A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Our business faces significant risks. You should carefully consider all of the information set forth in this annual report and in our other filings with the Securities and Exchange Commission (“the SEC”), including the following risk factors which we face, and which are faced by our industry. The risks and uncertainties described below are not the only ones facing us. Other events, circumstances or factors that we do not currently anticipate or that we currently do not deem to be material risks may also affect our business, results of operations and financial condition. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks.
Risks Relating to Our Business, Competition and Markets
The markets in which we operate are highly competitive and we may be unable to compete successfully.
The markets for our products, solutions and related services (also referred to elsewhere in this annual report as our “offerings”) are, in general, highly competitive. Our competitors include a number of large, established software development vendors. Some of our principal competitors or potential competitors may have advantages over us, including greater resources, a broader portfolio of products, applications and services, greater brand recognition, larger patent and intellectual property portfolios and access to a larger customer base. These potential advantages could enable our competitors to better adapt to new market trends, emerging technologies including Artificial Intelligence ("AI") and machine learning technologies (collectively, "AI Technologies"), or customer requirements, or devote more resources to the marketing and sale of their products and services.
Additional competition from existing and new potential entrants to our markets, including new technology vendors competing in specific areas of our business or specific industry verticals, may lead to the widespread availability and standardization of some of the products and services we provide, which could result in the commoditization of our products and services and reduce the demand for our products and services. In addition, AI Technologies vendors may train models on data derived from our inputs, outputs, or product behavior, potentially enabling unauthorized replication or approximation of our technologies or system functionality. Despite confidentiality and internal information control requirements, third party AI systems may analyze observable outputs or other external indicators and generate competing features or capabilities that could adversely affect our business.
Additionally, prices of our offerings may decrease throughout the market due to competitive pressures, including adoption of different approaches to pricing or different pricing models, which may be necessary due to the potential commoditization of our products and services, the potential of AI Technologies to introduce new pricing models in the market, which may be disruptive, or alternatively during times of economic difficulty. This could have a negative effect on our gross profit and results of operations.
In recent years, players in adjacent markets have increased their presence in our markets through internal development, partnerships and acquisitions. Infrastructure and/or enterprise software vendors, such as large technology providers, major cloud hyperscalers, large-language-model ("LLM") providers, providers of autonomous "Agentic AI" solutions, providers of AI-agent capabilities for use by human agents, Conversational-AI vendors, Customer Relationship Management (“CRM”) vendors, IT service management vendors as well as Unified Communications as a Service (“UCaaS”), video collaboration providers, Platform as a Service (“PaaS”) vendors, and pure digital vendors, have entered or may decide in the future to enter our market space, or build or acquire contact center as a Service (“CCaaS”) solutions and compete with us by offering comprehensive solutions and/or platforms. Moreover, as the investment in, and the shift to the use of AI Technologies (including generative AI Technologies) continue to grow, we may experience increased competition by vertical solutions’ players expanding their portfolios in the digital customer experience ("CX") market. We may also experience increased competition if large horizontal analytics providers and domain specific competitors in adjacent markets enter or
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increase their presence in the Financial Crime and Compliance markets. Some of these vendors may be well recognized by broadly known brand names, which can serve as an advantage as they enter or increase their presence in our market space. If we are not able to compete effectively with these market entrants or other competitors, we may lose market share, and our business, financial condition or results of operations could be adversely affected.
In light of the intense competition in our markets, successful development, positioning and sales execution of our offerings, and maintaining our customer relationships, are critical factors in our ability to successfully compete and maintain growth. Therefore, we must continue making significant expenditures on research and development, marketing, and sales activities to compete effectively. Successful marketing of our offerings to our customers and partners will be critical to our ability to maintain growth and our competitive positioning. We cannot assure that our offerings or existing partnerships will allow us to compete successfully.
In addition, our software solutions may compete with software developed internally by potential customers, as well as software and other solutions offered by competitors. We cannot ensure that market awareness or demand for our new products, applications or services will grow as rapidly as we expect, or that the introduction of new products or technological developments or services by others will not adversely impact the demand for our offerings.
The market for some of our solutions is highly fragmented and includes a broad range of product offerings, features and capabilities. Consolidation through mergers and acquisitions, or alliances formed, among our competitors in this market, could substantially influence our competitive position, especially if they will enable our competitors to offer a competitive comprehensive platform solution.
As we expand into new markets and geographies, we are faced with new challenges, including new competition, which may possess specific assets, relationships, know-how, technologies, and/or different pricing strategies, that enable our competitors to better respond to market trends or customer requirements or devote greater resources to the development, promotion and sale of their products and services.
Our inability to respond to or address the outcome of rapid technological changes and frequent new products, services and business models introductions in the markets in which we operate may have a material adverse effect on our results of operations and competitive position.
We operate in rapidly evolving markets characterized by fast-changing technology, frequent introduction of new offerings, and evolving industry standards, as well as persistent demand for state-of-the-art solutions. Existing and potential competitors might introduce new and enhanced products and services that could adversely affect the competitive position of our offerings.
We are making investments in AI based capabilities to enhance our offerings and expect that increased investment will continue in the future to continuously improve our use of AI Technologies. AI Technologies are rapidly evolving and may present several risks, including factual errors or inaccuracies in the work product developed with AI (often referred to as hallucinations), ethical risks related to biases in the algorithm or programming, privacy and security concerns as well as risks related to confidentiality and intellectual property rights. In particular, if the AI models underlying our AI Technologies are: incorrectly designed or implemented; trained or reliant on incomplete, inadequate, inaccurate, biased or otherwise poor quality data, or on data to which we do not have sufficient rights or in relation to which we and/or the providers of such data have not implemented sufficient legal compliance measures; used without sufficient oversight and governance to ensure their responsible use; and/or adversely impacted by unforeseen defects, technical challenges, cybersecurity threats or material performance issues, the performance of our products, services and business, as well as our reputation and the reputations of our customers, could suffer, or we could incur liability resulting from the violation of laws or contracts to which we are a party or civil claims.
We believe that our ability to anticipate changes in technology and industry standards and to successfully develop and introduce new, enhanced and differentiated products and services, on a timely basis, in each of the markets in which we operate, is a critical factor in our ability to grow our business. As a result, we expect to continue to make significant expenditures on research and development, particularly with respect to new software applications which are continuously required in all our business areas, as well as investments in AI Technologies. There is no certainty that such investments will result in products and services that successfully address the changes in the markets in which we operate. In the event that we do not anticipate changes in technology or industry practices or fail to timely address market needs or are not able to develop new products and services that are in demand, or should customer adoption of new technologies be slower than we anticipate, or should our competitors introduce new and enhanced products incorporating AI Technologies more rapidly and/or
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successfully than us, the competitive position of our offerings may be adversely affected and we may lose market share and our results of operations may be materially adversely affected. Our ability to develop or implement proprietary AI models may be limited by our access to processing infrastructure, and we may be dependent on third-party providers for such resources. Additionally, market acceptance of AI-based products and services may accelerate certain trends in the markets in which we operate. For example, a shift from seat-based recurring revenue to consumption-based revenue, or decrease in demand for solutions priced based on the number of human agents deployed. If we are not able to successfully address the effect of such AI-related trends on our business models, our business, financial condition and results of operation may be adversely affected.
In addition, some of our offerings must readily integrate with customers' (or their applicable vendors’) systems of record and data sources, consumer facing front-office applications and back-office business operations systems. Any changes to these third-party systems could require us to redesign our products or result in the loss of access to data necessary for our products, and any such redesign or other adjustments required to address these changes might not be possible on a timely basis or achieve market acceptance.
We may not be able to maintain and further expand the growth or profitability of our cloud-based SaaS business.
Our cloud-based Software-as-a-Service (“SaaS”, also referred to as “cloud”) business, in both our Customer Engagement and Financial Crime and Compliance markets, has grown significantly, and therefore we are more dependent now on the success of this area of our business. If we are not able to compete effectively, generate significant revenues or maintain the profitability of our cloud business or if we do not successfully execute our cloud strategy or anticipate the needs of our customers, including in relation to the pace of adoption of cloud solutions as well as AI-based cloud offerings by large enterprises, our revenues could decline and our reputation may be adversely affected.
Our cloud offerings are generally purchased by customers on a subscription basis, including those that include consumption-based pricing. We plan to continue to promote consumption and utilization pricing models for our cloud offerings and, accordingly, expect that our revenues will increasingly rely on consumption and utilization of our solutions. Our failure to secure subscription renewals for our solutions, or a reduction in the number or volume of subscriptions or consumption and utilization of our solutions, may adversely impact our revenues, profitability and results of operations.
We rely on cloud computing platforms provided by third parties, including PaaS provided by strategic partners, such as Amazon and Microsoft. These cloud computing platforms may not continue to provide competitive pricing, features and functionality, or may not be available on commercially reasonable terms. We may be affected by such changes, including with respect to pricing of certain infrastructure services, such as in the area of PaaS and network connectivity, which could in turn affect the rates we offer to our customers.
In addition, some of our customers may not accept the use of such services or particular platform. The inability to use any of these hardware, software or cloud computing platforms could have a material adverse impact on our business, increase our expenses and otherwise result in delays in providing our services until equivalent technology is either developed by us, or obtained through purchase or license and integrated into our services. In addition, to the extent that we suffer periods of unavailability of our service for reasons related to PaaS providers, we may be contractually obligated to provide our customers with credits for future services, and in some cases refunds, or be liable for penalties. Any such extended service outages could harm our reputation, revenue and operating results.
Some of our products and solutions utilize cloud services based on AI Technologies. Due to growing market demand for AI-based offerings, computing capacity for these offerings may become difficult to access or to obtain on commercially reasonable terms. Our inability to secure the required capacity for AI processing could limit our ability to deliver our solutions and constrain the growth in our AI-based offerings. Furthermore, even if accessible, the costs associated with running certain AI Technologies, including inference and compute costs, are significant and volatile. If we are unable to optimize these costs or successfully pass them on to our customers through our pricing models, our gross margins and overall cloud profitability may be negatively impacted.
As we grow our cloud business, we will continue to depend on both existing and new strategic relationships with such vendors. Our inability to establish and foster these relationships could adversely affect the development of our cloud business, as well as our growth, reputation and results of operations.
Further, cloud computing may make it easier for new competitors to enter our markets due to the lower up-front technology costs and easier implementation and for existing market participants to compete with us on a greater scale. Such
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increased competition is likely to heighten the pressure on us to decrease our pricing, which could have a negative effect on our revenues, profitability and results of operations.
We may not be able to compensate for loss of on-premises business with the continued shift to cloud-based offerings.
The increasing prevalence of SaaS delivery models offered by us and our competitors may unfavorably impact pricing and overall demand for our on-premises software products and related services, which could reduce our revenues and profitability. With the continued shift to cloud-based offerings, we cannot guarantee that revenues generated from our cloud business will compensate for a loss of business in our on-premises enterprise software business.
We may not be able to successfully execute our growth strategy.
Our strategy is to continue investing in, enhancing and securing our business and operations and to grow our business, both organically and through acquisitions. Investments in, among other things, new markets, products, solutions, and technologies, research and development, infrastructure and systems, geographic expansion, and additional qualified and experienced personnel, are critical to achieving our growth strategy. Growth of our revenue depends on the success of all these factors, including our ability to maintain and grow our customer base and the revenues from existing and new customers, develop our strategic partnerships, introduce our offerings to new global markets, strengthen and improve our offerings through significant investments in research and development and successfully consummate and integrate acquisitions.
Our success depends on our ability to execute our growth strategy effectively and efficiently in order to meet our customers' and market needs. We cannot guarantee that we will be able to sustain our growth in future years. If we are unable to execute our growth strategy successfully and properly manage our investments and expenditures, our results of operations may be materially adversely affected.
Customers’ move to communication channels other than voice channel could materially and adversely affect the success of our voice solutions.
Our voice solutions currently generate, and in recent years have generated, a significant portion of our revenues, and we will continue to rely on the sales of our voice solutions and related recurring revenues, such as subscription and maintenance services, in the next several years. The trend of enterprise customers moving from voice communications to other means of communication with the enterprise (such as autonomous AI agents, self-service, e-mail, messaging applications, social media and chat) may result in a reduction in the demand for our voice platform and applications. There can be no assurance that customers will adopt our solution for other or alternative communication channels that are offered as part of our product portfolio and that the growth in our digital and customer automation solutions will compensate for such possible decline in demand for our voice solutions. Therefore, a significant decline in the voice solutions market may have a material adverse effect on revenues generated from our voice solutions, which may have a material adverse effect on our business, financial condition or results of operations.
Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments. In particular, we may not succeed in making additional acquisitions or be effective in integrating such acquisitions.
As part of our growth strategy, we made a number of acquisitions over the last several years, including a significant acquisition of Cognigy GmbH ("Cognigy"), a provider of conversational and Agentic AI, in 2025 (see Item 5, “Operating and Financial Review and Prospects - Recent Acquisitions” in this annual report for a description of certain recent acquisitions), and expect to continue to complete acquisitions and investments in the future. As we continue to evaluate strategic opportunities, there can be no assurance that we will be successful in closing additional acquisitions. Even if we are successful in making additional acquisitions, integrating an acquired business into our operations or investing in new technologies may: (1) result in unforeseen operating difficulties and large expenditures; and (2) absorb significant management attention that would otherwise be available for the ongoing development of our business, both of which may result in the loss of key customers or personnel and expose us to unanticipated liabilities.
Other risks commonly encountered with respect to acquisitions include the effect of acquisitions on our financial and strategic position, the inability to integrate successfully or commercialize acquired technologies and achieve expected synergies or economies of scale on a timely basis and the potential impairment of acquired assets. Further, we may not be able to retain the key employees that may be necessary to operate the businesses we acquire and we may not be able to attract, in a timely manner, new skilled employees and management to replace them.
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In recent years, several of our competitors have also completed acquisitions of companies in our markets or in complementary markets. As a result, it may be more difficult for us to identify suitable acquisitions or investment targets or to consummate acquisitions or investments once identified on acceptable terms or at all. If we are not able to execute on our acquisition strategy, we may not be able to achieve our growth strategy, may lose market share, or may lose our leadership position in one or more of our markets.
We often compete with others to acquire companies, and such competition may result in decreased availability of, or an increase in price for, suitable acquisition candidates. We also may not be able to consummate acquisitions or investments that we have identified as crucial to the implementation of our strategy for other commercial or economic reasons. Further, we may not be able to obtain the necessary regulatory approvals, including those of competition authorities and foreign investment authorities, in countries where we seek to consummate acquisitions or make investments. For those and other reasons, we may ultimately fail to consummate an acquisition, even if we announce the intended acquisition. Also, even if we do consummate acquisitions, we may do so on less favorable terms and/or may be subject to certain conditions or commitments imposed by such authorities and agencies that may impact post-acquisition integration or have an adverse effect on our business.
We may require significant financing to complete an acquisition or investment, whether through bank loans, raising of debt or otherwise. We cannot assure that such financing options will be available to us or available on terms we find reasonable.
In addition, if we consummate one or more significant acquisitions in which the consideration consists, in whole or in part, of our ordinary shares or American Depositary Shares (“ADSs”) representing our ordinary shares, our shareholders may suffer immediate or other dilution of their interests in us or earnings per share, or may suffer future dilution if we issue exchangeable or convertible debt to finance a significant acquisition. For example, during 2025, we completed an acquisition in which the consideration also included the issuance of ADSs, resulting in immaterial dilution of our shares.
Future acquisitions or investments may also require us to incur contingent liabilities, amortization expenses related to intangible assets and impairment of goodwill, any of which could have a material adverse effect on our operating results and financial condition.
If we are unable to develop or maintain our relationships with existing and new distributors and strategic partners, our business and financial results could be materially adversely affected.
An important element of our market strategy involves developing our indirect sales, implementation and support channels, which include our global network of partners, distributors, resellers and other strategic partners. We have agreements in place with many distributors, dealers and resellers to market and sell our offerings across the business lines and geographies in which we operate. Our financial results could be materially adversely affected if our agreements with distribution channel partners or our other strategic partners were terminated, if our relationship with our distribution channel partners or our other strategic partners were to deteriorate, or if the financial condition of such partners were to weaken.
In addition, we depend on our channel partners globally to comply with applicable regulatory requirements, such as anti-corruption and anti-bribery laws and regulations. Despite our contractual arrangement with such partners, that require them to comply with applicable laws, we cannot guarantee that our partners will not violate applicable law or our policies and procedures designed to ensure compliance with applicable law. To the extent that they fail to do so, that could expose us to criminal or civil enforcement actions and could have a material adverse effect on our business, operating results, and financial condition.
The execution of our growth strategy also depends on our ability to create new alliances and enter into strategic partnerships with certain market players, including technology providers. Additionally, as our market opportunities change and we grow our business and expand in certain markets and territories, our dependency on particular distribution channels and strategic partners may increase or we may need to create new strategic partnerships and alliances to address changing market needs. We may not be successful in maintaining, creating or expanding these channels and partnerships, which may negatively impact the development of our business, our growth, gross margins and results of operations.
We may also develop dependency on certain strategic partners, and to the extent that we have to find alternatives in the market, our development efforts and business may be negatively impacted. Also, these partnerships and alliances are typically not exclusive and our partners may also offer products and services of our competitors or may compete with us directly. If we are not successful at creating and maintaining strategic partnerships under favorable terms, we may lose sales opportunities, customers and market share, which may have a material adverse effect on our business and results of operations.
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Risks Relating to Our Offerings and Operations
Some of our enhanced services are dependent on leased network connectivity lines, and a significant disruption or change in these services could adversely affect our business.
A portion of our cloud offerings is provided to customers through a dedicated network of equipment we own that is connected through leased network connectivity lines based on Internet protocol with capacity dedicated to us. We also deliver a portion of our voice long distance service over this dedicated network.
We lease network connectivity lines and space at co-location facilities for our equipment from third-party suppliers. These co-location facilities represent the backbone of our dedicated network. If any of these suppliers is unable or unwilling to provide or, if we desire, expand their current levels of service to us, the services we offer to customers may be adversely affected. We may not be able to obtain substitute services from other providers at reasonable or comparable prices or in a timely fashion. Any resulting disruptions in the services we offer that are provided over our dedicated network would likely result in customer dissatisfaction and adversely affect our operations. Furthermore, pricing increases by any of the suppliers we rely on for our dedicated network could adversely affect our results of operations if we are unable to pass-through such pricing increases.
We rely on multiple internet service providers to provide our customers and their clients with connectivity to our cloud contact center software. A failure by these service providers to provide reliable services could cause us to lose customers and subject us to claims for credits or damages.
We depend on internet service providers to provide uninterrupted and error-free service through their telecommunications networks. We exercise little control over these third-party providers, which increases our vulnerability to problems arising from the services they provide, including failures relating to internet accessibility in general. When problems occur, it may be difficult to identify the source of the problem, and there is no assurance that the multiple redundancies and backup we have will prevent such problems. Service disruption or outages, even if not caused by our products or services, may damage our reputation or result in loss of market acceptance of our offerings, and any necessary remedial actions may force us to incur significant costs and expenses, such as payments of credits, penalties or damages to affected customers.
We rely on third-party network service providers to originate and terminate public switched telephone network calls, and significant failures in these networks could harm our operations.
For our business in the unified communications market, we leverage the infrastructure of third-party network service providers to provide telephone numbers, public switched telephone network call termination and origination services, and local number portability for our customers rather than deploying our own network. If any of these network service providers ceases operations or otherwise terminate the services that we depend on, the delay in switching our technology to another network service provider, if available, could have an adverse effect on our business, financial condition or operating results.
We rely on software, components and technology infrastructure provided by third parties. If we lose the right to use that software or infrastructure, we will have to spend additional capital to redesign our existing software to adhere to new third-party providers or develop new software.
We integrate and utilize various third-party software products, such as LLMs or other AI Technologies as components of, or integration with our products and solutions, to enhance their functionality. The LLMs and other infrastructure components require significant computing resources, which may be limited or not available on terms acceptable to us. In addition, we rely on technology infrastructure from third parties, such as cloud services and cloud providers through which we deliver our offerings, including, in some cases, deployment through a single cloud provider. Furthermore, reliance on AI Technologies licensed from third parties subjects us to operational risks, including potential deprecation of specific model versions by vendors, which could impact the continuity of our downstream applications.
Our business could be disrupted if functional versions of these software products, components or technology infrastructure were either no longer available to us or no longer made available to us on commercially reasonable terms. In the event that any of these third-party vendors, including third-party vendors from which we license AI Technologies, suffers any malfunctions in the implementation of their services, service disruptions or outages, disruptions related to implementing security systems, security measures or authorization and access control mechanisms, or other disruptions resulting from sharing such vendor's resources with other third parties, or is unable to meet our requirements in a timely manner or in a
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manner that meets our needs or our relationship with any such vendor is terminated, we may experience disruption in our business until an alternative source of supply can be obtained. Any disruption or any other interruption in a vendor’s ability to provide software (including AI Technologies), components, technology infrastructure or services to us could result in interruptions to our services and delivery of our solutions, delays or inability in making product deliveries or the need to significantly redesign our products, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, price increases by any of our third-party vendors could adversely affect our results of operations if we are unable to pass-through such price increases.
Additionally, certain of the data that we use in developing our AI Technologies is licensed from third parties, and we are dependent upon our ability to obtain necessary data licenses within appropriate time frames and on commercially reasonable terms, and such third parties’ assurances that such data was obtained and provided to us lawfully. Our data suppliers may withhold their data from us in certain circumstances or we could terminate relationships with our data suppliers if they fail to adhere to our data quality, vendor or other standards. If a substantial number of data suppliers were to withdraw or withhold their data from us, or if we sever ties with our data suppliers based on their inability to meet our standards, our ability to provide products and services to our customers and our revenue prospects could be materially adversely impacted.
Undetected errors or malfunctions in our products or services could impact demand for our products and services, and we could face potential product liability claims directly impairing our financial results.
Our products and services may include undetected errors, inaccuracies, defects, failures, bugs or other weaknesses that could result in service disruption or unanticipated downtime for our customers, loss of data, product returns, loss of or delay in market acceptance of our products and services, loss of competitive position, or claims by customers or others.
In addition, the increasing implementation of AI Technologies in our products and services creates potential ethical issues, inaccurate content or results, unintentional bias, privacy and cybersecurity related challenges, potential breach of third-party intellectual property rights and potential difficulty in asserting ownership rights in our intellectual property rights when the development of such products and services is assisted by the use of AI tools. The realization of any of these or other AI related risks may result in potential legal, business, operations, reputational or financial harm.
Moreover, our customers could incorrectly implement or misuse our products or services, which could result in client dissatisfaction and harm our reputation and brand. Correcting and repairing such errors, inaccuracies, failures, misleading content or bugs, or investing in mitigation activities to address risks derived from the use of AI, such as those related to privacy, cybersecurity or intellectual property, could entail significant costs and could cause interruptions, delays or cessation of our products and services.
As our customers use our offerings for important aspects of their business, any errors, defects, disruptions in service or other performance problems could significantly damage our customers’ businesses and ultimately harm our reputation. As a result, customers could elect not to renew our services or delay or withhold payment to us. We could also lose future sales or customers may make warranty or other liability claims against us, which may harm our business and adversely affect our results. In particular, some of our customers, including financial institutions, may suffer significant damages as a result of a failure of our solutions to perform their functions. The occurrence of any of these events could result in our inability to attract or retain customers, and adversely affect our revenues, financial condition and results of operations.
We cannot guarantee that our quality assurance programs or other procedures will be effective in detecting, preventing or addressing errors, inaccuracies, malfunctions or other AI related risks in our products and solutions or that we will be able to eliminate or successfully limit our liability for any failure of, or inaccuracies in, our solutions, including with respect to responsible use of products and services incorporating AI Technologies. Any product liability insurance we carry may not be sufficient to cover our losses resulting from any such product liability claims. The successful assertion of one or more large product liability claims against us could have a material adverse effect on our results of operations and financial condition.
We provide certain service level commitments to our customers, which could cause us to provide credits for future services if the stated service levels are not met for a given period and could adversely impact our revenue.
Our customer agreements for cloud services provide service level commitments. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our service, including for reasons related to PaaS providers or other third parties, we may be contractually obligated to provide these customers with credits for future services,
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and in some cases refunds, or be liable for penalties. Our revenue could be adversely impacted if we suffer unscheduled downtime that exceeds the allowed downtimes under our agreements with our customers. Any such extended service outages could harm our reputation, revenue and operating results.
Challenges in designing or implementing our new ERP system could negatively impact our business and operations.
We went live with the core financials portion of our new enterprise resource planning system (“ERP”) during the first quarter of 2025. The implementation of an ERP system is a complex and time-consuming project and requires transformations of business and finance processes to reap the benefits of the ERP system. While the new ERP system is intended to maintain accurate financial records, improve operational functionality, and provide timely information to our management regarding our business operations, we cannot ensure the implementation of the new ERP system will be seamless as any such transformation involves inherent risks, including loss of information and potential disruption to normal operations. Additionally, if the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess those controls adequately could be delayed. The scope and time line for any subsequent phases is still to be determined.
Risks Relating to Information and Product Security and Intellectual Property
Our IT Systems and those of our third-party providers, such as hosting facilities, cloud computing platforms, service partners or other technology infrastructure providers as well as customers’ data, our business data, and our reputation are vulnerable to ongoing cybersecurity risks and threats that could result in material impact to our business, including legal and financial exposure and liabilities.
We rely on computer systems, hardware, software, technology infrastructure and online sites and networks for both internal and external operations that are critical to our business (collectively, “IT Systems”). We own and manage certain IT Systems but also rely on third parties for IT Systems and related services, such as cloud computing and SaaS solutions. Our products and services involve the storage and transmission of customers’ and their end users’ proprietary and other sensitive or confidential information, including financial information and other personally identifiable information. In addition, some of our customers use our products and services to compile and analyze highly sensitive or confidential information, and we may encounter or store such information or data, including when we perform service or maintenance functions for our customers. We also maintain propriety information about our business such as source code. Our IT Systems and information are vulnerable to security incidents and we cannot guarantee that the security measures we have in place or those used by our third-party providers will prove sufficient in preventing or detecting the occurrence of a security incident. Security incidents threaten the availability, integrity and confidentiality of our IT Systems and our or our customers' and their end users' information, and could result in significant investigations and enforcement actions, litigation and other liabilities that materially impacts our operations, financial results and/or reputation.
We are regularly subject to cyberattacks and from time to time have experienced, and expect to continue to experience attacks and security incidents in varying degrees in the future. For example, we regularly experience phishing attacks and have experienced unauthorized access to information in the past. These attacks and incidents to date have not materially impacted our business, financial results or reputation, but there is no guarantee that material incidents will not occur in the future. The sources of security incidents are diverse and include fraud or breaches by computer hackers, employee error, malfeasance, intentional misconduct, unauthorized access to, or use of, our systems, products and services, our customers’ and their end users' data or our data, including our intellectual property and other confidential business information, in order to derive a financial benefit or for other purposes. In addition, the perception or fact that the internal security policies and procedures which we have in place did not prove effective in safeguarding customers' confidential information, or that any of our employees has improperly handled sensitive information of a customer or a customer’s end user, could negatively affect our business.
Cybersecurity attacks are becoming increasingly sophisticated, including by way of frequent changes in the techniques and tools used by threat actors, such as advanced malware (e.g., ransomware), social engineering/phishing and AI, to obtain unauthorized access to IT Systems, circumvent controls, evade detection and even remove forensic evidence. This makes incident detection and recovery increasingly challenging. If we fail to recognize and deal with such security attacks and threats, or if we fail to update our systems, products and services and address such threatened attacks in real time to protect our customers’ or other parties’ sensitive information, whether retained in our IT Systems or by our customers using our products and services, our business and reputation will be harmed. The costs of recognizing and addressing security attacks and threats and updating our systems, products and services, may be material. In addition, we track known vulnerabilities in software that is used in our IT Systems but cannot guarantee that patches or countermeasures will be implemented before they can be
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exploited by a threat actor. We have acquired and are likely to continue to acquire companies with security vulnerabilities or unsophisticated security measures, which exposes us to significant integration and related risks.
Our offerings, including our cloud services, are vulnerable to cybersecurity attacks, even if they do not contain defects. Such vulnerability and risk further increase with our use of products and services incorporating AI Technologies, including to circumvent controls, avoid detection, and remove or obfuscate forensic evidence. These attacks on one of our products or services, even absent a defect or error, may result in significant concerns regarding the integrity of our offerings generally, which could cause adverse publicity and impair their market acceptance and could have a material adverse effect on our results or financial condition.
Third parties regularly attempt to attack our security measures or inappropriately take advantage of our solutions, including our cloud services, through computer viruses, electronic break-ins and other disruptions. Such attempts also include fraudulently inducing employees or customers into disclosing sensitive information such as usernames, passwords or other information to gain access to our customers’ data, our data or our systems. Furthermore, certain customers authorize third-party technology providers to access their customer data, and some of our customers and/or their providers may not have adequate security measures in place to protect their data that is stored on our services. Because we do not control our customers or third-party technology providers, or the access methods or processing of such data by third-party technology providers, we cannot ensure the integrity or security of such access, transmissions or processing. Malicious third parties may also conduct attacks designed to temporarily deny customers access to our services. Any security incident could result in a loss of confidence in the security of our services, damage our reputation, negatively impact our future sales, disrupt our business and lead to legal liability. In addition, any circumvention or failure of our cybersecurity measures could compromise the confidentiality, integrity, and availability of our customers’ own IT Systems and/or our customers’ information.
We could be subject to risks of losses resulting from cybersecurity attacks that might be beyond the limits, or outside the scope of coverage of the insurance policies maintained by us, which may limit or prevent indemnification available to us under our insurance policies. This potential insufficiency of insurance coverage could result in an adverse effect on our business, financial position, profit, and cash flows.
Interruptions or delays in our services through security incidents, failures, or disruptions could disrupt our ability to deliver services, harm our reputation and our relationships with customers and partners, and thereby subject us to material operational impact and liability.
Significant interruptions or delays to our services, whether as a result of error or security incidents, and whether accidental or willful, could harm our reputation and our relationships with customers and partners, subject us to liability, and adversely affect our business and results of operations. In the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur.
We currently serve our customers using third-party data center hosting facilities and cloud computing platform providers. While we have security measures in place that are based on applicable industry standards, they are vulnerable to breach due to third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise, and result in someone obtaining unauthorized access to our or our third-party vendors’ systems and infrastructure. Moreover, such facilities and platforms are vulnerable to interruptions resulting from power or network connectivity issues, criminal acts and other misconduct, including security incidents and computer viruses. Occurrence of such damage or interruptions could result in disruptions in our services. Despite precautions such vendors are required to take, the occurrence of such damage or interruption or other unanticipated problems at these facilities, could result in lengthy interruptions in our services, subject us to liability and require the issuance of credits or payment of penalties pursuant to our customer agreements, and/or cause customers to terminate their subscriptions and adversely affect our attrition rates and our ability to attract new customers, all of which would reduce our revenues. Also, we are not entitled to indemnification in all cases and situations and may not be able to recoup any such loss or damage from such service providers, which may result in us bearing the burden of any such liability or losses.
In addition, we are also dependent on our computer databases, billing systems and accounting computer programs, network and computer hardware that houses these systems to effectively operate our business and market our services. Our customers may become dissatisfied by any failures of such systems that interrupt our ability to deliver our services. Therefore, significant disruption or failure in the operation of these systems could adversely affect our business and results of operations.
Furthermore, we provide some of our services through computer hardware that we own and that is currently located in third-party web hosting co-location facilities and data centers maintained and operated in various locations globally. Our hosting providers do not guarantee that our customers’ access to our solutions will be uninterrupted, error-free or secure. Our
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operations depend on our providers’ ability to protect their and our systems in their facilities against such damage or interruption. Our back-up computer hardware and systems may not have sufficient capacity to recover all data and services in the event of an outage occurring simultaneously at all facilities. In the event that our hosting arrangements are terminated, or there is a lapse of service or accidental or willful damage to such facilities, we could experience lengthy interruptions in our service as well as delays and/or additional expense in arranging new facilities and services. Any or all of these events could cause interruptions in our services.
We may face risks relating to inadequate intellectual property protection of our products or solutions and liability resulting from infringement by our products or solutions of third-party proprietary rights.
Our success is dependent, to a significant extent, upon our proprietary technology. We currently hold 598 U.S. patents and 30 patents issued in additional countries covering substantially the same technology as the U.S. patents. We have 228 patent applications pending in the United States and other countries. We rely on a combination of patent, trade secret, copyright and trademark law, together with non-disclosure and non-competition agreements, as well as third-party licenses to establish and protect the technology used in our offerings. However, we cannot assure that such measures will be adequate to protect our proprietary technology, that competitors will not develop products with features based upon, or otherwise similar to our products, that intellectual property ownership and third-party licenses, including with respect to copyrights ownership of content that is produced in whole or in part by generative AI tools, will be available to us or that we will prevail in any proceeding instituted by us in order to enjoin competitors from selling similar products. In most of the areas in which we operate, third parties also have patents which could be found applicable to our technology and products. Such third parties may include competitors, as well as large companies, which heavily invest in their patent portfolios, regardless of their actual field of business. Regarding development of AI Technologies, other parties may have (or in the future may obtain) patents or other proprietary rights that would prevent, limit, or interfere with our ability to make, use, or sell our own AI Technologies. AI Technologies have sometimes generated content that is “substantially similar” to proprietary or open source materials on which the AI tool was trained. If the AI Technologies we use to generate materials such as code is too similar to other proprietary materials, or to software processes that are protected by patent, and we incorporate such materials in our business operations or offerings, we could be subject to intellectual property infringement claims based on how we use and distribute such materials. We cannot assure that one or more third parties will not make a claim related to infringement of intellectual property rights or that we will be successful in defending such claim. In defending ourselves against any such claims or actions we may be subject to substantial costs and diversion of management resources. While some providers of AI Technologies offer to indemnify their end users for any copyright or other intellectual property infringement claims arising from the output of their AI Technologies, such indemnification may not apply to the manner in which we generated or used such output, and we may not be successful in adequately recovering our losses in connection with such claims.
We generally distribute our software products and services under license terms that restrict the use of our products and services by terms and conditions prohibiting unauthorized reproduction or transfer of the software products or proprietary technology or data. However, effective copyrights and other intellectual property rights protection may be inadequate or unavailable to us in every country in which our software products are available, the laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and the assertion of our ownership rights in materials and inventions created with the assistance of AI tools is uncertain. Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require costly efforts to protect our technology. Policing the unauthorized use of our products, trademarks and other proprietary rights is expensive, difficult and, in some cases, impossible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of management resources, either of which could harm our business. Accordingly, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. If we fail to obtain protection for such intellectual property rights, or later have our intellectual property rights invalidated or otherwise diminished, third parties or our competitors may be able to take advantage of our research and development efforts to develop competing products, which could adversely affect our business, reputation and financial condition.
In addition, to the extent we are not successful in defending such claims, we may be subject to injunctions with respect to the use or sale of certain of our products or to liabilities for damages and may be required to obtain royalty bearing licenses which may not be available on reasonable terms. Any of these may have a material adverse impact on our business or financial condition.
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We face risks relating to our use of certain “open source” software and AI Technologies.
Certain of our software products contain open-source code, and we may use additional open-source code in the future. In addition, certain third-party software and AI technologies that we embed in our products and services may include open-source software and/or Open-Weights AI Models, meaning AI models whose trained parameters (weights) are made publicly available under applicable licenses. These licenses generally permit use, modification, and distribution, subject to compliance with applicable terms and conditions, which may impose certain obligations on us or our customers. Open-source software and Open-Weights AI Models are typically provided on an “as is” basis, without warranties, and the licensors generally do not provide indemnification, support, maintenance, or remedies for defects, security vulnerabilities, or other issues. As a result, the use of such software or models may increase our exposure to operational disruptions, security risks, regulatory or contractual non-compliance, and potential legal liability.
As a result of our use of open source materials, we could be subject to suits by parties claiming ownership of what we believe to be open source materials, and we may incur expenses in defending claims that we did not abide by the open source license. In addition, third-party licensors do not provide intellectual property protection with respect to the open source components of their products, and therefore we may not be indemnified by such third-party licensors in the event that we or our customers are held liable in respect of the open source software contained in such third-party software. If we are not successful in defending against any such claims that may arise, we may be subject to injunctions and/or monetary damages or be required to remove the open source materials from our products. Such events could disrupt our operations and the sales of our offerings, which would negatively impact our revenues and cash flow.
Moreover, under certain conditions, the use of open source materials to create derivative code may obligate us to make the resulting derivative code available to others at no cost. The circumstances under which our use of open source materials would compel us to offer derivative code at no cost are subject to varying interpretations. If we are required to publicly disclose the source code for such derivative products or to license our derivative products that use an open source license, our previously proprietary software products may be available to others without charge. If this happens, our customers and our competitors may have access to our products without cost to them, which could harm our business.
We monitor our use of such open source code to avoid subjecting our products to conditions we do not intend, however there is no assurance that the use of such open source code may not ultimately subject some of our products to unintended conditions and that we may be required to take remedial action that may divert resources away from our development efforts.
Risks Relating to Regulatory Environment
Privacy, data protection and cybersecurity legislation and other regulations may limit the use and adoption of our offerings, adversely affect our business, increase compliance costs and expose us to increased liability.
Governments and other international organizations in various jurisdictions around the world (such as the legislative and regulatory institutions of the European Union) have enacted and are continuing to adopt new laws, regulations and guidelines addressing data privacy and security, including the processing of personal information, cybersecurity, breach notification, risk management and reporting, as well as requirements related to security risk management and digital operational resilience. These laws, regulations and guidelines may be inconsistent across jurisdictions and are subject to evolving and differing (sometimes conflicting) interpretations. In some cases, different sets of data privacy laws and regulations, such as the European Union’s General Data Protection Regulation (“GDPR”), local laws and regulations including certain U.S. state laws on privacy and data protection, such as the California Consumer Privacy Act (“CCPA”), as amended by the California Privacy Rights Act ("CPRA"), as well as the Israeli Privacy Protection Law and the regulations promulgated thereunder (the “Israeli Privacy Law”), govern our collection, use, retention, security, disclosure, transfer and processing of personal information. Additionally, new state privacy laws in the U.S. may also apply. Certain privacy laws extend rights to consumers, which may apply additional compliance requirements to challenges to our use of AI Technologies. These and other regulatory requirements may slow the pace at which we close sales or procurement transactions and in some cases may restrict our ability to store, transfer and process data or impact our ability to offer some of our solutions and services for use in relation to data subjects that reside in certain locations or our customers’ ability to deploy our solutions globally. Compliance with these regulatory requirements may be onerous, time consuming and expensive, especially where these requirements are
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inconsistent from jurisdiction to jurisdiction or where the jurisdictional reach of certain requirements is not clearly defined or seeks to reach across national borders. Failure to comply with laws, regulations and guidelines addressing data privacy and security in the jurisdictions in which we operate, may expose us to administrative fines, civil claims and, in certain cases, criminal liability.
Should we, or any party on our behalf, fail to comply with privacy or cybersecurity legislation or other required or agreed security measures, we may incur substantive civil liability to government agencies, customers, shareholders and individuals who may have been impacted. As privacy and cybersecurity legislation is increasing globally, and more government agencies are granted with authority to fine organizations for non-compliance with applicable laws and regulations, and require companies to take certain steps to remediate such non-compliance, we may find ourselves forced to pay damages penalties, fines, remediation costs, reimbursement of customer costs and other significant expenses due to our (or our subcontractors' or vendors’) non-compliance with data privacy or cybersecurity laws and regulations. Moreover, even the perception that the privacy of personal information that we process or control is not adequately protected or does not meet regulatory requirements could damage our reputation, inhibit sales of our products or services and could limit adoption of our offerings.
In addition to legal and regulatory requirements, we are contractually obligated to certain customers, and may in the future be expected by prospective customers, to meet certain information security certifications or customer unique requirements. Such certifications or requirements may include requirements related to system resilience and performance such as the Digital Operational Resilience Act in the EU, territory-specific requirements imposed on banks and other financial institutions by local regulatory authorities, or network and information systems requirements, such as the Network and Information Security Directive 2 or other standards established by third parties, such as the ISO 27001:2022 on information security management certification. These certifications are often required by customers and regulators and are critical to our ability to compete in certain markets and secure new business. Achieving and maintaining these certifications requires significant resources. If we are unable to obtain or maintain these certifications or meet these standards or requirements, it could harm our reputation and business and subject us to liability.
Industry-specific regulation and other requirements and standards are evolving and unfavorable industry-specific laws, regulations, interpretive positions or standards could harm our business.
Our customers and potential customers conduct business in a variety of industries, including financial, insurance, telecommunications and healthcare services. We also serve customers in the public safety and other government entities. In certain industries in which we operate, there may be regulations or guidelines for use of SaaS, hosting and cloud-based services that mandate specific controls or require enterprises to obtain certain approvals prior to outsourcing certain functions. Regulators in certain industries have adopted and may in the future adopt regulations or interpretive positions regarding the use of cloud computing and other outsourced services. These regulations, such as regulations with respect to digital operational resilience, data sovereignty or residency requirements, may apply to various entities and providers to which we deliver our offerings. The costs of compliance with, and other burdens imposed by, industry-specific laws, regulations and interpretive positions may limit our customers’ use and adoption of our services and reduce overall demand for our services.
Compliance with these regulations may also require us to devote greater resources to support certain customers, which may increase costs and lengthen sales cycles. For example, some financial services regulators have imposed guidelines for use of cloud computing services that mandate specific controls or require financial services enterprises to obtain regulatory approval prior to outsourcing certain functions. Other examples may include sector-specific customers’ requirements, such as making available sovereign cloud platforms. If we are unable to adjust our products and solutions to facilitate compliance with these guidelines or controls, or if our customers are unable to obtain regulatory approval to use our services where required, our business may be harmed. If in the future we are unable to achieve or maintain industry specific certifications or other requirements or standards relevant to our customers, it may harm our business and adversely affect our results.
Our revenues would be adversely affected if we fail to adapt our offerings to changes in rules and regulations applicable to the business of certain customers, such as rules and regulations regarding securities trading, broker sales compliance and anti-money laundering, which could have an impact on their need for our products and services.
In addition, due to a variety of regulations that apply to certain of our customers, we may be limited in our ability to transfer or outsource business to certain jurisdictions and may be limited in our ability to undertake development activity in certain jurisdictions, which may impede our efficiency and adversely affect our business and results of operations.
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Failure to comply with legal and regulatory requirements, including those relating to AI, could materially and adversely affect our business, results of operations and financial condition.
Our business, results of operations and financial condition could be materially and adversely affected if we failed to comply with laws, regulations, contracts or standards relating to our business, products and services, our operations or our employees (including labor laws and regulations) or if they are changed or new ones are implemented. Such implemented laws and regulations include requirements in the United States, the EU, the U.K., Israel and other territories in which we operate, and may relate to data privacy and protection, AI, cybersecurity, consumer protection, anti-bribery and anti-corruption, foreign investment, import and export, sanctions, labor, tax, environmental and social issues. For information on the market risks relating to data privacy and protection and cybersecurity, please see Item 3, "Key Information - Risk Factors - Risks Relating to Regulatory Environment" in this annual report.
As a company with global operations we are also subject to applicable economic sanctions laws and export control laws, imposed by the countries in which we do business, that are subject to continuous change, and we may be prohibited from directly or indirectly engaging in transactions with individuals and entities or in countries and territories that are the target of sanctions. We may also be required to obtain licenses to export, reexport, or transfer certain products, services, or technology (which may be time-consuming and may not be granted on a timely basis or at all).
In November 2025, Israel's Ministry of Defense signed an order to revoke the 1974 Encryption Order, with the repeal officially taking effect in March 2026 and transferring control over the export of encryption and/or decryption items, including various items that include encryption capabilities, to the control frameworks under the defense and civilian dual-use equipment orders. To comply with such evolving regulation we may need to apply for or revise certain licenses and adjust our compliance processes, which could increase our compliance costs and affect the transactions cycles.
A failure to comply with applicable export control regulations or economic sanctions laws could result in fines, civil and criminal sanctions against us or our employees, prohibitions on the conduct of our business, and damage to our reputation, which could have an adverse effect on our business, financial condition, and results of operations.
Certain states and countries have already taken steps towards, proposed, or implemented, laws and regulations relating to AI. Such new proposed laws, regulations, regulatory guidance and executive orders in the EU, the United States, and other jurisdictions impose, and may continue to impose, additional obligations relating to the development, deployment, and use of AI Technologies. Additionally, existing laws and regulations may be interpreted in ways that would affect the operation of our AI Technologies, or could be rescinded or amended as new administrations take differing approaches to evolving AI Technologies. As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet completely determine the impact future laws, regulations, standards, or market perception of their requirements may have on our business and may not always be able to anticipate how to respond to these laws or regulations.
Already, certain existing legal regimes (e.g., relating to data privacy) regulate certain aspects of AI Technologies, and new laws regulating AI Technologies have either entered into force in the United States and the EU, or are expected to enter into force in the future. U.S. legislation related to AI Technologies has also been introduced at the federal level and has passed at the state level. For example, California enacted several laws and regulations, such as the California AI Transparency Act, that further regulate use of AI Technologies and provide consumers with additional protections around companies’ use of AI Technologies, including by imposing transparency obligations. Other states have also passed AI-focused legislation, such as Colorado’s Artificial Intelligence Act, which will require developers and deployers of “high-risk” AI systems to implement certain safeguards against algorithmic discrimination, Utah’s Artificial Intelligence Policy Act, which establishes disclosure requirements and accountability measures for the use of generative AI in certain consumer interactions, and Texas’ Responsible AI Governance Act, which prohibits specified harmful uses of AI, including behavioral manipulation and unlawful discrimination. Such additional regulations, and uncertainty around their enforceability, may impact our ability to develop, use, procure and commercialize AI Technologies in the future. However, the manner in which these laws are subsequently enforced is still uncertain and may be rescinded. In the United States in December 2025, the Trump administration issued the “Ensuring a National Policy Framework for Artificial Intelligence” Executive Order (the “AI National Framework EO”). This executive order calls for federal standards and legislation that would preempt conflicting state AI regulations and create a federal litigation task force focused on challenging state AI laws in court. The Trump administration may continue to rescind other existing federal orders and/or administrative policies relating to AI Technologies, or may implement new executive orders and/or other rule making relating to AI Technologies in the future. Any such changes at the federal level could require us to expend significant resources to modify our products, services, or operations to ensure compliance or remain competitive.
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In Europe, on August 1, 2024, the EU Artificial Intelligence Act (the “EU AI Act”) entered into force, and establishes a comprehensive, risk-based governance framework for AI in the EU market. Once gradually applicable through August 2026, the EU AI Act will have a material impact on the way AI is regulated in the EU, including depending on the risk level of each AI system, requirements around AI literacy, transparency, conformity assessments and monitoring, human oversight, security, and accuracy. The fines for non-compliance with the EU AI Act are significant. In addition, the revised EU Product Liability Directive came into force in December 2024, to be implemented into EU member state national law by December 2026. This Directive extends the EU’s existing strict product liability regime to AI Technologies and AI-enabled products, and facilitates civil claims in respect of harm caused by AI. Once fully applicable, the EU AI Act and the EU Product Liability Directive will have a material impact on the way AI is regulated in the EU. Further, in Europe, the GDPR regulates the use of personal data, including, for automated decision making, that results in a legal or similarly significant effect on a data subject, and provides rights to data subjects, including in respect of automated decision making. Any new regulations or further guidance of authorities with respect to privacy and AI regulations may require adjustments in our use or commercialization of our products, additional compliance measures and changes to our operations and processes, may result in increased compliance costs, and could adversely affect our business, operations and financial condition.
We expect that the legal and regulatory environment relating to AI Technologies will continue to develop and may also include regulatory developments in intellectual property, privacy, consumer protection, employment, and other laws regarding the use of AI Technologies. As the regulatory landscape continues to evolve, our investment in products and services incorporating AI Technologies and our procurement of AI-based tools for the internal operations of our business may be subject to enhanced governmental or regulatory scrutiny. Compliance with such regulatory requirements, as well as with related requirements by our customers, may be onerous, time consuming and expensive and may require adjustments in our products and services or in the implementation of AI Technologies as well as in the operations of our business in the various territories in which we operate, and may increase the risk of non-compliance.
We cannot assure that we will be successful in our efforts to comply with applicable laws and regulations or in addressing new or changed requirements and standards, including with respect to laws and regulations relating to AI or privacy, that such changes will not negatively affect the demand for our products and services, or that our competitors will not be more successful or prepared than us. The cost to comply with such laws, regulations, or decisions and/or guidance interpreting existing laws, or to adjust our business plans based on changes to how such laws are enforced, could be significant and may increase our operating expenses (such as by imposing additional reporting obligations regarding our use of AI Technologies). Any failure to comply with such requirements may result in civil or criminal liability imposed upon us or our employees, reputation or financial harm and may affect our business, financial condition or results of operations.
Alternatively, any substantial changes resulting in a reduction in the implementation or elimination of rules and regulations that apply to a certain sector of our business, such as deregulation in the area of compliance or other regulatory trends that may reduce demand by governmental customers, could result in a decrease in demand for certain of our products, which could materially and adversely affect our business and results of operations.
In addition, recent developments present new litigation risks resulting from claims alleging violations of privacy, wiretapping, and alleged breaches of data protection laws in the development and deployment of AI Technologies. For example, a recent trend in the U.S. has emerged in which class action lawsuits target consumer-facing companies that use generative AI Technologies to provide analytics on customer service calls and there is no guarantee that such class action lawsuits will not also target providers. These risks can also affect the demand for our offerings, our results of operations may be affected, and we could face potential legal claims which could result in monetary damages, liability, government investigation, lawsuits, and reputational harm.
Risks Relating to Our Financial Condition
Our quarterly results may be volatile at times, which could cause us to miss our forecasts.
We generally provide forecasts as to expected future revenues and profitability in the coming fiscal quarters and fiscal year. Our revenue and operating results can vary and have varied in the past, sometimes substantially, from one quarter to another. These forecasts are based on management estimation and expectations, our then-existing pipeline and backlog, and an analysis of assumptions and assessments that may not materialize or end up being inaccurate. We may not meet our expectations or those of industry analysts in a particular future quarter. Our quarterly operating results may be subject to significant fluctuations, due to the following factors, among others: the timing and size of customer orders, delays in issuance or shifting of customer orders (as often happens when customers postpone their buying decisions to the end of the budgetary year), large customer losses or reduction in usage, variations in distribution channels or pricing models, mix of products and
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services, delays in deployment of our offerings due to internal or external capacity constraints with deployment partners or customers, new product introductions and competitive pressures.
Our cloud offering is generally purchased by customers on a subscription basis and revenues from these offerings are generally recognized ratably over the term of the subscriptions. In cases where our offerings are purchased on a usage-based model, there may be seasonality in the usage of our offering, including macroeconomic factors that may impact customer usage of our solutions, or short-term declines in revenues resulting from transitioning from legacy pricing models to usage based pricing models, which would impact our ability to predict and forecast revenues and result in fluctuations in our quarterly results. Therefore, any fluctuations in our cloud business or other offerings could adversely affect our results of operations and our ability to forecast our quarterly results.
Our revenue and operating profit growth depends on the continued growth of demand for our products and services, and our business is affected by general economic, business, and geopolitical conditions worldwide, including inflation and rising interest rates. A softening of demand, whether caused by changes in customer preferences or a weakening of the U.S. or global economies, or by increasing shift to consumption-based pricing models, which may increase our exposure to macro-economic factors, may result in decreased revenue or growth.
In addition, we derive a substantial portion of our sales through indirect channels, making it more difficult for us to predict revenues because we depend partially on estimates of future sales provided by third parties. Changes in our arrangements with our network of channel partners or in the products they offer, such as the introduction of new support programs for our customers, which combines support from our channel partners with back-end support from us, could affect the timing and volume of orders. Furthermore, our expense levels are based, in part, on our expectations as to future revenues. If our revenue levels are below expectations, our operating results could be adversely affected.
Fluctuations in our results of operations may result from, among other things, our ability to retain and increase sales to existing customers, attract new customers and satisfy our customers’ requirements, the timing and success of new product and solution introductions and enhancements or product initiation by our competitors, the purchasing and budgeting cycles of our customers and general economic, industry and market conditions.
While seasonality and other factors mentioned above are common in the software and technology industry, this pattern should not be considered a reliable indicator of our future revenue or financial performance. Many other factors, including general economic conditions, may also have an impact on our business and financial results.
In addition, changes in non-core business factors including taxes and foreign exchange rates may also cause variation in quarterly results.
We face foreign exchange currency risks.
Exchange rate fluctuations affect our operations. We experience risks from fluctuations in the value of the NIS, EUR, GBP, INR, PHP and other currencies compared to the U.S. dollar, the functional currency in our financial statements. A significant portion of the expenses associated with our Israeli, Indian and Philippines operations, including personnel and facilities related expenses, are incurred in NIS, INR, EUR, and PHP, respectively, whereas most of our business and revenues are generated in dollars, and to a certain extent, in GBP, EUR and other currencies. If the value of the dollar decreases against these foreign currencies, our earnings may be negatively affected. As a result, we may experience an increase in the costs of our operations, as expressed in dollars, which could adversely affect our earnings. In addition, certain balance sheet items are denominated in currencies other than U.S. dollar. Fluctuations in the value of the U.S. dollar exchange rate compared to these currencies, can result in unfavorable balance sheet revaluation at the reporting period.
We monitor foreign currency exposure and may use various instruments to preserve the value of sales transactions, expenses and commitments, however this cannot ensure our full protection against risks of currency fluctuations that could affect our financial results. As part of our efforts to mitigate these risks, we use foreign currency hedging mechanisms, which may be ineffective in protecting us against adverse currency fluctuations and can also limit opportunities to profit from exchange rate fluctuations that would otherwise be favorable. For information on the market risks relating to foreign exchange, please see Item 11, “Quantitative and Qualitative Disclosures about Market Risk” in this annual report.
We currently benefit from local government programs as well as international programs and local tax benefits that may be discontinued or reduced, or may result in liabilities if underlying conditions are not met.
We derive and expect to continue to derive benefits from various programs, including Israeli tax benefits relating to our "Special Preferred Technology Enterprise" and “Preferred Technology Enterprise” programs, and certain other grants and
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tax benefits, including grants from the Israel Innovation Authority (formerly known as the Office of the Chief Scientist of the Ministry of Economy) of the State of Israel (the “IIA”), for research and development.
To be eligible for tax benefits as a Special Preferred Technology Enterprise as of 2025 and Preferred Technology Enterprise, we must continue to meet certain conditions. While we believe that we have met and continue to meet the conditions that entitled us to previously obtained Israeli tax benefits, there can be no assurance that we will in the future or that the Israeli Tax Authorities will agree.
To be eligible for IIA-related grants and benefits, we must continue to meet certain conditions, including providing the IIA with an undertaking that the know-how to be funded, and any derivatives thereof, is wholly-owned by us, upon its creation. In addition, we are prohibited from transferring to third parties the know-how developed with these grants without the prior approval of an IIA research committee, which approval may be conditioned upon payment(s) to the IIA. See Item 4, “Information on the Company—Research and Development” in this annual report, for additional information about IIA programs.
If the local and international grants, programs and benefits available to us or the laws, rules and regulations under which they were granted are eliminated or their scope is further reduced, or if we fail to meet the conditions of existing grants, programs or benefits and are required to refund grants or tax benefits already received (together with interest and penalties and in certain circumstances may lead to criminal charges) or fail to meet the criteria for future Israeli Special Preferred Technology Enterprise and Preferred Technology Enterprises, our business, financial condition and results of operations could be adversely affected.
Additional tax liabilities resulting from our global operations could materially adversely affect our results of operations and financial condition.
As a global corporation, we are subject to income, non-income and transactional tax regimes in the United States, Israel, India and various other jurisdictions, which are unsettled and may be subject to significant change. Our effective tax rate could be materially affected by changes in tax rulings, tax laws, regulations, administrative practices, principles, applicability of special tax regimes, or changes in interpretations of existing tax laws, including changes to the global tax framework, in the jurisdictions in which we do business. Such changes could come about as a result of economic, political, and other conditions. Additionally, our effective tax rate could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuations of our deferred tax assets and liabilities, tax implications of acquisitions, expansion into new territories, intercompany transactions, changes in foreign currency exchange rates, changes in our stock price and uncertain tax positions. Although we believe that our provision for income taxes and our tax estimates are reasonable, tax authorities may disagree with certain positions we have taken. From time to time, we are subject to income and other tax audits in various jurisdictions, the timing of which is unpredictable. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our tax accruals. While we believe we comply with applicable tax laws and have adequate balance sheet reserves related to tax positions, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess us with additional taxes, which we may dispute and litigate. If we are assessed additional taxes exceeding our tax accruals or if additional taxes are imposed on us, such additional taxes could have a material adverse effect on our results of operations and financial condition.
The Organization for Economic Co-operation and Development (“OECD”), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%. In December 2022, the EU member states adopted a directive that complements the Pillar Two framework. Certain countries in which we operate have enacted legislation to adopt the Pillar Two framework (e.g., United Kingdom), and several other countries are also considering changes to their tax laws to implement this framework. Tax and compliance costs are expected to be increased by the adoption of the Pillar Two framework in these countries. In response to concerns raised by the United States, the OECD recently finalized a “side-by-side” approach, under which certain U.S.- parented multinational enterprises may be exempt from certain Pillar Two rules. It is not entirely clear how this side-by-side agreement will be implemented by each participating jurisdiction. As a result, Pillar Two remains under negotiation and continues to evolve. When and how this framework is adopted or enacted by the various countries in which we do business could increase tax complexity and uncertainty and may adversely affect our provision for income taxes in the United States and other non-U.S. jurisdictions.
In line with the above-mentioned global developments in international taxation, the state of Israel has recently enacted the Law for the Taxation of Multinational Enterprise Groups – 2025, entered into force as of January 1, 2026 and is aimed at implementing key aspects of the OECD’s Pillar Two framework. In particular, the new legislation introduces a
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domestic minimum top-up tax (Qualified Domestic Minimum Top-Up Tax – QDMTT) generally applicable to Israeli entities that are part of multinational enterprise groups with consolidated annual revenues of at least EUR 750 million, with the objective of ensuring a minimum effective tax rate of 15% on profits attributable to activities in Israel and preventing the allocation of taxing rights to foreign jurisdictions under the Income Inclusion Rule or the Undertaxed Profits Rule.
The Israeli Ministry of Finance has recently published draft legislation as part of the 2026 Economic Plan, proposing a revised incentive regime for research and development activities in Israel, structured primarily as refundable or credit-based tax incentives designed to qualify under the OECD’s “qualified” incentive criteria in a Pillar Two environment.
We might recognize a loss with respect to our financial investments.
We invest most of our cash through a variety of financial investments. If the obligor of any of our financial investments defaults or undergoes reorganization in bankruptcy, we may lose a portion of such investment and our assets and income may decrease. In addition, a downturn in the credit markets or the downgrading of the credit rating of our investments could result in a reduction in the market value of our holdings and reduce the liquidity of our investments, which could require us to recognize a loss at the time of credit impairment and would adversely affect our assets and income.
Restrictions in the agreements governing our indebtedness could adversely affect our financial condition and impact our business needs and plans.
On February 18, 2026, we and NICE Systems, Inc. (“NICE Systems”) entered into a secured Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”), which provides for a senior secured revolving facility in an aggregate amount of $300 million USD.
The Credit Agreement imposes, and the terms of any future debt may also impose, operating and other restrictions on us. Such restrictions, in certain circumstances, limit or prohibit, among other things, our and our subsidiaries' ability to:
•incur or guarantee additional debt;
•pay dividends on our ordinary shares or redeem, repurchase or retire our equity interests or subordinated debt;
•transfer or sell our assets:
•make certain payments, investments or acquisitions;
•make capital expenditures;
•create certain liens on assets;
•create restrictions on the ability of our subsidiaries to pay dividends or make other payments to us;
•engage in certain transactions with our affiliates; and
•merge or consolidate with other companies.
The Credit Agreement also includes a requirement that we maintain a Total Net Leverage Ratio (as defined below) that does not exceed 3.00 to 1.00, but after any acquisition or series of related acquisitions consummated within a six-month period by any loan party with aggregate consideration of at least $250 million, we shall have the option to increase the maximum Total Net Leverage Ratio for each of the four consecutive fiscal quarters ending thereafter (commencing with the fiscal quarter during which such acquisition is consummated) by 0.50:1.00.
In addition, if we were to anticipate non-compliance with the Total Net Leverage Ratio, we may take actions to maintain compliance with them. These actions may include reductions in our general and administrative expenses or capital expenditures, which could have an adverse effect on our business, financial condition, and results of operations. We cannot assure that our business will continue to generate sufficient cash flow from operations or that future financing will be available
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to us in an amount sufficient to enable us to service our debt, or to fund our other liquidity needs or execute on our strategic plans.
If any event of default occurs under the Credit Agreement, the lenders under the Credit Agreement could elect to terminate their commitments or cease making further loans and accelerate the outstanding loans.
For additional information relating to the Credit Agreement, see Item 10, "Additional Information - Material Contracts - Credit Agreement" in this annual report.
If we fail to maintain effective internal control over financial reporting and operations, it could have a material adverse effect on our business, operating results, and the price of our ordinary shares and ADSs.
Effective internal controls are necessary for us to provide reliable financial reports and prepare consolidated financial statements for external reporting purposes in accordance with U.S. GAAP and U.S. securities laws, as well as to effectively prevent material fraud. Because of inherent limitations, even effective internal control over financial reporting may not prevent or detect every misstatement. In addition, if we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting and operations. Furthermore, as we grow our business or acquire businesses, our internal controls may become more complex and we may require significantly more resources to ensure they remain effective. In addition, we may identify material weaknesses or significant deficiencies in our internal control over financial reporting. Failure to maintain effective internal control over financial reporting and operations could result in investigation or sanctions by regulatory authorities and could have a material adverse effect on our business and operating results, investor confidence in our reported financial information, and the market price of our ordinary shares and ADSs.
Current and future accounting pronouncements and other financial reporting standards and principles might have a significant impact on our financial position and negatively impact our financial results.
We prepare our consolidated financial statements in accordance with U.S. GAAP. These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change in these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions. Additionally, the adoption of new or revised accounting principles may require that we make significant changes to our systems, processes and controls. Changes resulting from these new standards may result in materially different financial results and may require that we change how we process, analyze and report financial information and that we change financial reporting controls.
We regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards and changes in their interpretation, we might be required to change our accounting policies.
This could lead to risks associated with our ability to react in a timely manner to new accounting pronouncements and financial reporting standards and unpredictable changes in interpretation of standards. Any one or more of these events could have an adverse effect on our business, financial position, and profit. See Item 5, “Operating and Financial Review and Prospects - Recently Issued Accounting Pronouncements Not Yet Adopted” in this annual report for a description of certain recent accounting pronouncements.
Risks Relating to Our Securities
The market price of each of our ADSs and ordinary shares is volatile and may decline.
The market price of our ADSs and ordinary shares has fluctuated in the past and may continue to fluctuate or decline. Numerous factors, some of which are beyond our control, may cause the market price of our ADSs and ordinary shares to fluctuate significantly. These factors include, among other things:
•Quarterly variations in our operating results;
•Changes in expectations as to our future financial performance, including financial estimates by securities analysts;
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•Perceptions of our company held by analysts and investors;
•Additions or departures of key personnel;
•Announcements related to dividends and share repurchase plans;
•Development of or disputes concerning our intellectual property rights;
•Announcements of technological innovations;
•Material orders of our products or services by customers and business partners;
•New products and services by us or our competitors;
•Acquisitions or investments by us or by our competitors and partners;
•Security breaches or other incidents impacting our customers’ or their end users’ data and security breaches of companies that provide solutions or services similar to ours;
•Currency exchange rate fluctuations;
•Earnings releases by us, our partners or our competitors;
•General financial, economic and market conditions;
•Geopolitical risks, including those arising from political changes, international armed conflicts (including in Israel)
•Natural catastrophes or event beyond our control in the regions in which we operate;
•Market conditions in the industry and the general state of the securities markets, with particular emphasis on the technology and Israeli sectors of the securities markets; and
•General stock market volatility.
Our ADSs and ordinary shares are traded on different markets and this may result in price variations.
Our ADSs have been listed on The Nasdaq Stock Market since 1996 and our ordinary shares have been traded on the Tel Aviv Stock Exchange, or the “TASE,” since 1991. Trading in our securities on these markets takes place in different currencies (our ADSs are traded in U.S. dollars and our ordinary shares are traded in New Israeli Shekels), and at different times (resulting from different time zones and different public holidays in the United States and Israel). As a result, the trading prices of our securities on these two markets may differ due to these factors. In addition, any decrease in the price of our securities on one of these markets could cause a decrease in the trading price of our securities on the other market.
Substantial future sales or the perception of sales of our ADSs or ordinary shares could cause the price of our ADSs or ordinary shares to decline.
Sales of substantial amounts of our ADSs or ordinary shares in the public market, or the perception that these sales could occur, could adversely affect the price of our ADSs and ordinary shares and could impair our ability to raise capital through the sale of additional shares. Such sales may also make it more difficult for us to sell equity or equity-related securities in the future at a time and at a desirable price.
It may be difficult to enforce a U.S. judgment against us and our officers and directors in Israel or the United States, or to serve process on our officers and directors.
Service of process upon us, our Israeli subsidiaries, directors and officers, and Israeli advisors, if any, named in this annual report, may be difficult to obtain within the United States. Additionally, it may be difficult to enforce civil liabilities
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under U.S. federal securities law in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel is not the most appropriate forum to bring such a claim. In Israeli courts, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process and certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing these matters.
Provisions of Israeli law and the Company's articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.
Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, establishes a high ownership threshold to squeeze out minority shareholders in a full tender offer, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions.
In addition, the Company's articles of association provides that a merger of the Company shall require the approval of the holders of a majority of seventy five percent (75%) of the voting power represented at the General Meeting of the Company and voting in accordance with the provisions of the Israeli Companies Law.
Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.
See Item 10, “Additional Information—Mergers and Acquisitions” in this annual report, for additional discussion regarding anti-takeover effects of Israeli law.
General Risk Factors
Conditions and changes in the local and global economic environments may adversely affect demand for our products and services, our business and financial results.
Adverse economic conditions in markets or regions in which we operate can harm our business. Demand for our products and services, availability of infrastructure services or other products and services we rely on and our results of operations can be affected by adverse changes in local and global economic conditions, slowdowns, inflation, recessions, trade policies and restrictions, and international trade disputes, including tariffs and other protectionist measures, or unpredictable changes in tax and tariff regimes, and economic instability. To the extent that our business suffers as a result of such unfavorable economic and market conditions, our operating results may be materially adversely affected.
In particular, during times of economic slowdowns, enterprises may reduce spending in connection with their customer engagement or contact centers and financial institutions may reduce spending in relation to trading floors, compliance and operational risk management. Generally, our customers may prioritize other expenditures over our solutions, including a possible slowdown resulting from a shift or reduction in expenditures driven by AI and generative AI solutions' effect on the markets in which we operate. If any of the above occurs, and our customers or partners do not adopt our solutions or significantly reduce their spending, our business, results of operations, and financial condition could be materially adversely affected.
In addition, our operations may be subject to the effects of the rising rate of inflation. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
Some of our customers or partners may fail to comply with the terms of their agreements, including compliance with regulatory requirements and intellectual property terms, or may suffer from liquidity concerns and possibly commence insolvency or other reorganization procedures or go out of business due to disruption to the global economy or other business and market conditions, or may terminate their subscriptions for our solution which may result in delay or failure to make payments to us, all of which risks may be intensified by the effects of adverse economic conditions, including, slowdowns, inflation, recessions, trade policies and restrictions or unpredictable changes in tax and tariff regimes, and economic instability, and may adversely impact our business and results of operations.
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Disruption to the global economy could also result in a number of follow-on effects in addition to a slow-down in our business and increased costs, including a possible (i) negative impact on our liquidity, financial condition and share price, which may impact our ability to raise capital in the market, obtain financing and secure other sources of funding in the future on terms favorable to us, and (ii) decrease in the value of our assets that are deemed to be other than temporary, which may result in impairment losses (iii) instability of banking institutions with which we or our customers or partners engage.
We face risks relating to our global operations.
We sell our offerings throughout the world and intend to continue to increase our penetration of international markets. Our operations and results of operations could be adversely affected by a variety of global factors affecting international transactions, including:
•governmental controls and regulations, including import or export license requirements, trade protection measures, sanctions, telecommunication authorization and licenses and changes in tariffs;
•compliance with applicable international and local laws, regulations and practices, including those related to trade compliance, anti-corruption, data privacy and protection, AI, tax, labor, employee benefits, customs, currency restrictions and other requirements;
•fluctuations in currency exchange rates;
•longer payment cycles in certain countries in our geographic areas of operations;
•potential adverse tax consequences, variations in effective income tax rates and tax policies among countries where we conduct business, including the complexities of foreign value added tax systems;
•geopolitical risks, including those arising from political instability or tensions, armed conflicts, terrorism and security concerns, disruption and tensions resulting from restrictions related to the conflict between Russia and Ukraine, and armed conflicts in the Middle East, their intensity, duration and effect on demand for our products and services are difficult to predict;
•reduced or limited protection for intellectual property rights in some countries; and
•general difficulties in managing our global operations.
Changes in the political or economic environments, credit rating and the availability and cost of capital in the countries in which we operate, especially in Israel and the U.S., including the impact of such changes on foreign currency rates and interest rates, could have a material adverse effect on our financial condition, results of operations and cash flow.
As a result of our global presence, especially in emerging markets, we face increasing challenges that could adversely impact our results of operations, reputation and business.
In light of our global presence, especially in emerging markets such as those in Asia, Eastern Europe and Latin America, we face a number of challenges in certain jurisdictions that provide reduced legal protection, including poor protection of intellectual property, inadequate protection against crime (including bribery, corruption and fraud) and breaches of local laws or regulations, unstable governments and economies, governmental actions that may inhibit the flow of goods and currency, challenges relating to competition from companies that already have a local presence in such markets and difficulties in recruiting sufficient personnel with appropriate skills and experience.
Local business practices in jurisdictions in which we operate, and particularly in emerging markets, may be inconsistent with international regulatory requirements, such as anti-corruption and anti-bribery laws and regulations (including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act) to which we are subject. We cannot guarantee that our policies and procedures will be effective in ensuring compliance with these laws or that none of our employees, contractors, partners and agents, as well as those companies to which we outsource certain elements of our business operations, will not violate applicable law or our policies and procedures designed to ensure compliance with applicable law. Any such violation could have an adverse effect on our business and reputation and may expose us to criminal or civil enforcement actions, including penalties and fines.
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Furthermore, the increased presence of our global operations in emerging markets, including outsourcing of certain operations to service providers in such markets (such as India and the Philippines), could impact the control over our operations, as well as create dependency on such external service providers. This method of operation may impact our business and adversely affect our results of operations.
Our business, facilities or operations could be adversely affected by events outside of our control, such as natural disasters or health epidemics.
Natural disasters or other unexpected events that adversely affect the business climate in any of our markets could have a material adverse effect on our business, financial condition and results of operations. Our business operations may be subject to a disruption or failure of our systems or operations because of a natural disaster, such as a major earthquake, weather event, fire, power shortages, telecommunications failures, pandemics and epidemics, such as COVID-19, cybersecurity attack, terrorist attack or other catastrophic event or event beyond our control, which could cause delays in completing sales, providing services, or performing other critical functions. There is no assurance that our disaster recovery and business continuity plans will be effective in addressing any such event. Such events could make it difficult or impossible for us to manage our operations and deliver our products and services to our customers.
The occurrence of such events may adversely affect our operations, financial condition, and results of operations. The extent to which such events impact our business going forward will depend on factors such as the duration and scope of such events; governmental, business, and individuals' actions in response to such events; and the impact on economic activity, including the possibility of recession or financial market instability.
Our business could be negatively affected as a result of the actions of activist shareholders, and such activism could impact the trading value of our securities.
In recent years, U.S. and non-U.S. companies listed on U.S. exchanges have been faced with governance-related demands from activist shareholders, as well as unsolicited tender offers and proxy contests. Responding to these types of actions by activist shareholders could be costly and time-consuming and divert the attention of management and our employees. Such activities could interfere with our ability to execute our strategic plan. In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and our Board of Directors. Lawsuits, including derivative actions, against the Company, are also a means activist shareholders may use. For example, a shareholder of a negligible amount of shares has filed a request for discovery of documents against us in an Israeli court. While we believe such request has no merit, there is no assurance that we will be successful in having such request dismissed nor that it will not mature into a derivative action or other legal proceedings. The perceived uncertainties due to these potential actions of activist shareholders could also affect our reputation or the market price and volatility of our securities.
We depend on our ability to recruit and retain qualified personnel.
In order to compete, we must recruit and retain highly qualified personnel across our business, including executives and other key employees. Hiring and retaining highly qualified personnel, executives and key employees is critical to our business. Competition for highly qualified and experienced executives in our industry is intense. There is no guarantee that key management members will not leave the Company, or if they do, that we will be able to identify and hire qualified replacements, or that the transition of new personnel will not cause disruption in our business.
In addition, due to our growth, or as a result of regular recruitment, we are required to regularly hire and integrate new employees across all locations in which we operate, and may also require us to obtain work visas and comply with local immigration laws and policies. Recruiting and retaining qualified engineers and computer programmers (particularly with AI and machine learning backgrounds) to perform research and development and to commercialize our offerings, as well as qualified personnel to market and sell the offerings, are critical to our success.
There is competition to recruit and retain highly skilled employees in the technology industry due to market conditions and the continued workforce trend that values multiple company experiences over long tenures. As a result, we may be required to offer exclusive compensation packages in order to retain and recruit certain skilled employees and key employees with particular expertise.
In certain locations in which we have development centers, including low-cost countries such as India, the rate of attrition is typically higher than other locations and could have a negative impact on our ability to retain our employees in such centers, timely develop our products and solutions, and/or service our customers.
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Any inability to attract and retain highly qualified employees may have an adverse effect on our ability to develop new products, solutions and enhancements for our offerings and to successfully market such offerings, all of which would likely have a material adverse effect on our results of operations and financial position. Our success also depends, to a significant extent, upon the continued service of key management, sales, marketing and development employees and executives, the loss of any of whom could materially adversely affect our business, financial condition and results of operations.
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Item 4. Information on the Company