Freshworks (FRSH) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We have a history of losses, and we may not be able to achieve profitability or, if achieved, sustain profitability
2. 02We have experienced significant growth in recent periods and our recent growth rates may not be indicative of our future growth
3. 03We have a limited operating history at our current scale, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful
4. 04Our quarterly results have and may continue to fluctuate significantly and may not meet our expectations or those of investors or securities analysts
5. 05Sales efforts to large customers involve risks that may not be present or that are present to a lesser extent with respect to sales to smaller organizations
6. 06If we are unable to attract new customers, convert customers using our trial versions into paying customers, and expand usage of our products within or across organizations, our revenue growth would be harmed
7. 07Our ability to attract new customers and increase revenue from existing customers depends on our ability to develop new features, integrations, capabilities, and enhancements, and to partner with third parties to design complementary products
8. 08Our business depends substantially on our customers renewing their subscriptions and purchasing additional subscriptions from us. Any decline in our customer retention would harm our future operating results
9. 09We use generative artificial intelligence, including in certain of our products and services, which may result in operational challenges, legal liability and reputational concerns that could adversely affect our business and results of operations
10. 10We operate in a highly competitive industry, and competition presents an ongoing threat to the success of our business
11. 11We track certain key business metrics, which are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and materially adversely affect our stock price, business, results of operations, and financial condition
12. 12We believe our long-term value as a company will be greater if we focus on growth, which may negatively impact our profitability
13. 13We recognize revenue from subscriptions over the term of our customer contracts. Consequently, downturns or upturns in new sales may not be immediately reflected in our operating results and may be difficult to discern
14. 14Failure to effectively develop and expand our direct sales capabilities would harm our ability to expand usage of our products within our customer base and achieve broader market acceptance of our products
15. 15If we are unable to develop and maintain successful relationships with channel partners, our business, operating results, and financial condition could be adversely affected
16. 16The failure to attract and retain additional qualified personnel could harm our business and prevent us from executing our business strategy and growth plans, and the steps we took recently to realign our workforce to our focused priorities may not have the expected benefits or may exacerbate these difficulties
17. 17loss of key personnel may cause disruptions in, and harm to, our operations and have an adverse effect on our ability to grow our business and our results of operations and financial condition
18. 18Remote work has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations
19. 19In addition to experiencing a security incident, third parties may gather, collect, or infer Sensitive Information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position
20. 20If we fail to manage our technical operations infrastructure, or experience service outages, interruptions, or delays in the deployment of our products, our results of operations may be harmed
21. 21If we are unable to ensure that our products interoperate with a variety of software applications that are developed by others, including our integration partners, we may become less competitive and our business, results of operations, and financial condition may be harmed
22. 22We rely on traditional web search engines to direct traffic to our website. If our website fails to rank prominently in unpaid search results, traffic to our website could decline and our business would be adversely affected
23. 23We rely on third parties maintaining open digital marketplaces to distribute our mobile applications for our Freshservice, Freshdesk, Freshchat, Freshcaller, and Freshsales products. If such third parties interfere with the distribution of our mobile applications, our business would be adversely affected
24. 24Real or perceived errors, failures, vulnerabilities, or bugs in our products would harm our business, results of operations, and financial condition
25. 25If we experience excessive fraudulent activity, we could incur substantial costs and lose the right to accept credit cards for payment, which could cause our customer base to decline significantly
26. 26We face exposure to foreign currency exchange rate fluctuations
27. 27We derive, and expect to continue to derive, substantially all of our revenue from a limited number of products
28. 28Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our ability to expand our base of customers may be impaired, and our business and results of operations will be harmed
29. 29If we fail to offer high-quality customer support, our business and reputation will suffer

Risks Related to International Operations

1. 30Our international operations and sales to customers outside the United States expose us to risks inherent in international operations and sales
2. 31We are subject to anti-corruption, anti-bribery, and similar laws, and our failure to comply with these laws could subject us to criminal penalties or significant fines and harm our business and reputation
3. 32A substantial portion of our business and operations are located in India, and we are subject to regulatory, economic, social, and policy uncertainties in India. Non-compliance with and changes in such laws may adversely affect our business, results of operations, and financial condition
4. 33We are subject to various export control, import, and trade and economic sanction laws and regulations that could impair our ability to compete in international markets and subject us to liability for noncompliance
5. 34Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our products and could harm our business
6. 35Restrictive changes to immigration laws may hamper our growth
7. 36Government regulation on e-commerce and foreign investment, including investment in e-commerce in India, is evolving, and unfavorable changes to, or failure by us to comply with, these evolving regulations could adversely affect our business, financial condition, and results of operations

Risks Related to Intellectual Property

1. 37We may become subject to intellectual property rights claims and other litigation that are expensive to support, and if resolved adversely, could have a material adverse effect on us
2. 38If we are unable to protect our intellectual property rights both in the United States and abroad, the value of our brand and other intangible assets may be diminished, and our business may be adversely affected
3. 39Our failure to obtain or maintain the right to use certain of our intellectual property would negatively affect our business
4. 40A portion of the technologies we use in our products and mobile applications incorporates “open source” software, and we may incorporate open source software in our products and mobile applications in the future

Risks Related to Tax Matters

1. 41Our business, results of operations, and financial condition may be harmed if we are required to collect sales or other related taxes for subscriptions to our products in jurisdictions where we have not historically done so
2. 42Our ability to utilize our net operating loss carryforwards and certain other tax attributes to offset taxable income or taxes may be limited
3. 43Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations
4. 44Our international operations may subject us to potential adverse tax consequences
5. 45Changes in the taxation system in India could adversely affect our business
6. 46Our ability to receive dividends and other payouts from our Indian subsidiary is subject to Indian legal restrictions and withholding tax

Risks Related to Ownership of Our Class A Common Stock

1. 47Additional stock issuances could result in significant dilution to our stockholders
2. 48We may not realize the anticipated long-term stockholder value of our stock repurchase program, and any failure to repurchase our common stock after we have announced our intention to do so may negatively impact our stock price
3. 49The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment
4. 50Sales of a substantial number of shares of our Class A common stock in the public market, or the perception that these sales might occur, could depress the market price of our Class A common stock
5. 51Our Class A common stock market price and trading volume could decline if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business
6. 52We incur and will continue to incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, which may harm our business

General Risks

1. 53If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected
2. 54Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States
3. 55A failure to maintain an effective system of disclosure controls and internal control over financial reporting, could adversely affect our ability to produce timely and accurate financial statements or comply with applicable regulations
4. 56We are currently planning and designing information systems enhancements, and problems with the design or implementation of these enhancements could interfere with our business and operations
5. 57We have in the past and may in the future engage in merger and acquisition activities, which require significant management attention, and could disrupt our business, dilute stockholder value, and adversely affect our business, results of operations, and financial condition
6. 58Increased government scrutiny of the technology industry could negatively affect our business
7. 59We may need additional capital, and we cannot be sure that additional financing will be available
8. 60We do not intend to pay dividends for the foreseeable future
9. 61may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering
10. 62Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management or hinder efforts to acquire a controlling interest in us, and the market price of our Class A common stock may be lower as a result
11. 63Catastrophic events, including climate change, natural disasters and other events beyond our control, may disrupt our business
12. 64Failure to effectively and efficiently address ESG matters could adversely impact us