities or the incurrence of debt, which could affect our business, financial position, results of operations, costs, and financial flexibility.
Litigation could have a material adverse impact on our results of operations and financial condition.
From time to time, we have been subject to litigation, including the matters disclosed elsewhere in the Risk Factors section. The outcome of any litigation, regardless of its merits, is inherently uncertain. Regardless of the merits of any claims that may be brought against us, pending or future litigation could result in a diversion of management’s attention and resources, and we may be required to incur significant expenses defending against these claims. If we are unable to prevail in litigation, we could incur substantial liabilities. Where we have applicable insurance, it might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such , and might not continue to be available on terms acceptable to us (including premium increases or the imposition of large deductible or co-insurance requirements), or at all. Where we can make a reasonable estimate of the liability relating to pending and determine that it is probable, we record a related liability. As additional information becomes available, we assess the potential liability and revise estimates as appropriate. However, because of uncertainties relating to , the amount of our estimates could be . Any determination related to , or even the of or potential of liability, could require us to change our technology or our business practices, pay monetary , or enter into royalty or licensing arrangements, which could materially affect our results of operations and cash flows, our reputation, or otherwise impact our business.
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We may be adversely affected by natural disasters and other catastrophic events, and by man-made problems such as terrorism, or geopolitical unrest, that could disrupt our business and adversely affect results of operations, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Natural disasters or other catastrophic events may also cause damage or disruption to our operations, international commerce, and the global economy, and could have an adverse effect on our business, financial condition, and results of operations. For example, as a result of the COVID-19 pandemic and subsequent economic conditions, we experienced an increase in the average length of sales cycles to customers, delays in new projects and purchasing decisions, and requests by some customers for contract renegotiations or extensions of payment obligations. In addition, the COVID-19 pandemic disrupted the operations of certain of our customers and technology partners, including as a result of supply chain constraints or uncertainty in the financial markets. More generally, the COVID-19 pandemic adversely affected global economies and financial markets, leading to an economic downturn, which adversely affected demand for technology solutions, led to some of our customers initiating or completing proceedings, and affected our ability to collect payments from our customers and could our business and results of operations. All of these developments affected our business and results of operations, and other natural , events, acts of terrorism, armed , geopolitical , and other events could lead to effects on our business similar to what we experienced as a result of COVID-19.
In the event of a natural disaster, including a major earthquake, blizzard, flood, or hurricane, or a catastrophic event such as a fire, power loss, or telecommunications failure, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in development of our solution, lengthy interruptions in service, security breaches or incidents, and loss of critical data, all of which could have an adverse effect on our future results of operations. Climate change may increase the frequency, intensity and unpredictability of these natural disasters and extreme weather events and their associated impacts. Our main corporate offices are located in California, a state that frequently experiences earthquakes and fires. Additionally, any natural , power , connectivity issue, or other event could affect the ability of our remote employees to work, or affect the third parties our operations rely upon, such as cloud service providers, data center operators, and telecommunications networks. All the aforementioned risks may be further increased if we do not implement an adequate recovery plan or our partners’ recovery plans prove to be .
