Zscaler (ZS) risk factors, FY2024 10-K

Risks Related to Our Growth

1. 01We have a history of annual net losses and may not be able to achieve or sustain profitability in the future
2. 02If organizations do not adopt our cloud platform, our ability to grow our business and operating results may be adversely affected
3. 03If we are unable to attract new customers, our future results of operations could be harmed
4. 04If our customers do not renew their subscriptions for our services and add additional users and services to their subscriptions, our future results of operations could be harmed
5. 05We have experienced rapid revenue and other growth in recent periods, which may not be indicative of our future performance
6. 06If we fail to effectively manage our growth, we may be unable to execute our business plan, maintain high levels of service, adequately address competitive challenges or maintain our corporate culture, and our business, financial condition and results of operations would be harmed
7. 07Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations
8. 08Our business and growth depend in part on the success of our relationships with our channel partners

Risks Related to Our Products and Services

1. 09We face intense and increasing competition and could lose market share to our competitors, which could adversely affect our business, financial condition and results of operations
2. 10If the delivery of our services to our customers is interrupted or delayed for any reason, our business would suffer
3. 11If we fail to develop or introduce new enhancements to our cloud platform on a timely basis, our ability to attract and retain customers, remain competitive and grow our business could be impaired
4. 12If our global network of data centers, which deliver our services, was damaged or otherwise failed to meet the requirements of our business, our ability to provide services to our customers and maintain the performance of our cloud platform could be negatively impacted, which could cause our business to suffer
5. 13If our cloud platform or internal networks, systems or data are or are perceived to have been breached, our solution may be perceived as insecure, our reputation may be damaged and our financial results may be negatively impacted
6. 14Any of the above could materially and adversely affect our business, financial condition and results of operations
7. 15If our cloud platform does not interoperate with our customers’ network and security infrastructure or with third-party products, websites or services, our cloud platform may become less competitive and our results of operations may be harmed

Risks Related to Our Sales and Operations

1. 16If we are not able to maintain and enhance our brand, our business and results of operations may be adversely affected
2. 17If we do not effectively develop and expand our sales and marketing capabilities, we may be unable to add new customers or increase sales to our existing customers, and our business will be adversely affected
3. 18Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense
4. 19Because we recognize revenue from subscriptions for our services over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our operating results and may be difficult to discern
5. 20We provide service level commitments under our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide credits for future service and our business could suffer
6. 21We rely on our key technical, sales and management personnel to grow our business, and the loss of one or more key employees or the inability to attract and retain qualified personnel could harm our business
7. 22Our business depends, in part, on sales to the public sector and significant changes in the contracting or fiscal policies of such public sector organizations could have an adverse effect on our business and operating results
8. 23Our international operations expose us to significant risks, and failure to manage those risks could materially and adversely impact our business
9. 24Future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our operating results, financial condition and prospects
10. 25If we are unable to effectively manage certain risks and challenges related to our India operations, our business could be harmed
11. 26Our failure to raise additional capital necessary to expand our operations and invest in new solutions could reduce our ability to compete and could harm our business

Risks Related to Information Technology, Intellectual Property, Data Security and Privacy

1. 27The actual or perceived failure of our cloud platform to block malware or prevent a security breach or incident could harm our reputation and adversely impact our business, financial condition and results of operations
2. 28Any of the above results could materially and adversely affect our business, financial condition and results of operations
3. 29Issues in the development, use and execution of AI and ML, combined with an uncertain regulatory environment, may harm our business
4. 30We incorporate technology from third parties into our cloud platform, and our inability to obtain or maintain rights to the technology could harm our business
5. 31Some of our technology incorporates "open source" software, and we license some of our software through open source projects, which could negatively affect our ability to sell our platform and subject us to possible litigation
6. 32Claims by others that we infringe their proprietary technology or other rights, or other lawsuits asserted against us, could result in significant costs and substantially harm our business, financial condition, results of operations and prospects
7. 33The success of our business depends in part on our ability to protect and enforce our intellectual property rights
8. 34Adverse economic conditions or reduced IT security spending may adversely impact our revenue and profitability

Risks Relating to Legal, Regulatory, Accounting and Tax Matters

1. 35Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties
2. 36If we were not able to satisfy data protection, security, privacy and other government- and industry-specific requirements or regulations, our business, results of operations and financial condition could be harmed
3. 37We are subject to governmental export and import controls and trade and economic sanctions that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws
4. 38We are exposed to fluctuations in currency exchange rates, which could negatively affect our operating results
5. 39these hedging activities may not be successful in effectively mitigating the potentially adverse impact on our financial statements due to unfavorable movements in foreign currency exchange rates
6. 40We are subject to counterparty default risks
7. 41Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which would harm our results of operations
8. 42Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited
9. 43Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our operating results

Risks Related to the Ownership of Our Common Stock

1. 44The concentration of our stock ownership with insiders will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval
2. 45Certain provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove members of our board of directors or current management and may adversely affect the market price of our common stock
3. 46The market price of our common stock may be volatile, and you could lose all or part of your investment
4. 47Sales of substantial amounts of our common stock in the public markets, or the perception that they might occur, could reduce the price that our common stock might otherwise attain and may dilute your voting power and your ownership interest in us
5. 48We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock
6. 49If industry or financial analysts issue inaccurate or unfavorable research regarding our common stock, our stock price and trading volume could decline
7. 50Our amended and restated certificate of incorporation further provides that the federal district courts of the United States are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended

Risks Related to the Notes

1. 51Servicing our debt may require a significant amount of cash, and we may not have sufficient cash flow from our business or the ability to raise funds to pay our substantial debt
2. 52The conditional conversion feature of the Notes, when triggered, may adversely affect our financial condition and operating results
3. 53The capped call transactions may affect the value of our common stock
4. 54We are subject to counterparty risk with respect to the capped call transactions

General Risks

1. 55Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and to interruption by man-made problems such as power disruptions, computer viruses, acts of war, international conflicts, terrorism, and security breaches or incidents
2. 56We are subject to anti-corruption, anti-bribery and similar laws, and noncompliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation
3. 57If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired
4. 58If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected
5. 59We rely on third parties for certain essential financial and operational services, and a failure or disruption in these services could materially and adversely affect our ability to manage our business effectively
6. 60We may become involved in litigation that may materially and adversely affect us