LifeLock 2013 Annual Report Download - page 29

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Software code that is freely shared in the software development community is referred to as open source software. A portion of the technologies licensed
by us incorporates such open source software, and we may incorporate open source software in the future. Su ch open source software is generally licensed by
its authors under open source licenses. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as
open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some open
source licenses, such as the GNU General Public License, require that source code subject to the license be disclosed to third parties, grant such third parties
the right to modify and redistribute that source code and a requirement that the source code for any software derived from it be disclosed. If we combine our
proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of our
proprietary software to the public. This would allow our competitors to create similar services and platforms with lower development effort and time and
ultimately could reduce or eliminate our ability to commercialize or profit from our services.
Although we have established internal review and approval processes with respect to the use of open source software to avoid subjecting our
technologies to conditions we do not intend, we cannot be certain that all open source software is submitted for approval prior to use in our services. The terms
of many open source licenses have not been interpreted by the U.S. courts, and there is a risk that these licenses could be construed in a way that imposes
unanticipated conditions or restrictions on our ability to commercialize our services. In this event, we could be required to seek licenses from third parties to
continue offering our services, to make generally available, in source code form, our proprietary code, or to discontinue the sale of our services, any of which
could adversely affect our business, operating results, and financial condition.
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We may experience significant fluctuations in our revenue, expenses, and operating results in future periods. Our operating results may fluctuate in the
future as a result of a number of factors, many of which are beyond our control. These fluctuations may result in declines in our stock price. Moreover, these
fluctuations may make comparing our operating results on a period-to-period basis less meaningful and make our future results diffi cult to predict. You
should not rely on our past results as an indication of our future performance. In addition, if revenue levels do not meet our expectations, our operating results
and ability to execute on our business plan are likely to be harmed. In addition to the other factors listed in this “Risk Factors” section, factors that could affect
our operating results include the following:
•our ability to expand our customer base and the market for our services;
•our ability to generate revenue from existing customers;
•our ability to establish and maintain relationships with strategic partners;
•our expense and capital expenditure levels;
•service introductions or enhancements and market acceptance of new services by us and our competitors;
•pricing and availability of competitive services;
•our ability to address competitive factors successfully;
•changes in the competitive landscape as a result of mergers, acquisitions, or strategic alliances that could allow our competitors to gain market
share, or the emergence of new competitors;
•changes or anticipated changes in economic conditions; and
•changes in legislation and regulatory requirements related to our business.
Due to these and other factors, our financial results for any quarterly or annual period may not meet our expectations or the expectations of investors or
analysts that follow our stock and may not be meaningful indications of our future performance.
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We recognize revenue in our consumer business from our members ratably over the term of their subscription periods. As a result, a large portion of the
revenue we recognize in any period is deferred revenue from memberships purchased during previous periods. Consequently, a decline in new members or a
decrease in member retention in any particular period will not necessarily be fully reflected in the consumer revenue in that period and will negatively affect our
revenue in future periods. In addition, we may be unable to adjust our cost structure to reflect this reduced revenue. Accordingly, the effect of significant
fluctuations in new members or member retention and market acceptance of our services may not be fully reflected in our operating results until future periods.
Our subscription model also makes it difficult for us rapidly to increase our revenue through additional sales in any period, as revenue from new members is
recognized ratably over the applicable subscription periods.
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