UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | --- | --- | |--------------------------------------------|------------------------------------------------------------------------------- ...

[Form 10-Q Filing Information](index=1&type=section&id=Form%2010-Q%20Filing%20Information) Details A10 Networks, Inc.'s filing status, commission number, address, stock exchange, and outstanding shares as of July 26, 2023 [Registrant Information and Filing Status](index=1&type=section&id=Registrant%20Information%20and%20Filing%20Status) Details A10 Networks' accelerated filer status, commission number, stock exchange, and outstanding shares as of July 26, 2023 - Company Name: **A10 NETWORKS, INC.**[2](index=2&type=chunk) - Commission File Number: **001-36343**[2](index=2&type=chunk) - Trading Symbol: **ATEN** (New York Stock Exchange)[2](index=2&type=chunk) - Filing Status: Accelerated filer, filed all required reports and submitted Interactive Data Files[2](index=2&type=chunk) - Outstanding Shares (as of July 26, 2023): **74,110,542**[4](index=4&type=chunk) [Table of Contents](index=3&type=section&id=Table%20of%20Contents) Provides a structured overview of the Form 10-Q report, outlining main parts and items [Report Structure Overview](index=3&type=section&id=Report%20Structure%20Overview) Outlines the Form 10-Q report's main parts, covering financial statements, management analysis, risk, controls, and exhibits [Note Regarding Forward-Looking Statements](index=4&type=section&id=NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Defines forward-looking statements and outlines key areas they cover [Identification and Nature of Forward-Looking Statements](index=4&type=section&id=Identification%20and%20Nature%20of%20Forward-Looking%20Statements) Defines forward-looking statements by terminology and outlines their scope, including strategy, revenue, products, and profitability - Forward-looking statements are identified by words like 'believe,' 'may,' 'will,' 'estimate,' 'continue,' 'anticipate,' 'intend,' 'expect,' and similar expressions[6](index=6&type=chunk) - Statements concern strategy, business plan, growth management, revenue recognition, new product plans, customer purchase expectations, and profitability[7](index=7&type=chunk) - Also covers expectations regarding third-party relationships, tax assets, foreign earnings repatriation, future costs, gross margin variability, liquidity, capital requirements, stock repurchase, and dividends[7](index=7&type=chunk) [Risks and Uncertainties](index=4&type=section&id=Risks%20and%20Uncertainties) Highlights that forward-looking statements are subject to risks, uncertainties, and assumptions, advising against undue reliance due to potential material differences - Forward-looking statements are subject to risks, uncertainties, and assumptions, including those detailed in the Annual Report on Form 10-K[8](index=8&type=chunk) - Important factors that could cause actual results to differ include unanticipated market changes, significant declines in global macroeconomic conditions, business interruptions, and execution risks[8](index=8&type=chunk) - Investors should not rely upon forward-looking statements as predictions of future events, as the company cannot guarantee their achievement[9](index=9&type=chunk) [Investor Information and Disclosure](index=5&type=section&id=Investor%20Information%20and%20Disclosure) Informs investors about official channels for disclosing material non-public information and complying with Regulation FD - The investor relations website (https://investors.A10networks.com) is used to post important information for investors[12](index=12&type=chunk) - Other disclosure channels include the company blog (https://www.a10networks.com/blog) and corporate Twitter account (https://twitter.com/A10Networks)[12](index=12&type=chunk) - These platforms are used for disclosing material non-public information and complying with Regulation FD[12](index=12&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents the company's unaudited condensed consolidated financial statements and related notes [ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)](index=6&type=section&id=ITEM%201.%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20%28UNAUDITED%29) Presents unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows, with detailed accounting notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of June 30, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :------------ | :------------------ | | **ASSETS** | | | | Cash and cash equivalents | $111,181 | $67,971 | | Marketable securities | $42,730 | $83,018 | | Accounts receivable, net | $69,171 | $72,928 | | Inventory | $20,438 | $19,693 | | Total current assets | $256,465 | $256,991 | | Property and equipment, net | $25,210 | $19,743 | | Total assets | $368,232 | $369,105 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable | $6,399 | $6,725 | | Accrued liabilities | $22,656 | $37,183 | | Deferred revenue (current) | $78,023 | $74,340 | | Total current liabilities | $107,078 | $118,248 | | Deferred revenue (non-current) | $53,590 | $52,652 | | Total liabilities | $175,294 | $188,093 | | Total stockholders' equity | $192,938 | $181,012 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Provides the company's financial performance, including revenue, gross profit, operating income, and net income for the three and six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Operations (Three Months Ended June 30, in thousands, except per share data) | Metric | 2023 | 2022 | Change | % Change | | :------------------------------------ | :----- | :----- | :----- | :------- | | Total Revenue | $65,817 | $67,973 | ($2,156) | (3.2)% | | Gross Profit | $52,354 | $54,488 | ($2,134) | (3.9)% | | Income from Operations | $12,266 | $13,143 | ($877) | (6.7)% | | Net Income | $11,626 | $10,416 | $1,210 | 11.6% | | Basic Net Income Per Share | $0.16 | $0.14 | $0.02 | 14.3% | | Diluted Net Income Per Share | $0.15 | $0.13 | $0.02 | 15.4% | Condensed Consolidated Statements of Operations (Six Months Ended June 30, in thousands, except per share data) | Metric | 2023 | 2022 | Change | % Change | | :------------------------------------ | :----- | :----- | :----- | :------- | | Total Revenue | $123,508 | $130,645 | ($7,137) | (5.5)% | | Gross Profit | $99,829 | $104,321 | ($4,492) | (4.3)% | | Income from Operations | $18,433 | $21,145 | ($2,712) | (12.8)% | | Net Income | $15,584 | $16,765 | ($1,181) | (7.0)% | | Basic Net Income Per Share | $0.21 | $0.22 | ($0.01) | (4.5)% | | Diluted Net Income Per Share | $0.21 | $0.21 | $0.00 | 0.0% | [Condensed Consolidated Statements of Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Details the company's comprehensive income, including net income and other comprehensive income items, for the three and six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Comprehensive Income (Three Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Net Income | $11,626 | $10,416 | | Unrealized gain (loss) on marketable securities | $593 | ($201) | | Unrealized gain on cash flow hedge | $112 | — | | **Comprehensive Income** | **$12,331** | **$10,215** | Condensed Consolidated Statements of Comprehensive Income (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Net Income | $15,584 | $16,765 | | Unrealized gain (loss) on marketable securities | $1,121 | ($977) | | Unrealized gain on cash flow hedge | $147 | — | | **Comprehensive Income** | **$16,852** | **$15,788** | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Outlines changes in stockholders' equity, including stock repurchases, dividends, and net income, for the six months ended June 30, 2023 and 2022 Key Stockholders' Equity Changes (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Beginning balance (Stockholders' equity) | $181,012 | $208,888 | | Repurchase of common stock | ($6,230) | ($31,758) | | Payments for dividends | ($8,880) | ($7,663) | | Net income | $15,584 | $16,765 | | Ending balance (Stockholders' equity) | $192,938 | $194,759 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Presents the company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change | | :------------------------------------ | :----- | :----- | :----- | | Net cash provided by operating activities | $18,722 | $24,740 | ($6,018) | | Net cash provided by investing activities | $37,039 | $17,028 | $20,011 | | Net cash used in financing activities | ($12,551) | ($36,451) | $23,900 | | Net increase in cash and cash equivalents | $43,210 | $5,317 | $37,893 | | Cash and cash equivalents—end of period | $111,181 | $84,242 | $26,939 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Description of Business and Summary of Significant Accounting Policies](index=12&type=section&id=1.%20Description%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) Describes A10 Networks' business, product offerings, revenue sources, sales strategy, and confirms no material changes to accounting policies - A10 Networks, Inc. provides secure application solutions and services, including Thunder ADC, Lightning ADC, Thunder CGN, Thunder TPS, Thunder SSLi, Thunder CFW, Harmony Controller, and aGalaxy TPS[30](index=30&type=chunk) - Revenue is derived from products (hardware, perpetual software, subscription offerings) and services (post contract support, professional services, training)[31](index=31&type=chunk) - Solutions are sold globally to service providers and enterprises through a high-touch sales organization and distribution channel partners[32](index=32&type=chunk)[34](index=34&type=chunk) - No material changes to significant accounting policies during the three and six months ended June 30, 2023[38](index=38&type=chunk) [Concentration of Credit Risk and Significant Customers](index=13&type=section&id=Concentration%20of%20Credit%20Risk%20and%20Significant%20Customers) Discusses credit risk exposure from financial instruments and identifies significant customer revenue concentrations - Financial instruments subject to credit risk include cash, cash equivalents, marketable securities, and accounts receivable[39](index=39&type=chunk) Significant Customers (Percentage of Total Revenue) | Customer | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Customer A | 25% | 11% | 20% | 10% | | Customer B | * (less than 10%) | 20% | * (less than 10%) | 18% | - As of June 30, 2023, one customer accounted for **33%** of total gross accounts receivable[42](index=42&type=chunk) [2. Leases](index=14&type=section&id=2.%20Leases) Details the company's operating lease arrangements, including right-of-use assets, liabilities, and future payment obligations - The Company leases various operating spaces in the United States, Asia, and Europe under non-cancellable operating lease arrangements expiring through July 2027[44](index=44&type=chunk) Operating Lease Liabilities (June 30, 2023, in thousands) | Metric | Amount | | :-------------------------- | :----- | | Total right-of-use assets | $18,794 | | Total operating lease liabilities | $19,165 | Aggregate Future Lease Payments (as of June 30, 2023, in thousands) | Period | Amount | | :-------------------------- | :----- | | Remainder of 2023 | $2,683 | | 2024 | $5,446 | | 2025 | $4,953 | | 2026 | $4,892 | | 2027 | $2,441 | | Total lease payments | $20,415 | | Present value of lease liabilities | $19,165 | - Weighted-average remaining lease term is **3.84 years**, and the weighted-average discount rate is **3.2%**[49](index=49&type=chunk) [3. Marketable Securities and Fair Value Measurements](index=15&type=section&id=3.%20Marketable%20Securities%20and%20Fair%20Value%20Measurements) Provides details on the company's marketable securities portfolio, including fair value measurements and unrealized gains or losses Marketable Securities (as of June 30, 2023, in thousands) | Type | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :-------------------------------- | :------------- | :--------------------- | :---------------------- | :--------- | | Corporate securities | $1,983 | — | ($3) | $1,980 | | U.S. Treasury and agency securities | $39,858 | $21 | ($99) | $39,780 | | Commercial paper | $950 | $20 | — | $970 | | **Total** | **$42,791** | **$41** | **($102)** | **$42,730** | Marketable Securities (as of December 31, 2022, in thousands) | Type | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :-------------------------------- | :------------- | :--------------------- | :---------------------- | :--------- | | Corporate securities | $35,137 | — | ($550) | $34,587 | | U.S. Treasury and agency securities | $28,627 | — | ($292) | $28,335 | | Commercial paper | $11,859 | — | — | $11,859 | | Asset-backed securities | $8,331 | — | ($94) | $8,237 | | **Total** | **$83,954** | **—** | **($936)** | **$83,018** | - Total gross unrealized losses on marketable securities decreased from **$936 thousand** as of December 31, 2022, to **$102 thousand** as of June 30, 2023[51](index=51&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - No other-than-temporary impairment charges were recognized during the three and six months ended June 30, 2023 and 2022[56](index=56&type=chunk) [4. Condensed Consolidated Financial Statement Details](index=16&type=section&id=4.%20Condensed%20Consolidated%20Financial%20Statement%20Details) Presents detailed breakdowns of inventory, prepaid expenses, property and equipment, accrued liabilities, and deferred revenue Inventory (in thousands) | Type | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :------------------ | | Raw materials | $13,179 | $12,771 | | Finished goods | $7,259 | $6,922 | | **Total inventory** | **$20,438** | **$19,693** | Prepaid Expenses and Other Current Assets (in thousands) | Type | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :------------------ | | Prepaid expenses | $5,315 | $5,310 | | Deferred contract acquisition costs | $6,242 | $6,144 | | Other | $1,388 | $1,927 | | **Total** | **$12,945** | **$13,381** | Property and Equipment, Net (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :------------------ | | Property and equipment, gross | $48,722 | $42,487 | | Less: accumulated depreciation | ($23,512) | ($22,744) | | **Property and equipment, net** | **$25,210** | **$19,743** | Accrued Liabilities (in thousands) | Type | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :------------------ | | Accrued compensation and benefits | $6,597 | $19,832 | | Accrued tax liabilities | $1,864 | $1,635 | | Lease liability | $4,861 | $4,792 | | Other | $9,334 | $10,924 | | **Total** | **$22,656** | **$37,183** | Deferred Revenue (in thousands) | Type | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :------------------ | | Products | $10,870 | $7,782 | | Services | $120,743 | $119,210 | | **Total deferred revenue** | **$131,613** | **$126,992** | | Less: current portion | ($78,023) | ($74,340) | | **Non-current portion** | **$53,590** | **$52,652** | [5. Commitments and Contingencies](index=18&type=section&id=5.%20Commitments%20and%20Contingencies) Outlines the company's contractual obligations, including operating leases, purchase commitments, and indemnification agreements - The Company has non-cancellable operating lease arrangements totaling **$19.2 million** as of June 30, 2023, expiring through July 2027[67](index=67&type=chunk) - Open purchase commitments with third-party contract manufacturers in Taiwan totaled **$19.8 million** as of June 30, 2023[68](index=68&type=chunk) - Provides indemnifications to customers against intellectual property infringement claims; no significant impact on financial statements to date[69](index=69&type=chunk) [6. Equity Incentive Plans, Stock-Based Compensation and Stock Repurchase Program](index=19&type=section&id=6.%20Equity%20Incentive%20Plans%2C%20Stock-Based%20Compensation%20and%20Stock%20Repurchase%20Program) Describes equity incentive plans, stock-based compensation expenses, and details of the ongoing stock repurchase program - The 2023 Stock Incentive Plan was approved on April 26, 2023, replacing the 2014 Plan, with **5,600,236 shares** available for future grant as of June 30, 2023[72](index=72&type=chunk)[73](index=73&type=chunk) Stock-Based Compensation by Type of Award (Six Months Ended June 30, in thousands) | Type of Award | 2023 | 2022 | | :----------------------------- | :----- | :----- | | Stock awards | $6,648 | $5,635 | | Employee stock purchase rights | $566 | $678 | | **Total** | **$7,214** | **$6,313** | - As of June 30, 2023, **$27.6 million** of unrecognized stock-based compensation expense remains, to be recognized over a weighted-average period of **2.21 years**[75](index=75&type=chunk) - Under the 2022 stock repurchase program (authorized up to **$50 million**), **437 thousand shares** were repurchased for **$6.2 million** through June 30, 2023[81](index=81&type=chunk) [7. Net Income Per Share](index=21&type=section&id=7.%20Net%20Income%20Per%20Share) Presents the calculation of basic and diluted net income per share, including weighted-average shares outstanding Net Income Per Share (Six Months Ended June 30, in thousands, except per share amounts) | Metric | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Net income | $15,584 | $16,765 | | Weighted-average shares outstanding - basic | 74,009 | 76,343 | | Weighted-average shares outstanding - diluted | 75,512 | 78,809 | | Basic Net Income Per Share | $0.21 | $0.22 | | Diluted Net Income Per Share | $0.21 | $0.21 | - **63 thousand** common shares related to potentially dilutive shares were excluded from diluted EPS calculation for the six months ended June 30, 2023, as their effect would have been anti-dilutive[85](index=85&type=chunk) [8. Income Taxes](index=21&type=section&id=8.%20Income%20Taxes) Details the income tax provision and unrecognized tax benefits, primarily consisting of U.S. federal and state taxes Income Tax Provision (in thousands) | Period | 2023 | 2022 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $3,186 | $3,212 | | Six Months Ended June 30 | $4,150 | $4,352 | - The income tax provision primarily consisted of U.S. federal and state taxes[86](index=86&type=chunk) - Unrecognized tax benefits totaled **$7.2 million** as of June 30, 2023, with no material change anticipated over the next twelve months[86](index=86&type=chunk) [9. Geographic Information](index=22&type=section&id=9.%20Geographic%20Information) Provides a breakdown of total revenue by geographic region for the three and six months ended June 30, 2023 and 2022 Total Revenue by Geographic Region (Three Months Ended June 30, in thousands) | Region | 2023 Amount | 2023 % of Total Revenue | 2022 Amount | 2022 % of Total Revenue | | :------------- | :---------- | :---------------------- | :---------- | :---------------------- | | Americas | $36,921 | 56% | $38,553 | 57% | | APJ | $21,982 | 33% | $21,614 | 32% | | EMEA | $6,914 | 11% | $7,806 | 11% | | **Total revenue** | **$65,817** | **100%** | **$67,973** | **100%** | Total Revenue by Geographic Region (Six Months Ended June 30, in thousands) | Region | 2023 Amount | 2023 % of Total Revenue | 2022 Amount | 2022 % of Total Revenue | | :------------- | :---------- | :---------------------- | :---------- | :---------------------- | | Americas | $66,877 | 54% | $71,511 | 55% | | APJ | $37,742 | 31% | $39,403 | 30% | | EMEA | $18,889 | 15% | $19,731 | 15% | | **Total revenue** | **$123,508** | **100%** | **$130,645** | **100%** | [10. Revenue](index=22&type=section&id=10.%20Revenue) Details contract balances, revenue recognized from deferred amounts, and remaining performance obligations Contract Balances (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :------------------ | | Accounts receivable, net | $69,171 | $72,928 | | Deferred revenue, current | $78,023 | $74,340 | | Deferred revenue, non-current | $53,590 | $52,652 | | **Total deferred revenue** | **$131,613** | **$126,992** | - Revenue recognized from deferred revenues at the beginning of the period was **$26.1 million** for Q2 2023 and **$51.3 million** for H1 2023[95](index=95&type=chunk) Remaining Performance Obligations (as of June 30, 2023, in thousands) | Period | Amount | | :-------------------------- | :----- | | Within 1 year | $78,023 | | Next 2 to 3 years | $44,010 | | Thereafter | $9,580 | | **Total** | **$131,613** | [11. Subsequent Events](index=23&type=section&id=11.%20Subsequent%20Events) Discloses significant events occurring after the reporting period, specifically a declared quarterly cash dividend - On July 26, 2023, the Board of Directors declared a quarterly cash dividend of **$0.06 per share**, payable on September 1, 2023[100](index=100&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Provides management's perspective on the company's financial condition, results of operations, liquidity, and capital resources [Overview](index=24&type=section&id=Overview) Reaffirms A10 Networks' position as a secure application solutions provider, detailing products, revenue, sales strategy, and financial position - A10 Networks is a leading provider of secure application solutions and services, including Thunder ADC, CGN, TPS, SSLi, CFW, Harmony Controller, and aGalaxy TPS[103](index=103&type=chunk) - Revenue is derived from products (hardware, software licenses, subscriptions) and services (PCS, professional services, training), primarily through distribution channel partners[104](index=104&type=chunk) - For Q2 2023, **56%** of total revenue was from the Americas (**48%** from the US), **33%** from APJ (**19%** from Japan), and **11%** from EMEA[109](index=109&type=chunk) - Purchases by the ten largest end-customers accounted for **51%** of total revenue for the three months ended June 30, 2023[110](index=110&type=chunk) - As of June 30, 2023, the company had **$111.2 million** in cash and cash equivalents and **$42.7 million** in marketable securities[111](index=111&type=chunk) - The company plans to continue investing in product development, global sales, marketing, and channel partner programs for long-term growth[111](index=111&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, covering revenue, costs, gross profit, operating expenses, and income taxes for the periods presented [Revenue](index=27&type=section&id=Revenue) Analyzes total revenue by source and customer type, highlighting changes for the three and six months ended June 30, 2023 and 2022 Total Revenue by Source (Three Months Ended June 30, in thousands) | Metric | 2023 Amount | 2023 % of Total Revenue | 2022 Amount | 2022 % of Total Revenue | Change Amount | % Change | | :------- | :---------- | :---------------------- | :---------- | :---------------------- | :------------ | :------- | | Products | $39,090 | 59% | $41,475 | 61% | ($2,385) | (6)% | | Services | $26,727 | 41% | $26,498 | 39% | $229 | 1% | | **Total revenue** | **$65,817** | **100%** | **$67,973** | **100%** | **($2,156)** | **(3)%** | Total Revenue by Source (Six Months Ended June 30, in thousands) | Metric | 2023 Amount | 2023 % of Total Revenue | 2022 Amount | 2022 % of Total Revenue | Change Amount | % Change | | :------- | :---------- | :---------------------- | :---------- | :---------------------- | :------------ | :------- | | Products | $70,272 | 57% | $78,520 | 60% | ($8,248) | (11)% | | Services | $53,236 | 43% | $52,125 | 40% | $1,111 | 2% | | **Total revenue** | **$123,508** | **100%** | **$130,645** | **100%** | **($7,137)** | **(5)%** | - Total revenue decreased by **$2.2 million (3%)** for the three months ended June 30, 2023, primarily due to a **$2.3 million** decrease from enterprise customers, partially offset by a **$0.1 million** increase from service provider customers[123](index=123&type=chunk)[125](index=125&type=chunk) - Total revenue decreased by **$7.1 million (5%)** for the six months ended June 30, 2023, primarily due to an **$8.1 million** decrease from service provider customers, partially offset by a **$0.9 million** increase from enterprise customers[127](index=127&type=chunk) - Services revenue increased due to higher PCS sales from a growing installed customer base, especially in the Americas region[125](index=125&type=chunk)[128](index=128&type=chunk) [Cost of Revenue, Gross Profit and Gross Margin](index=29&type=section&id=Cost%20of%20Revenue%2C%20Gross%20Profit%20and%20Gross%20Margin) Examines changes in cost of revenue, gross profit, and gross margin for products and services for the periods presented Cost of Revenue (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change | % Change | | :--------------- | :----- | :----- | :----- | :------- | | Products | $15,519 | $18,151 | ($2,632) | (14.5)% | | Services | $8,160 | $8,173 | ($13) | (0.2)% | | **Total cost of revenue** | **$23,679** | **$26,324** | **($2,645)** | **(10.0)%** | - Products cost of revenue decreased due to lower products revenue[133](index=133&type=chunk) - Services cost of revenue remained relatively stable, driven by the mix of services delivered[134](index=134&type=chunk) Gross Profit and Gross Margin (Six Months Ended June 30, in thousands) | Metric | 2023 Amount | 2023 Gross Margin | 2022 Amount | 2022 Gross Margin | Change Amount | Change Gross Margin | | :---------------- | :---------- | :---------------- | :---------- | :---------------- | :------------ | :------------------ | | Products | $54,753 | 77.9% | $60,369 | 76.9% | ($5,616) | 1.0% | | Services | $45,076 | 84.7% | $43,952 | 84.3% | $1,124 | 0.4% | | **Total gross profit** | **$99,829** | **80.8%** | **$104,321** | **79.9%** | **($4,492)** | **0.9%** | - Products gross margin increased by **1.0%** for the six months ended June 30, 2023, primarily due to the Company's cost savings efforts[137](index=137&type=chunk) [Operating Expenses](index=31&type=section&id=Operating%20Expenses) Details changes in sales and marketing, research and development, and general and administrative expenses for the periods presented Operating Expenses (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Sales and marketing | $43,202 | $44,555 | ($1,353) | (3.0)% | | Research and development | $25,630 | $27,122 | ($1,492) | (5.5)% | | General and administrative | $12,564 | $11,499 | $1,065 | 9.3% | | **Total operating expenses** | **$81,396** | **$83,176** | **($1,780)** | **(2.1)%** | - Sales and marketing expenses decreased due to lower personnel costs[141](index=141&type=chunk) - Research and development expenses decreased due to lower personnel costs but are expected to increase in 2023 for strategic investments in cybersecurity technology[143](index=143&type=chunk) - General and administrative expenses increased for the six-month period due to an increase in personnel costs from higher headcount[144](index=144&type=chunk) [Non-Operating Income (Expense), Net](index=32&type=section&id=Non-Operating%20Income%20%28Expense%29%2C%20Net) Discusses changes in interest income and other income/expense, net, for the six months ended June 30, 2023 and 2022 Non-Operating Income (Expense), Net (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Change | % Change | | :------------------------------------ | :----- | :----- | :----- | :------- | | Interest income | $1,635 | $304 | $1,331 | 437.8% | | Other income (expense), net | ($334) | ($332) | ($2) | 0.6% | | **Non-operating income (expense), net** | **$1,301** | **($28)** | **$1,329** | (4,746.4)% | - The favorable change was primarily driven by foreign exchange gains (fluctuations in Japanese Yen vs. U.S. Dollar) and increased interest income[147](index=147&type=chunk) [Provision for Income Taxes](index=32&type=section&id=Provision%20for%20Income%20Taxes) Presents the income tax provision for the three and six months ended June 30, 2023 and 2022, primarily from U.S. federal and state taxes Provision for Income Taxes (in thousands) | Period | 2023 | 2022 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $3,186 | $3,212 | | Six Months Ended June 30 | $4,150 | $4,352 | - The income tax provision primarily consisted of U.S. federal and state taxes[148](index=148&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's cash position, working capital, and ability to meet future cash needs, including stock repurchases and dividends - As of June 30, 2023, the company had **$111.2 million** in cash and cash equivalents and **$42.7 million** in marketable securities[149](index=149&type=chunk) - Working capital was **$149.4 million** as of June 30, 2023[149](index=149&type=chunk) - Existing cash and marketable securities are believed to be sufficient to meet anticipated cash needs for at least the next 12 months and beyond[150](index=150&type=chunk) - Under the 2022 stock repurchase program, **$6.2 million** was used to repurchase **0.4 million shares** during the three and six months ended June 30, 2023[152](index=152&type=chunk) - A quarterly cash dividend of **$0.06 per share ($4.4 million)** was paid in Q2 2023, with another **$0.06 per share** dividend declared for September 1, 2023[153](index=153&type=chunk) [Statements of Cash Flows](index=33&type=section&id=Statements%20of%20Cash%20Flows) Analyzes cash flow changes from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | Change | | :------------------------------------ | :----- | :----- | :----- | | Operating activities | $18,722 | $24,740 | ($6,018) | | Investing activities | $37,039 | $17,028 | $20,011 | | Financing activities | ($12,551) | ($36,451) | $23,900 | | **Net increase in cash and cash equivalents** | **$43,210** | **$5,317** | **$37,893** | - Cash provided by operating activities decreased primarily due to cash outflows from changes in accrued liabilities (**$17.1 million**) and inventory (**$1.7 million**), partially offset by deferred revenue (**$4.6 million**)[157](index=157&type=chunk) - Cash provided by investing activities increased significantly due to higher proceeds from sales and maturities of marketable securities (**$86.8 million**) compared to purchases (**$44.7 million**)[161](index=161&type=chunk) - Cash used in financing activities decreased due to lower common stock repurchases (**$6.2 million** in 2023 vs. **$31.8 million** in 2022)[162](index=162&type=chunk) [Contractual Obligations](index=34&type=section&id=Contractual%20Obligations) Details the company's contractual obligations, including operating lease arrangements and uncertain tax liabilities - Contractual obligations include non-cancellable operating lease arrangements totaling **$19.2 million** as of June 30, 2023, expiring through July 2027[163](index=163&type=chunk) - The Company has **$7.2 million** of tax liabilities related to uncertain tax positions as of June 30, 2023, with the timing of settlement not reliably estimable[163](index=163&type=chunk) [Critical Accounting Policies and Estimates](index=35&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Confirms financial statements adhere to U.S. GAAP and that no material changes occurred in significant accounting policies - Condensed consolidated financial statements are prepared in accordance with U.S. GAAP, requiring estimates and assumptions[164](index=164&type=chunk) - No material changes to the Company's significant accounting policies occurred during the six months ended June 30, 2023[164](index=164&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=35&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Discloses the company's exposure to market risks, specifically foreign currency and interest rate fluctuations [Foreign Currency Risk](index=35&type=section&id=Foreign%20Currency%20Risk) Discusses exposure to foreign currency exchange rate fluctuations, particularly with the Japanese Yen, British Pound, and Euro - The company's results are subject to fluctuations due to changes in foreign currency exchange rates, primarily the Japanese Yen, British Pound, and Euro against the U.S. Dollar[165](index=165&type=chunk)[166](index=166&type=chunk) - Net foreign exchange gains were **$2.2 million** for the three months ended June 30, 2023 (vs. **$0.4 million** in 2022)[167](index=167&type=chunk) - Net foreign exchange losses were **$0.1 million** for the six months ended June 30, 2023 (vs. **$0.2 million** in 2022)[167](index=167&type=chunk) - A hypothetical **10%** change in exchange rates would not have a significant impact on consolidated results of operations[167](index=167&type=chunk) [Interest Rate Sensitivity](index=35&type=section&id=Interest%20Rate%20Sensitivity) Addresses market risk from interest rate changes, primarily affecting the marketable securities portfolio, with hypothetical fair value analysis - Exposure to market risk for interest rate changes primarily relates to marketable securities, which include corporate securities, U.S. Treasury and agency securities, commercial paper, and asset-backed securities[168](index=168&type=chunk) - As of June 30, 2023, the investment portfolio had an aggregate amortized cost of **$42.8 million** and a fair value of **$42.7 million**[168](index=168&type=chunk) - A hypothetical **10%** change in interest rates would not have a material impact on interest expense[168](index=168&type=chunk) Hypothetical Fair Values of Marketable Securities (as of June 30, 2023, in thousands) | Interest Rate Shift | Fair Value | | :------------------ | :--------- | | -150 BPS | $43,222 | | -100 BPS | $43,058 | | -50 BPS | $42,894 | | Current (0 BPS) | $42,730 | | +50 BPS | $42,566 | | +100 BPS | $42,402 | | +150 BPS | $42,238 | [ITEM 4. CONTROLS AND PROCEDURES](index=36&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Details management's evaluation of disclosure controls and procedures and changes in internal control over financial reporting [Management's Evaluation of Disclosure Controls and Procedures](index=36&type=section&id=Management's%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) States management's conclusion on the effectiveness of disclosure controls and procedures as of June 30, 2023 - Management, with CEO and CFO participation, evaluated disclosure controls and procedures as of June 30, 2023[169](index=169&type=chunk) - Disclosure controls and procedures were concluded to be effective at the reasonable assurance level[171](index=171&type=chunk) - The condensed consolidated financial statements present fairly, in all material respects, and conform with U.S. GAAP[171](index=171&type=chunk) [Changes in Internal Control over Financial Reporting](index=36&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Reports no material changes in internal control over financial reporting during the three months ended June 30, 2023 - No material changes in internal control over financial reporting were identified during the three months ended June 30, 2023[172](index=172&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=36&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) Acknowledges that control systems provide reasonable, not absolute, assurance due to inherent limitations and resource constraints - Management does not expect disclosure controls or internal control over financial reporting to prevent or detect all error and fraud[173](index=173&type=chunk) - A control system can provide only reasonable, not absolute, assurance due to resource constraints and inherent limitations[173](index=173&type=chunk) - Controls may become inadequate over time due to changes in conditions or deterioration in compliance[173](index=173&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) Presents other information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=37&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) States the company's involvement in legal proceedings and management's assessment of potential losses - The company is involved in various legal proceedings with uncertain outcomes[176](index=176&type=chunk) - Management assesses the probability and amount of potential losses, recording a liability when a loss is probable and reasonably estimable[176](index=176&type=chunk) - Judgments may differ from actual outcomes due to inherent uncertainties in legal processes, potentially impacting business and financial results[176](index=176&type=chunk) [ITEM 1A. RISK FACTORS](index=37&type=section&id=ITEM%201A.%20RISK%20FACTORS) Refers readers to the Annual Report on Form 10-K for risk factors, noting no material changes since December 31, 2022 - Investors should review risk factors in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2022[177](index=177&type=chunk) - No material changes to the risk factors disclosed in the 2022 Annual Report on Form 10-K have occurred[177](index=177&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=37&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Details the 2022 stock repurchase program and summarizes repurchase activity for the second quarter of 2023 - The Board of Directors authorized a new **$50 million** share repurchase program (the '2022 Program') on November 1, 2022, for a 12-month period[178](index=178&type=chunk) - Repurchases may occur in open market, privately negotiated transactions, or block trades, funded by existing cash and operating activities[178](index=178&type=chunk) Share Repurchase Activity (Three Months Ended June 30, 2023, in thousands, except per share amounts) | Periods | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) | | :------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------- | | April 1 - 30, 2023 | 282 | $14.54 | 282 | $45,899 | | May 1 - 31, 2023 | 155 | $13.78 | 155 | $43,770 | | June 1 - 30, 2023 | — | — | — | $43,770 | | **Total** | **437** | | | **$43,770** | [ITEM 5. OTHER INFORMATION](index=37&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Discloses CEO trading plans adopted under Rule 10b5-1(c) for selling common stock - On June 12, 2023, CEO Dhrupad Trivedi adopted a Rule 10b5-1(c) trading plan to sell up to **60,606 shares** between November 7-9, 2023[182](index=182&type=chunk) - A previous Rule 10b5-1(c) trading plan for the CEO, dated November 10, 2022, terminated on June 30, 2023, with no shares sold[182](index=182&type=chunk) [ITEM 6. EXHIBITS](index=38&type=section&id=ITEM%206.%20EXHIBITS) Provides a list of exhibits filed with the report, including corporate governance documents and certifications - Exhibits include Amended and Restated Certificate of Incorporation (3.1) and Bylaws (3.2)[184](index=184&type=chunk) - Certifications of CEO and CFO pursuant to Section 302 (31.1, 31.2) and Section 906 (32.1, 32.2) of the Sarbanes-Oxley Act are filed[184](index=184&type=chunk) - Inline XBRL Document Set for financial statements (101) and cover page (104) are included[184](index=184&type=chunk) - Section 906 certifications (32.1 and 32.2) are not deemed filed with the SEC[185](index=185&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) Confirms the official signing of the Form 10-Q report by the company's President, CEO, and CFO on August 1, 2023 [Report Signatures](index=39&type=section&id=Report%20Signatures) Confirms the official signing of the Form 10-Q report by the company's President, CEO, and CFO on August 1, 2023 - The report was signed by Dhrupad Trivedi, President and Chief Executive Officer, and Brian Becker, Chief Financial Officer[187](index=187&type=chunk) - The signing date for the report was August 1, 2023[187](index=187&type=chunk)

A10 Networks, Inc. (NYSE:ATEN) Q2 2023 Earnings Conference Call July 26, 2023 4:30 PM ET Company Participants Rob Fink - Managing Partner, FNK Investor Relations Dhrupad Trivedi - President & Chief Executive Officer Brian Becker - Chief Financial Officer Conference Call Participants Gray Powell - BTIG Hamed Khorsand - BWS Financial Anja Soderstrom - Sidoti Hendi Susanto - Gabelli Funds Operator Good afternoon. Thank you for attending today's A10 Networks' Second Quarter 2023 Financial Results. My name is Co ...

Q2 2023 Performance - Q2 revenue increased by 14.1% sequentially compared to Q1 2023[7] - Adjusted EBITDA was $17.4 million, representing 26.4% of revenue[7] - Non-GAAP EPS was $0.19, compared to $0.17 in the previous period[7] Revenue and Profitability Trends - Q2 2023 revenue was $65.8 million[9] - Non-GAAP net income for Q2 2023 was $14.5 million[9] - The company demonstrated earnings power despite revenue challenges[8] - Security solutions remain in high demand[8] Customer Vertical Revenue - In Q2 2023, Enterprise accounted for 32.6% of revenue, while Service Provider accounted for 67.4% of revenue, with total revenue reaching $65.8 million[11] Financial Metrics - Non-GAAP gross margin for Q2 2023 was 80.2%[14] - Non-GAAP operating margin for Q2 2023 was 23.1%[14]

A10 Networks, Inc. (NYSE:ATEN) Q1 2023 Earnings Conference Call May 6, 2023 4:00 PM ET Company Participants Dhrupad Trivedi - President and Chief Executive Officer Brian Becker - Chief Financial Officer Conference Call Participants Christian Schwab - Craig-Hallum Gray Powell - BTIG. Hamed Khorsand - BWS Financial Operator Hello and welcome to the A10 Networks’ First Quarter 2023 Financial Results Conference Call. My name is Alex, and I will be your moderator for today. [Operator Instructions ] I would now h ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | --- | --- | |--------------------------------------------|----------------------------------------------------------------------------------- ...

[Note Regarding Forward-Looking Statements](index=4&type=section&id=Note%20Regarding%20Forward-Looking%20Statements) This section clarifies that the report contains forward-looking statements subject to risks and uncertainties, and actual results may differ - The report contains forward-looking statements regarding various aspects of the business, including the impact of COVID-19, semiconductor shortages, revenue growth, market needs, product introductions, competition, and financial performance[7](index=7&type=chunk)[8](index=8&type=chunk) - These statements are subject to risks, uncertainties, and assumptions detailed in the 'Risk Factors' section, and actual results may differ materially from those anticipated[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk) [Note Regarding COVID-19](index=6&type=section&id=Note%20Regarding%20COVID-19) The COVID-19 pandemic has impacted business practices and may continue to negatively affect the company's financial performance and operations - The COVID-19 pandemic has led to modified business practices (e.g., work-from-home, travel restrictions) and may continue to negatively affect revenue, operations, financial condition, liquidity, and capital investments in 2023 and beyond[14](index=14&type=chunk) - The company implemented work-from-home policies, focused on profitability, and closely monitored its supply chain in response to the pandemic[15](index=15&type=chunk) [Risk Factor Summary](index=7&type=section&id=Risk%20Factor%20Summary) This section provides an overview of the company's key risks across business operations, intellectual property, litigation, regulations, and financial markets [Risks Related to Our Business, Operations and Industry](index=7&type=section&id=Risks%20Related%20to%20Our%20Business%2C%20Operations%20and%20Industry) This section outlines key risks related to the company's business, operations, and industry, including the impact of COVID-19, market adoption of products, intense competition, cloud computing trends, reliance on key customers, and supply chain vulnerabilities - Key risks include the effects of the COVID-19 pandemic, challenges in anticipating market needs and product adoption, maintaining profitability, variability in operating costs, reliance on end-of-quarter shipments, intense competition, and cloud-based computing trends[17](index=17&type=chunk) - Other operational risks involve maintaining brand reputation, dependence on a limited number of large end-customers, potential changes in deployment and payment models, fluctuations in gross margin, and risks associated with international operations and third-party manufacturers[17](index=17&type=chunk) [Risks Related to Intellectual Property, Litigation, Laws and Regulations](index=7&type=section&id=Risks%20Related%20to%20Intellectual%20Property%2C%20Litigation%2C%20Laws%20and%20Regulations) This section details risks concerning intellectual property, legal proceedings, and compliance with various laws and regulations, including potential litigation, data security, and international trade policies - Risks include litigation and claims regarding intellectual property rights, challenges in protecting IP, political developments like Brexit, enhanced U.S. tariffs and trade barriers, and the costs of protecting against security breaches and ensuring data confidentiality[18](index=18&type=chunk) - Compliance risks extend to governmental laws and regulations, export and import controls, environmental laws, tax laws, and the ability to maintain effective internal controls[18](index=18&type=chunk) [Risks Related to Capitalization and Financial Markets](index=9&type=section&id=Risks%20Related%20to%20Capitalization%20and%20Financial%20Markets) This section covers financial market risks such as currency fluctuations, ownership concentration, the need for additional funding, stock price volatility, and changes to dividend and stock repurchase programs - Financial risks include fluctuations in foreign currency exchange rates, ownership concentration of common stock, the ability to raise additional funds (and potential dilution), volatility of the stock price, and changes to the dividend and stock repurchase programs[19](index=19&type=chunk) [PART I](index=10&type=section&id=PART%20I) This part covers the company's business overview, risk factors, unresolved staff comments, properties, legal proceedings, and mine safety disclosures [Item 1. Business](index=10&type=section&id=Item%201.%20Business) A10 Networks, Inc. is a leading provider of networking solutions focused on reliability, availability, scalability, and cybersecurity for next-generation networks. The company serves service providers, government organizations, and enterprises globally, offering a portfolio of secure application solutions and intelligent management tools across various form factors [Overview](index=10&type=section&id=Overview) A10 Networks provides secure application solutions for next-generation networks, supporting cloud, on-premise, and hybrid environments globally - A10 Networks provides networking solutions for next-generation networks, emphasizing reliability, availability, scalability, and cybersecurity, supporting cloud, on-premise, and hybrid environments[21](index=21&type=chunk) - The company integrates security into its solutions to help customers adapt to market trends in cloud, IoT, and increasing data needs, serving service providers, government, and enterprises globally[21](index=21&type=chunk) [Industry Trends & Market Drivers](index=10&type=section&id=Industry%20Trends%20%26%20Market%20Drivers) Demand for A10's solutions is driven by cloud adoption, network complexity, automation, DDoS attacks, TLS/SSL growth, and 5G networks - Key industry trends driving demand for A10's solutions include increased adoption of cloud applications, growing network complexity, the importance of automation and orchestration, the rise of DDoS attacks, rapid growth of TLS/SSL encrypted applications, and the advent of 5G networks[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - There is a need for advanced multi-cloud secure application service solutions that offer central management across environments, clear visibility and analytics, scalability, and sophisticated security functionality[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [Product Portfolio](index=11&type=section&id=Product%20Portfolio) A10 Networks offers six secure application solutions and two management tools in various form factors, shifting towards software-only and subscription models - A10 Networks' product portfolio includes six secure application solutions (Thunder ADC, Lightning ADC, Thunder CGN, Thunder TPS, Thunder SSLi, Thunder CFW) and two intelligent management and automation tools (Harmony Controller, aGalaxy TPS)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - Solutions are available in various form factors: hardware appliances, bare metal software, containerized software, virtual appliances, and cloud-native software, with a shift towards term licenses, subscriptions, and software-only models[31](index=31&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) - The Harmony Controller provides central management, orchestration, and real-time/predictive analytics for secure application services across hybrid environments[31](index=31&type=chunk)[41](index=41&type=chunk) [Underlying Technology](index=14&type=section&id=Underlying%20Technology) Most products are built on the proprietary Advanced Core Operating System (ACOS) platform, known for high performance, scalability, and advanced networking features - Most products are built on the proprietary Advanced Core Operating System (ACOS) platform, known for high performance and scalability, leveraging 64-bit multi-core CPUs and a shared memory architecture[46](index=46&type=chunk)[47](index=47&type=chunk) - ACOS features include high-performance intelligent network I/O processing (Flexible Traffic Accelerator), scalable and efficient memory usage, optimized application networking and security, aFleX scripting, ADP for multi-tenancy, aVCS for managing multiple appliances, and aXAPI for automated management[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) [Support & Services](index=15&type=section&id=Support%20%26%20Services) The company provides global customer support through maintenance options and professional services, including specialized DDoS security incident response - The company offers global customer support, including standard warranty, four maintenance options (Basic, Basic Plus, Gold, Platinum), and professional services like network assessment, capacity planning, and implementation[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - Thunder TPS includes enhanced support with access to the A10 DDoS Security Incident Response Team (SIRT) and a subscription to the A10 Threat Intelligence Service[55](index=55&type=chunk) [Customers](index=15&type=section&id=Customers) A10 Networks serves over 8,000 global customers across diverse industries, with significant revenue concentration from its largest end-customers and distribution partners - As of December 31, 2022, A10 Networks had sold products to over **8,000 customers worldwide** across various industries, including telecommunications, technology, government, and finance[56](index=56&type=chunk) Revenue Concentration by Largest End-Customers | Year | % of Total Revenue from 10 Largest End-Customers | | :--- | :----------------------------------------------- | | 2022 | 41% | | 2021 | 39% | | 2020 | 41% | Revenue Concentration by Distribution Channel Partners | Year | Distribution Partner 1 | Distribution Partner 2 | | :--- | :--------------------- | :--------------------- | | 2022 | 15% | 13% | | 2021 | 12% | N/A | | 2020 | 10% | N/A | [Competition](index=16&type=section&id=Competition) A10 Networks competes in evolving cybersecurity, 5G, and hybrid networking markets against various network security and application delivery providers - A10 Networks competes in evolving markets like cybersecurity (DDoS protection), 5G/5G-readiness, and hybrid networking, facing competition from network security solution providers (e.g., Arbor Networks, F5 Networks), network security product vendors, Gi/SGi firewall and CGN product providers (e.g., Cisco, Juniper, Fortinet), and traditional application delivery market players (e.g., F5 Networks, Citrix, Avi Networks)[58](index=58&type=chunk) - Key competitive factors include innovation, ability to mitigate cyber threats, scalability with high-speed traffic, support for on-premise and cloud environments, accommodation of various IT delivery models, customer intimacy, total cost of ownership, brand reputation, and talent attraction/retention[59](index=59&type=chunk) [Sales and Marketing](index=16&type=section&id=Sales%20and%20Marketing) The company utilizes a high-touch sales force and distribution channels globally, with marketing focused on demand generation and brand awareness - The company uses a high-touch sales force directly and through distribution channels, with sales presence in **28 countries** as of December 31, 2022[60](index=60&type=chunk)[61](index=61&type=chunk) - Revenue fulfilled through distribution channel partners accounted for **83%**, **89%**, and **91%** of total revenue for 2022, 2021, and 2020, respectively[62](index=62&type=chunk) - Marketing efforts focus on global demand generation, joint campaigns with partners, and building awareness through industry analysts, media, blogs, social media, and events[63](index=63&type=chunk) [Manufacturing](index=17&type=section&id=Manufacturing) Hardware product manufacturing is outsourced to original design manufacturers, with quality assurance performed at company and manufacturer locations - Hardware product manufacturing is outsourced to original design manufacturers (Lanner, AEWIN, iBase) to leverage scale, reduce costs, and adjust to demand[64](index=64&type=chunk) - Quality assurance and testing are performed at San Jose, Taiwan, and Japan distribution centers, as well as at manufacturers' locations[65](index=65&type=chunk) [Backlog](index=17&type=section&id=Backlog) The company's product backlog represents confirmed orders, but it is subject to cancellation and rescheduling, making it an unreliable indicator of future revenues Product Backlog | As of December 31, | Backlog (in millions USD) | | :----------------- | :-------------------- | | 2022 | $8.1 | | 2021 | $10.9 | - Backlog represents confirmed orders for products to be shipped generally within 90 days, but orders are subject to cancellation and rescheduling, making it an unreliable indicator of future revenues[66](index=66&type=chunk) [Intellectual Property](index=17&type=section&id=Intellectual%20Property) The company protects its intellectual property through patents, copyrights, trademarks, and trade secrets, with a portfolio of U.S. and overseas patents - The company relies on patents, copyrights, trademarks, trade secrets, and disclosure restrictions to protect its intellectual property[68](index=68&type=chunk) Intellectual Property Portfolio (as of Dec 31, 2022) | Category | Issued | Pending | | :------- | :----- | :------ | | U.S. Patents | 212 | 4 | | Overseas Patents | 77 | 12 | - Future success depends on protecting proprietary rights, but unauthorized parties may copy products or use trade secrets, especially in foreign countries with weaker IP laws[69](index=69&type=chunk) [Human Capital](index=18&type=section&id=Human%20Capital) As of December 31, 2022, the company had 575 full-time employees across R&D, customer support, sales, marketing, and G&A, with good employee relations - As of December 31, 2022, the company had **575 full-time employees**, with **252 in R&D and customer support**, **269 in sales and marketing**, and **54 in G&A**[71](index=71&type=chunk) - No employees are represented by a labor union, and relations with employees are considered good[71](index=71&type=chunk) [Corporate Responsibility](index=18&type=section&id=Corporate%20Responsibility) The company is committed to environmental preservation, social responsibility (diversity, employee well-being), and strong corporate governance practices [Environmental](index=18&type=section&id=Environmental) The company is committed to environmental preservation, legal compliance, and minimizing product impact, aligning with the Paris Agreement - The company is committed to environmental preservation, meeting legal compliance, and minimizing product impact, aligning with the Paris Agreement's 1.5°C ambition[74](index=74&type=chunk) - Efforts include working with manufacturers for compliance with RoHS, REACH, and WEEE, adhering to a Conflict Minerals Supply Chain Policy, and maintaining energy-efficient corporate headquarters with EV charging stations and recycling[75](index=75&type=chunk)[76](index=76&type=chunk) [Social](index=19&type=section&id=Social) A10 Networks promotes diversity, inclusion, equal opportunity, and employee well-being through comprehensive rewards and health and safety policies - A10 Networks is committed to diversity, inclusion, and equal opportunity, making employment decisions based on qualifications and business needs, and fostering a cooperative work environment free of discrimination[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - Employees are offered a comprehensive total rewards package including medical, dental, vision, retirement plans, and stock ownership opportunities (over **75% participation** in stock programs)[80](index=80&type=chunk) - The company prioritizes employee health and safety, implementing work-from-home and social distancing policies during COVID-19, and maintaining a zero-tolerance policy against aggressive behavior[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) [Governance](index=20&type=section&id=Governance) The Board of Directors emphasizes diversity and continuously reviews corporate governance guidelines, ensuring independent oversight and ethical conduct - The Board of Directors emphasizes diversity (**60% self-identify as diverse**) and continuously reviews corporate governance guidelines, with **four out of five board members** being independent[84](index=84&type=chunk) - The company engages an independent audit firm for Sarbanes-Oxley Act compliance and outlines governance policies in its Code of Business Conduct and Ethics, Corporate Governance Guidelines, and Whistleblower Policy[85](index=85&type=chunk) [Corporate Information](index=20&type=section&id=Corporate%20Information) A10 Networks, Inc. was incorporated in Delaware in 2014, using its investor relations website and social media to disseminate public information - A10 Networks, Inc. was incorporated in California in 2004 and reincorporated in Delaware in 2014, with its website at www.A10networks.com and investor relations at https://investors.A10networks.com[86](index=86&type=chunk) - The company uses its investor relations website, press releases, SEC filings, public conference calls, and social media (Twitter, Facebook) to disseminate material information to the public[88](index=88&type=chunk) [Item 1A. Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks that could materially harm A10 Networks' business, financial condition, operating results, and stock price. These risks span business operations, intellectual property, litigation, regulatory compliance, and financial markets [Risks Related to Our Business, Operations and Industry](index=22&type=section&id=Risks%20Related%20to%20Our%20Business%2C%20Operations%20and%20Industry) The company faces risks from the COVID-19 pandemic, semiconductor shortages, market demand unpredictability, intense competition, reliance on key customers, and supply chain vulnerabilities - The COVID-19 pandemic and global semiconductor shortages continue to pose material adverse effects on operations, supply chains, and customer demand[91](index=91&type=chunk)[92](index=92&type=chunk)[94](index=94&type=chunk) - Failure to anticipate market needs, timely develop new products, or maintain profitability could significantly harm the business, as operating results are highly variable and unpredictable due to factors like large customer purchases and end-of-quarter shipments[95](index=95&type=chunk)[98](index=98&type=chunk)[101](index=101&type=chunk)[104](index=104&type=chunk)[108](index=108&type=chunk) - The company faces intense competition from larger, well-established companies, and cloud-based computing trends present competitive and execution risks, requiring significant investment in new solutions[109](index=109&type=chunk)[111](index=111&type=chunk)[116](index=116&type=chunk) - Reliance on a limited number of large end-customers (service providers accounted for **66% of 2022 revenue**) makes the company vulnerable to delays or loss of purchases, and changes in customer deployment/payment models (e.g., SaaS subscriptions) could adversely affect operating results[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[123](index=123&type=chunk) - Dependence on third-party manufacturers (primarily in Taiwan) and limited component supply sources expose the company to disruptions, delays, and increased costs, which could impair product delivery[138](index=138&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[144](index=144&type=chunk) - Real or perceived defects, errors, or vulnerabilities in products, including failure to block security threats, could harm reputation, lead to lost sales, increased expenses, and potential litigation[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [Risks Related to Intellectual Property, Litigation, Laws and Regulations](index=39&type=section&id=Risks%20Related%20to%20Intellectual%20Property%2C%20Litigation%2C%20Laws%20and%20Regulations) Risks include intellectual property litigation, political and economic uncertainties (e.g., tariffs), data security breaches, compliance with privacy laws, and changes in tax regulations - The company is exposed to intellectual property litigation and claims, with potential for significant expenses, damages, or injunctions, and may not be able to adequately protect its IP rights, especially in foreign countries[181](index=181&type=chunk)[182](index=182&type=chunk)[184](index=184&type=chunk)[186](index=186&type=chunk)[188](index=188&type=chunk) - Brexit, enhanced U.S. tariffs, import/export restrictions, and Chinese regulations create political and economic uncertainty, potentially increasing costs, delaying orders, and negatively impacting global economic conditions and the company's business[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[196](index=196&type=chunk) - Failure to protect the confidentiality and security of data, trade secrets, and personally identifiable information (PII) could lead to legal liability, reputational damage, and significant costs, as evidenced by a January 2023 cyber-security incident[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - Compliance with evolving data protection and privacy laws (e.g., GDPR, CCPA/CPRA) is critical, and non-compliance could result in significant fines, enforcement actions, and reputational harm[204](index=204&type=chunk)[205](index=205&type=chunk) - Sales to governmental organizations are subject to challenges like high competition, lengthy sales cycles, and budgetary constraints, while compliance with various governmental laws and regulations (e.g., anti-bribery, export controls, environmental) is essential to avoid penalties[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) - Changes in tax laws or accounting principles, or adverse outcomes from tax examinations, could negatively affect operating results and financial condition, and the ability to use net operating loss carryforwards may be limited[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk) [Risks Related to Capitalization and Financial Markets](index=47&type=section&id=Risks%20Related%20to%20Capitalization%20and%20Financial%20Markets) Financial market risks include currency fluctuations, concentrated stock ownership, potential dilution from future funding, and stock price volatility - Fluctuations in foreign currency exchange rates, particularly between the U.S. Dollar and Japanese Yen, can negatively affect operating income, despite hedging practices[226](index=226&type=chunk) - Concentrated ownership by executive officers, directors, and affiliates (**5.6% as of Dec 31, 2022**, or **34.1% including other 5%+ holders**) may limit new investors' influence and could delay liquidity events[227](index=227&type=chunk)[228](index=228&type=chunk) - The company may need to raise additional funds, which could dilute existing stockholders, and the stock price has been and may continue to be volatile due to various market and company-specific factors[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) - Sales of substantial amounts of common stock in public markets could reduce the stock price and dilute voting power, while changes to dividend payments or stock repurchase programs could also negatively affect the stock price[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk)[241](index=241&type=chunk) [Item 1B. Unresolved Staff Comments](index=50&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - No unresolved staff comments were reported[243](index=243&type=chunk) [Item 2. Properties](index=50&type=section&id=Item%202.%20Properties) A10 Networks' corporate headquarters is in San Jose, California, leased until July 2027, with additional leased offices globally. The company believes current facilities are adequate but anticipates expanding and incurring additional expenses for new or expanded facilities - The corporate headquarters is a **116,381 square foot** leased space in San Jose, California, with the lease expiring on **July 31, 2027**[243](index=243&type=chunk) - The company also leases international and domestic sales offices in locations including Japan, UK, Netherlands, Taiwan, South Korea, Singapore, and India[243](index=243&type=chunk) - Current facilities are deemed adequate, but future expansion is expected, which will incur additional expenses[243](index=243&type=chunk) [Item 3. Legal Proceedings](index=50&type=section&id=Item%203.%20Legal%20Proceedings) A10 Networks is involved in various legal proceedings and claims in the ordinary course of business, with outcomes subject to uncertainty. The company assesses the probability and estimability of losses to record liabilities, and judgments may differ from actual outcomes - The company is subject to various legal proceedings and claims, which are inherently uncertain and may involve unascertainable damages[244](index=244&type=chunk) - Liabilities for claims are recorded when a loss is probable and reasonably estimable, requiring significant judgment that may differ from actual outcomes[244](index=244&type=chunk) [Item 4. Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to A10 Networks - This item is not applicable[245](index=245&type=chunk) [PART II](index=51&type=section&id=PART%20II) This part covers market information for common equity, management's discussion and analysis, market risk disclosures, and financial statements [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=51&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section provides information on the market for A10 Networks' common stock, including its NYSE listing, dividend policy, and stock repurchase programs. It also includes a comparison of cumulative total return against relevant indices [Market for Registrant's Common Equity](index=51&type=section&id=Market%20for%20Registrant%27s%20Common%20Equity) A10 Networks' common stock is listed on the NYSE, with quarterly cash dividends initiated and increased, and approximately 74 stockholders of record - A10 Networks' common stock is quoted on the NYSE under the symbol '**ATEN**'[248](index=248&type=chunk) - The Board of Directors approved quarterly cash dividends, starting at **$0.05 per share** in December 2021 and increasing to **$0.06 per share** in November 2022, treated as a return of capital[248](index=248&type=chunk) - As of February 17, 2023, there were approximately **74 stockholders of record**[249](index=249&type=chunk) [Company Stock Performance](index=52&type=section&id=Company%20Stock%20Performance) The report includes a graph comparing A10 Networks' stock performance against major indices, assuming a $100 investment from December 31, 2017 - The report includes a graph comparing the cumulative total return of A10 Networks' common stock against the NASDAQ Composite Index, Russell 1000 Index, and NYSE Technology Index, assuming a **$100 investment** on December 31, 2017[251](index=251&type=chunk) [Issuer Purchases of Equity Securities](index=52&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) The Board authorized a new $50 million stock repurchase program in November 2022, funded by existing cash and operating activities - On November 1, 2022, the Board authorized a new **$50 million stock repurchase program** for the next 12 months, with no shares repurchased during Q4 2022 under this program[254](index=254&type=chunk) - Repurchases are funded from existing cash and operating activities, and the program does not obligate the company to acquire a specific number of shares[254](index=254&type=chunk) [Unregistered Sales of Equity Securities](index=52&type=section&id=Unregistered%20Sales%20of%20Equity%20Securities) There were no unregistered sales of equity securities reported - There were no unregistered sales of equity securities[255](index=255&type=chunk) [Item 6. [Reserved]](index=52&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - This item is reserved[255](index=255&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on A10 Networks' financial condition and results of operations for 2022 and 2021, including an overview of the business, detailed analysis of revenue, costs, operating expenses, non-operating items, liquidity, cash flows, and critical accounting policies [Overview](index=53&type=section&id=Overview) A10 Networks provides secure application solutions, deriving revenue from products and services, with significant contributions from service providers and specific geographic regions - A10 Networks is a leading provider of secure application solutions for next-generation networks, offering products like Thunder ADC, Lightning ADC, Thunder CGN, Thunder TPS, Thunder SSLi, Thunder CFW, Harmony Controller, and aGalaxy TPS[258](index=258&type=chunk)[259](index=259&type=chunk) - Revenue is derived from products (hardware, perpetual software, subscriptions) and services (PCS, professional services, training), with a substantial portion from distribution channel partners[260](index=260&type=chunk) - The company reports customer verticals (service providers, enterprises) and geographic regions (Americas, APJ, EMEA), with service providers accounting for **66% of total revenue in 2022**[261](index=261&type=chunk)[264](index=264&type=chunk) Revenue by Geographic Region (2022) | Region | % of Total Revenue | | :------- | :----------------- | | Americas | 53% | | APJ | 32% | | EMEA | 15% | - Cash and cash equivalents were **$68.0 million** and marketable securities were **$83.0 million** as of December 31, 2022, with cash provided by operating activities at **$66.1 million in 2022**[266](index=266&type=chunk) [Results of Operations](index=55&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing changes in revenue, cost of revenue, gross profit, gross margin, and operating expenses for the reporting periods [Revenue](index=55&type=section&id=Revenue) Total revenue increased by 12.1% in 2022, driven by product and service growth, particularly in the Americas and EMEA, despite a slight decline in APJ Total Revenue (2022 vs 2021) | Metric | 2022 (in thousands USD) | 2021 (in thousands USD) | Change (Amount in thousands USD) | Change (%) | | :------- | :------------------ | :------------------ | :-------------- | :--------- | | Products | $173,201 | $148,398 | $24,803 | 16.7% | | Services | $107,137 | $101,644 | $5,493 | 5.4% | | Total | **$280,338** | **$250,042** | **$30,296** | **12.1%** | - Products revenue increased by **17% in 2022**, driven by higher demand from service provider customers in the Americas, APAC, and EMEA, partially offset by lower demand in Japan[274](index=274&type=chunk) - Services revenue increased by **5% in 2022**, mainly due to increased PCS sales from a growing customer base in the Americas and EMEA[274](index=274&type=chunk) Revenue by Geographic Region (2022 vs 2021) | Region | 2022 (in thousands USD) | 2021 (in thousands USD) | Change (Amount in thousands USD) | Change (%) | | :------- | :------------------ | :------------------ | :-------------- | :--------- | | Americas | $148,673 | $121,169 | $27,504 | 23% | | APJ | $89,702 | $90,374 | $(672) | (1)% | | EMEA | $41,963 | $38,499 | $3,464 | 9% | [Cost of Revenue, Gross Profit and Gross Margin](index=57&type=section&id=Cost%20of%20Revenue%2C%20Gross%20Profit%20and%20Gross%20Margin) Total cost of revenue increased by 6% in 2022, resulting in a 1.1% increase in total gross margin, influenced by product mix and decreased service personnel costs Cost of Revenue (2022 vs 2021) | Metric | 2022 (in thousands USD) | 2021 (in thousands USD) | Change (Amount in thousands USD) | Change (%) | | :------- | :------------------ | :------------------ | :-------------- | :--------- | | Products | $40,135 | $32,620 | $7,515 | 23% | | Services | $16,697 | $20,885 | $(4,188) | (20)% | | Total | **$56,832** | **$53,505** | **$3,327** | **6%** | Gross Profit and Gross Margin (2022 vs 2021) | Metric | 2022 Gross Profit (in thousands USD) | 2022 Gross Margin | 2021 Gross Profit (in thousands USD) | 2021 Gross Margin | Change in Gross Margin | | :------- | :------------------------------- | :---------------- | :------------------------------- | :---------------- | :--------------------- | | Products | $133,066 | 76.8% | $115,778 | 78.0% | (1.2)% | | Services | $90,440 | 84.4% | $80,759 | 79.5% | 4.9% | | Total | **$223,506** | **79.7%** | **$196,537** | **78.6%** | **1.1%** | - Products gross margin decreased by **1.2%** due to changes in product and geographic mix, while services gross margin increased by **4.9%** primarily due to decreased personnel-related support costs[279](index=279&type=chunk)[280](index=280&type=chunk) [Operating Expenses](index=57&type=section&id=Operating%20Expenses) Total operating expenses increased by 4% in 2022, primarily due to higher sales and marketing, and research and development consulting expenses Operating Expenses (2022 vs 2021) | Expense Category | 2022 (in thousands USD) | 2021 (in thousands USD) | Change (Amount in thousands USD) | Change (%) | | :----------------- | :------------------ | :------------------ | :-------------- | :--------- | | Sales and marketing | $88,511 | $85,651 | $2,860 | 3% | | Research and development | $58,398 | $54,077 | $4,321 | 8% | | General and administrative | $23,518 | $23,421 | $97 | 0% | | Total Operating Expenses | **$170,427** | **$163,149** | **$7,278** | **4%** | - Sales and marketing expenses increased by **$2.9 million** due to higher travel, marketing activities, and consulting expenses[284](index=284&type=chunk) - Research and development expenses increased by **$4.3 million**, mainly from a **$5.0 million rise in consulting expenses** as the company shifts to non-employee consultants, partially offset by a decrease in salary and benefits[285](index=285&type=chunk) - General and administrative expenses remained stable, with a **$2.8 million increase in consulting expenses** and **$1.7 million in property tax**, offset by a **$4.4 million decrease in salary and benefits** due to reduced headcount[287](index=287&type=chunk) [Non-Operating Income (Expense) - Interest Income](index=59&type=section&id=Non-Operating%20Income%20%28Expense%29%20-%20Interest%20Income) Interest income significantly increased in 2022, primarily from cash, cash equivalents, and marketable securities Interest Income (2022 vs 2021) | Year | Interest Income (in thousands USD) | | :--- | :----------------------------- | | 2022 | $1,304 | | 2021 | $409 | - Interest income primarily from cash, cash equivalents, and marketable securities, increased significantly in 2022[289](index=289&type=chunk) [Non-Operating Income (Expense) - Interest and Other Income (Expense), Net](index=59&type=section&id=Non-Operating%20Income%20%28Expense%29%20-%20Interest%20and%20Other%20Income%20%28Expense%29%2C%20Net) Net interest and other income showed a favorable change in 2022, driven by foreign currency gains, partially offset by an equity investment impairment - Interest and other income (expense), net, showed a favorable change of **$0.5 million (23%) in 2022** compared to 2021, driven by a **$1.5 million favorable change in foreign currency exchange gains and losses**, partially offset by a **$1.0 million impairment of an equity investment**[290](index=290&type=chunk) [Provision for (Benefit from) Income Taxes](index=59&type=section&id=Provision%20for%20%28Benefit%20from%29%20Income%20Taxes) The company recorded an income tax provision in 2022, contrasting with a significant benefit in 2021 primarily due to a deferred tax asset valuation allowance release Income Tax Provision (Benefit) (2022 vs 2021) | Year | Income Tax Provision (Benefit) (in thousands USD) | | :--- | :-------------------------------------------- | | 2022 | $5,808 | | 2021 | $(63,245) | - The 2021 income tax benefit was mainly due to the release of a deferred tax asset valuation allowance, while the 2022 provision primarily consisted of federal income taxes[291](index=291&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with sufficient cash and marketable securities to meet anticipated needs, alongside ongoing stock repurchase and dividend programs Liquidity Position (as of Dec 31, 2022) | Metric | Amount (in millions USD) | | :-------------------- | :------------------- | | Cash and cash equivalents | $68.0 | | Marketable securities | $83.0 | | Working capital | $138.7 | | Total stockholders' equity | $181.0 | - The company believes existing cash, cash equivalents, and marketable securities are sufficient for anticipated needs for at least the next 12 months and beyond, despite plans for continued investment in long-term growth[294](index=294&type=chunk) - In September 2022, the company repurchased **3.5 million shares** of common stock from Summit Partners for **$44.6 million**[295](index=295&type=chunk) - The Board authorized a new **$50 million stock repurchase program** in November 2022, with **$50.0 million available** as of December 31, 2022. Total repurchases in 2022 were **6.1 million shares for $79.3 million**[296](index=296&type=chunk) - Quarterly cash dividends were initiated in October 2021 and increased to **$0.06 per share** in October 2022, with future payments subject to Board discretion[297](index=297&type=chunk) [Statements of Cash Flows](index=60&type=section&id=Statements%20of%20Cash%20Flows) Cash provided by operating activities increased in 2022, while cash used in investing and financing activities reflected marketable securities transactions, stock repurchases, and dividend payments Cash Flows Summary (2022 vs 2021) | Activity | 2022 (in thousands USD) | 2021 (in thousands USD) | | :--------- | :------------------ | :------------------ | | Operating | $66,100 | $50,097 | | Investing | $11,087 | $(38,070) | | Financing | $(88,141) | $(16,383) | | Net Change | $(10,954) | $(4,356) | - Cash provided by operating activities increased to **$66.1 million in 2022**, driven by net income and non-cash adjustments, partially offset by changes in operating assets and liabilities[300](index=300&type=chunk)[301](index=301&type=chunk) - Cash used in investing activities was **$11.1 million in 2022**, primarily due to purchases of marketable securities and property/equipment, offset by proceeds from maturities and sales of marketable securities[304](index=304&type=chunk) - Cash used in financing activities was **$88.1 million in 2022**, mainly for common stock repurchases (**$79.3 million**) and dividend payments (**$15.9 million**), partially offset by proceeds from equity incentive plans[305](index=305&type=chunk) [Critical Accounting Policies and Estimates](index=61&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statement preparation involves significant judgments and estimates, particularly for revenue recognition, inventory valuation, and various allowances and accruals - The preparation of financial statements requires significant judgments and estimates, particularly for revenue recognition, allowance for doubtful accounts, inventory valuation, marketable securities, contingencies, accrued liabilities, deferred commissions, and stock-based compensation[306](index=306&type=chunk) - Inventory is valued at the lower of cost or net realizable value, with write-downs for excess and obsolete products impacting cost of products revenue[307](index=307&type=chunk) - Revenue recognition follows a five-step model, allocating transaction price to distinct performance obligations (products and PCS) based on standalone selling price (SSP) estimates, which require significant judgment[308](index=308&type=chunk)[309](index=309&type=chunk)[312](index=312&type=chunk)[313](index=313&type=chunk) [Recent Accounting Pronouncements](index=64&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted several ASUs, none of which had a significant impact on its consolidated financial statements - The company adopted ASU 2016-13 (Credit Losses), ASU 2017-04 (Goodwill Impairment), ASU 2018-13 (Fair Value Measurement), ASU 2019-12 (Income Taxes), and ASU 2020-10 (Codification Improvements), none of which had a significant impact on consolidated financial statements[316](index=316&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=65&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses A10 Networks' exposure to market risks, specifically foreign currency risk and interest rate sensitivity, and the strategies employed to manage them [Foreign Currency Risk](index=65&type=section&id=Foreign%20Currency%20Risk) The company is exposed to foreign currency fluctuations, primarily affecting Japanese Yen-denominated revenue and local currency costs, with a limited overall impact - The company is exposed to foreign currency exchange rate fluctuations, primarily impacting revenue denominated in Japanese Yen and costs in local currencies (Americas, EMEA, APAC)[318](index=318&type=chunk) - Net foreign exchange losses were **$0.5 million in 2022** and **$1.9 million in 2021**. A hypothetical **10% change** in exchange rates would not significantly impact consolidated results[320](index=320&type=chunk) [Interest Rate Sensitivity](index=65&type=section&id=Interest%20Rate%20Sensitivity) Exposure to interest rate changes primarily relates to marketable securities, including various fixed-income instruments, with hypothetical fair values provided for sensitivity analysis - Exposure to interest rate changes relates primarily to marketable securities, which include certificates of deposit, corporate securities, U.S. Treasury and agency securities, commercial paper, and asset-backed securities[321](index=321&type=chunk) Hypothetical Fair Values of Marketable Securities (Dec 31, 2022) | Interest Rate Shift | Fair Value (in thousands USD) | | :------------------ | :------------------------ | | -150 BPS | $83,529 | | -100 BPS | $83,359 | | -50 BPS | $83,188 | | 0 BPS (Actual) | $83,018 | | +50 BPS | $82,847 | | +100 BPS | $82,676 | | +150 BPS | $82,506 | [Item 8. Financial Statements and Supplementary Data](index=66&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements of A10 Networks, Inc. for the years ended December 31, 2022, 2021, and 2020, along with accompanying notes detailing accounting policies, revenue, marketable securities, leases, other balance sheet accounts, commitments, equity incentive plans, net income per share, income taxes, geographic information, and quarterly financial data [Report of Independent Registered Public Accounting Firm](index=67&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Armanino LLP issued an unqualified opinion on the consolidated financial statements and internal control effectiveness, highlighting revenue recognition and income taxes as critical audit matters - Armanino LLP, the independent registered public accounting firm, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2022[326](index=326&type=chunk)[327](index=327&type=chunk) - Critical audit matters included revenue recognition (identifying distinct performance obligations, determining standalone selling prices) and income taxes (applying complex tax laws, estimating future tax credit utilization)[334](index=334&type=chunk)[336](index=336&type=chunk) [Consolidated Balance Sheets](index=70&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of December 31, 2022, and 2021 Consolidated Balance Sheets (as of Dec 31, 2022 and 2021) | ASSETS (in thousands USD) | Dec 31, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | Cash and cash equivalents | $67,971 | $78,925 | | Marketable securities | $83,018 | $106,117 | | Accounts receivable, net | $72,928 | $61,795 | | Inventory | $19,693 | $22,462 | | Prepaid expenses and other current assets | $13,381 | $14,720 | | **Total current assets** | **$256,991** | **$284,019** | | Property and equipment, net | $19,743 | $10,692 | | Goodwill | $1,307 | $1,307 | | Deferred tax assets, net | $63,183 | $65,773 | | Other non-current assets | $27,881 | $31,294 | | **Total assets** | **$369,105** | **$393,085** | | LIABILITIES (in thousands USD) | | | | Accounts payable | $6,725 | $6,852 | | Accrued and other liabilities | $37,183 | $36,101 | | Deferred revenue, current | $74,340 | $73,132 | | **Total current liabilities** | **$118,248** | **$116,085** | | Deferred revenue, non-current | $52,652 | $48,499 | | Other non-current liabilities | $17,193 | $19,613 | | **Total liabilities** | **$188,093** | **$184,197** | | STOCKHOLDERS' EQUITY (in thousands USD) | | | | Common stock | $1 | $1 | | Treasury stock, at cost | $(134,934) | $(55,677) | | Additional paid-in-capital | $466,927 | $446,035 | | Dividends paid | $(19,802) | $(3,880) | | Accumulated other comprehensive loss | $(726) | $(229) | | Accumulated deficit | $(130,454) | $(177,362) | | **Total stockholders' equity** | **$181,012** | **$208,888** | | **Total liabilities and stockholders' equity** | **$369,105** | **$393,085** | [Consolidated Statements of Operations](index=71&type=section&id=Consolidated%20Statements%20of%20Operations) This section provides the company's financial performance, including revenue, cost of revenue, gross profit, operating expenses, and net income for 2022, 2021, and 2020 Consolidated Statements of Operations (Years Ended Dec 31, 2022, 2021, 2020) | (in thousands USD) | 2022 | 2021 | 2020 | | :--------------- | :--- | :--- | :--- | | Products Revenue | $173,201 | $148,398 | $129,876 | | Services Revenue | $107,137 | $101,644 | $95,651 | | **Total Revenue** | **$280,338** | **$250,042** | **$225,527** | | Cost of Products Revenue | $40,135 | $32,620 | $29,109 | | Cost of Services Revenue | $16,697 | $20,885 | $21,039 | | **Total Cost of Revenue** | **$56,832** | **$53,505** | **$50,148** | | **Gross Profit** | **$223,506** | **$196,537** | **$175,379** | | Sales and marketing | $88,511 | $85,651 | $77,732 | | Research and development | $58,398 | $54,077 | $58,063 | | General and administrative | $23,518 | $23,421 | $21,851 | | **Total Operating Expenses** | **$170,427** | **$163,149** | **$157,646** | | **Income from Operations** | **$53,079** | **$33,388** | **$17,733** | | Interest income | $1,304 | $409 | $1,513 | | Interest and other income (expense), net | $(1,667) | $(2,155) | $(107) | | **Total Non-Operating Income (Expense), Net** | **$(363)** | **$(1,746)** | **$1,406** | | **Income before Income Taxes** | **$52,716** | **$31,642** | **$19,139** | | Provision for (benefit from) income taxes | $5,808 | $(63,245) | $1,323 | | **Net Income** | **$46,908** | **$94,887** | **$17,816** | | Net income per share: Basic | $0.62 | $1.23 | $0.23 | | Net income per share: Diluted | $0.60 | $1.19 | $0.22 | [Consolidated Statements of Comprehensive Income (Loss)](index=72&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This section presents the company's comprehensive income (loss), including net income and other comprehensive income items, for 2022, 2021, and 2020 Consolidated Statements of Comprehensive Income (Loss) (Years Ended Dec 31, 2022, 2021, 2020) | (in thousands USD) | 2022 | 2021 | 2020 | | :--------------- | :--- | :--- | :--- | | Net income | $46,908 | $94,887 | $17,816 | | Unrealized loss on marketable securities | $(497) | $(327) | $(153) | | **Comprehensive income** | **$46,411** | **$94,560** | **$17,663** | [Consolidated Statements of Stockholders' Equity](index=73&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section details changes in stockholders' equity, including common shares, treasury stock, additional paid-in capital, dividends, and accumulated deficit, for 2022, 2021, and 2020 Consolidated Statements of Stockholders' Equity (Years Ended Dec 31, 2022, 2021, 2020) | (in thousands USD) | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | | :--------------- | :----------- | :----------- | :----------- | | Common Shares | 73,738 | 77,423 | 76,346 | | Common Stock | $1 | $1 | $1 | | Treasury stock, at cost | $(134,934) | $(55,677) | $(37,410) | | Additional Paid-in Capital | $466,927 | $446,035 | $425,534 | | Dividends paid | $(19,802) | $(3,880) | $0 | | Accumulated Other Comprehensive (Loss) | $(726) | $(229) | $98 | | Accumulated Deficit | $(130,454) | $(177,362) | $(272,249) | | **Total Stockholders' Equity** | **$181,012** | **$208,888** | **$115,974** | [Consolidated Statements of Cash Flows](index=74&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash flows from operating, investing, and financing activities for 2022, 2021, and 2020 Consolidated Statements of Cash Flows (Years Ended Dec 31, 2022, 2021, 2020) | (in thousands USD) | 2022 | 2021 | 2020 | | :--------------- | :--- | :--- | :--- | | Net cash provided by operating activities | $66,100 | $50,097 | $55,286 | | Net cash provided by (used in) investing activities | $11,087 | $(38,070) | $5,202 | | Net cash used in financing activities | $(88,141) | $(16,383) | $(22,949) | | Net increase (decrease) in cash and cash equivalents | $(10,954) | $(4,356) | $37,539 | | Cash and cash equivalents - end of year | $67,971 | $78,925 | $83,281 | [Notes to Consolidated Financial Statements](index=75&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies, financial statement line items, and other relevant financial information [1. Description of Business and Summary of Significant Accounting Policies](index=75&type=section&id=1.%20Description%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note describes A10 Networks' business and outlines its significant accounting policies, including revenue recognition, inventory, and stock-based compensation - A10 Networks, Inc. provides secure application solutions and services, including Thunder ADC, Lightning ADC, Thunder CGN, Thunder TPS, Thunder SSLi, Thunder CFW, Harmony Controller, and aGalaxy TPS, available in various form factors[351](index=351&type=chunk) - The financial statements are prepared in accordance with U.S. GAAP, requiring estimates and assumptions for revenue recognition, allowances, inventory valuation, marketable securities, and stock-based compensation[352](index=352&type=chunk)[353](index=353&type=chunk) - Key accounting policies cover cash and cash equivalents, available-for-sale marketable securities (fair value measurement), accounts receivable (net of allowances), inventory (lower of cost or net realizable value), property and equipment (straight-line depreciation), leases (ROU assets and lease liabilities), goodwill (annual impairment review), and intangible assets (straight-line amortization)[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk) - Revenue is recognized upon transfer of control, with products revenue from hardware and software licenses, and services revenue from PCS, professional services, and training. SSP is used for contracts with multiple performance obligations[368](index=368&type=chunk)[369](index=369&type=chunk)[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk) - Deferred contract acquisition costs (sales commissions) are capitalized and amortized. Research and development costs are expensed as incurred, except for certain internally developed software costs capitalized from Q1 2020[376](index=376&type=chunk)[377](index=377&type=chunk)[378](index=378&type=chunk) - Stock-based compensation is measured at fair value on the grant date and recognized over the service period. Warranty costs are estimated based on historical returns. Foreign currency transactions are remeasured, with gains/losses in interest and other income, net[379](index=379&type=chunk)[380](index=380&type=chunk)[381](index=381&type=chunk) - Income taxes are accounted for using the asset and liability method, with deferred tax assets and liabilities recognized for temporary differences and carryforwards, and a valuation allowance established if realization is not more likely than not[382](index=382&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk) - The company operates as a single reportable segment, relies on three third-party manufacturers, and manages credit risk for accounts receivable through evaluations[386](index=386&type=chunk)[387](index=387&type=chunk)[388](index=388&type=chunk) Significant Customer Revenue Concentration | Customer | 2022 | 2021 | 2020 | | :--------- | :--- | :--- | :--- | | Customer A (distributor) | 15% | 12% | * | | Customer B (distributor) | 13% | * | * | | Customer C (distributor) | * | * | 10% | | Customer D (end-customer) | 11% | 11% | 12% | * represents less than 10% of total revenue [2. Revenue](index=83&type=section&id=2.%20Revenue) This note details the company's revenue recognition, contract balances, deferred revenue, and remaining performance obligations Contract Balances (in thousands USD) | Balance Sheet Line Reference | Dec 31, 2022 | Dec 31, 2021 | | :--------------------------- | :----------- | :----------- | | Accounts receivables, net | $72,928 | $61,795 | | Deferred revenue, current | $74,340 | $73,132 | | Deferred revenue, non-current | $52,652 | $48,499 | - The company recognized **$74.5 million** and **$65.0 million** in revenue during 2022 and 2021, respectively, related to deferred revenue at the beginning of those periods[400](index=400&type=chunk) Deferred Revenue Breakdown (in thousands USD) | Deferred Revenue | Dec 31, 2022 | Dec 31, 2021 | | :----------------- | :----------- | :----------- | | Products | $7,782 | $6,164 | | Services | $119,210 | $115,467 | | **Total deferred revenue** | **$126,992** | **$121,631** | | Less: current portion | $(74,340) | $(73,132) | | **Non-current portion** | **$52,652** | **$48,499** | - Deferred contract acquisition costs totaled **$6.1 million (current)** and **$4.3 million (non-current)** as of December 31, 2022, with related amortization of **$7.6 million** for the year[402](index=402&type=chunk) Remaining Performance Obligations (as of Dec 31, 2022) | Period | Amount (in thousands USD) | | :----- | :-------------------- | | 2023 | $74,340 | | 2024 | $42,314 | | 2025 | $10,338 | | **Total** | **$126,992** | [3. Marketable Securities and Fair Value Measurements](index=84&type=section&id=3.%20Marketable%20Securities%20and%20Fair%20Value%20Measurements) This note provides details on the company's marketable securities portfolio, fair value measurements, and unrealized gains or losses Marketable Securities (as of Dec 31, 2022) | Category | Amortized Cost (in thousands USD) | Gross Unrealized Losses (in thousands USD) | Fair Value (in thousands USD) | | :--------- | :---------------------------- | :------------------------------------- | :------------------------ | | Corporate securities | $35,137 | $(550) | $34,587 | | U.S. Treasury and agency securities | $28,627 | $(292) | $28,335 | | Commercial paper | $11,859 | $0 | $11,859 | | Asset-backed securities | $8,331 | $(94) | $8,237 | | **Total** | **$83,954** | **$(936)** | **$83,018** | - All marketable securities are classified as current assets and are available-for-sale. Unrealized losses are considered temporary, primarily due to interest rate shifts, and no impairment charges were recorded[406](index=406&type=chunk)[408](index=408&type=chunk) Fair Value Measurements (as of Dec 31, 2022) | (in thousands USD) | Level 1 | Level 2 | Level 3 | Total | | :--------------- | :------ | :------ | :------ | :---- | | Cash | $54,336 | $0 | $0 | $54,336 | | Cash equivalents | $13,635 | $0 | $0 | $13,635 | | Corporate securities | $0 | $34,587 | $0 | $34,587 | | U.S. Treasury and agency securities | $0 | $28,335 | $0 | $28,335 | | Commercial paper | $0 | $11,859 | $0 | $11,859 | | Asset-backed securities | $0 | $8,237 | $0 | $8,237 | | **Total** | **$67,971** | **$83,018** | **$0** | **$150,989** | [4. Leases](index=85&type=section&id=4.%20Leases) This note describes the company's operating lease arrangements, including right-of-use assets, lease liabilities, and future lease payment obligations - The company leases various facilities under non-cancellable operating lease arrangements expiring through **July 2027**, requiring payment of operating expenses and containing renewal/escalation clauses[410](index=410&type=chunk) Operating Lease Assets and Liabilities (as of Dec 31, 2022) | Metric | Amount (in thousands USD) | | :-------------------- | :-------------------- | | Right-of-use assets | $21,197 | | Current lease liabilities | $4,792 | | Non-current lease liabilities | $16,846 | | **Total operating lease liabilities** | **$21,638** | Future Lease Payments (as of Dec 31, 2022) | Year | Total Lease Payments (in thousands USD) | | :--- | :---------------------------------- | | 2023 | $5,392 | | 2024 | $5,513 | | 2025 | $4,970 | | 2026 | $4,892 | | 2027 | $2,441 | | **Total** | **$23,208** | - Operating lease costs were **$4.358 million** for the year ended December 31, 2022, with a weighted-average remaining term of **4.4 years** and a weighted-average discount rate of **3.20%**[413](index=413&type=chunk)[414](index=414&type=chunk) [5. Other Balance Sheet Accounts Details](index=87&type=section&id=5.%20Other%20Balance%20Sheet%20Accounts%20Details) This note provides detailed breakdowns of various balance sheet accounts, including allowance for doubtful accounts, inventory, property and equipment, and accrued liabilities Allowance for Doubtful Accounts (in thousands USD) | Metric | Dec 31, 2022 | Dec 31, 2021 | | :-------------------------------- | :----------- | :----------- | | Beginning balance | $543 | $41 | | Increase (decrease) in provision | $(202) | $616 | | Write-offs | $(309) | $(114) | | **Ending balance** | **$32** | **$543** | Inventory Breakdown (in thousands USD) | Category | Dec 31, 2022 | Dec 31, 2021 | | :--------- | :----------- | :----------- | | Raw materials | $12,771 | $10,774 | | Finished goods | $6,922 | $11,688 | | **Total inventory** | **$19,693** | **$22,462** | Property and Equipment, Net (in thousands USD) | Category | Dec 31, 2022 | Dec 31, 2021 | | :--------- | :----------- | :----------- | | Equipment | $27,028 | $25,407 | | Software | $2,537 | $807 | | Furniture and fixtures | $503 | $545 | | Leasehold improvements | $3,267 | $3,231 | | Construction in progress | $9,152 | $4,823 | | **Property and equipment, gross** | **$42,487** | **$34,813** | | Less: accumulated depreciation | $(22,744) | $(24,121) | | **Property and equipment, net** | **$19,743** | **$10,692** | - Purchased intangible assets (developed technology and patents) were fully amortized as of December 31, 2021[422](index=422&type=chunk) Accrued Liabilities (in thousands USD) | Category | Dec 31, 2022 | Dec 31, 2021 | | :--------- | :----------- | :----------- | | Accrued compensation and benefits | $19,832 | $24,003 | | Accrued tax liabilities | $1,635 | $1,020 | | Lease liabilities | $4,792 | $3,983 | | Other | $10,924 | $7,095 | | **Total accrued liabilities** | **$37,183** | **$36,101** | [6. Commitments and Contingencies](index=89&type=section&id=6.%20Commitments%20and%20Contingencies) Thi

Financial Data and Key Metrics Changes - Fourth quarter revenue reached a record $77.6 million, up 9.9% year-over-year [17] - Full-year revenue was a record $280.3 million, up 12.1% year-over-year [20] - Non-GAAP net income for Q4 was $18.4 million, or $0.24 per share, up 12% year-over-year [19] - Non-GAAP gross margin for the year was 80.3%, consistent with the previous year [20] - Adjusted EBITDA for Q4 was a record $22.3 million, reflecting 28.7% of revenue [18] Business Line Data and Key Metrics Changes - Product revenue for Q4 was $49.6 million, representing 63.9% of total revenue, up 13.5% year-over-year [17] - Services revenue for Q4 was $28.1 million, or 36.1% of total revenue [17] - On a trailing 12-month basis, product revenue increased by 17% [10] Market Data and Key Metrics Changes - Revenue from North America was $41.2 million, up 21.8% [17] - Revenue in Japan increased approximately 8% year-over-year in Q4 on a constant currency basis [17] - Deferred revenue was $127 million as of December 31, 2022, up 45% year-over-year [17] Company Strategy and Development Direction - The company focuses on critical network infrastructure and security solutions, which continue to drive growth [10] - A10 aims to maintain a disciplined, flexible, and opportunistic capital allocation strategy [15] - The management emphasizes organic growth while remaining open to M&A opportunities that align with strategic goals [38] Management Comments on Operating Environment and Future Outlook - Management noted extended cycles in customer decision-making, particularly in North America, due to economic concerns [26] - The company expects full-year 2023 revenue growth to outpace its peer set while achieving profitability targets [21] - Management expressed confidence in achieving profitability targets despite economic headwinds [14] Other Important Information - The company returned over $95 million to shareholders in 2022 through cash dividends and stock repurchases [15] - A quarterly dividend of $0.06 per share was approved, to be paid on March 1, 2023 [21] - The company ended the year with nearly $151 million in cash and no debt [15] Q&A Session Summary Question: What are you seeing regarding extended cycles affecting revenue targets? - Management indicated that extended cycles are particularly relevant to North American customers, who are cautious due to economic factors [26] Question: Are you experiencing increased competition or pricing pressure? - Management clarified that there is no significant pricing pressure and that customer decisions are influenced more by CapEx cycles and risk perception [28] Question: How much of the expenses are within your control? - Management stated that they have been able to flex their cost structure to ensure that expense growth remains lower than revenue growth [32] Question: Have you seen changes in customer decision-making due to the macro environment? - Management noted increased scrutiny in the decision-making process, particularly for modernization projects, while revenue-generating projects continue to move forward [36] Question: Are you actively looking for M&A opportunities? - Management confirmed they are evaluating opportunities but prioritize organic growth first [38] Question: Can you provide insight into revenue growth visibility for the upcoming year? - Management indicated that the first half of the year may be softer, with larger deals potentially shifting to the latter part of the year [41]

Q4 2022 Financial Results & Commentary February 7, 2023 Cautionary Statements & Disclosures This presentation and the accompanying oral presentation contain "forward-looking" statements that are based on our management's beliefs and assumptions, including statements regarding our future financial performance, strategy, routes to market, technical differentiation, positioning, capital allocation strategy, expansion opportunities, growth, profitability, market growth, as well as market and technology trends. ...

```markdown [Note Regarding Forward-Looking Statements](index=4&type=section&id=Note%20Regarding%20Forward-Looking%20Statements) This section outlines the company's forward-looking statements, identifying key phrases, covered topics, risks, and official disclosure channels - Forward-looking statements are identified by words such as "believe," "may," "will," "estimate," "anticipate," and similar expressions conveying uncertainty of future events or outcomes[6](index=6&type=chunk) - Topics covered by forward-looking statements include the impact of COVID-19, semiconductor shortages, revenue growth, market needs, new product introductions, competition, liquidity, stock repurchase programs, and dividends[7](index=7&type=chunk) - Actual results may differ materially from forward-looking statements due to various risks, including those described in the "Risk Factors" section and the rapidly changing environment, such as the COVID-19 pandemic[8](index=8&type=chunk)[9](index=9&type=chunk) - The company uses its investor relations website, company blog, and corporate Twitter account to post important information for investors and for disclosing material non-public information[11](index=11&type=chunk) [Note Regarding COVID-19](index=5&type=section&id=Note%20Regarding%20COVID-19) This section details the ongoing impact of COVID-19 on operations, supply chain, financial performance, and responsive measures - The COVID-19 pandemic, declared in March 2020, continues to affect areas where the company operates and sells products and services, leading to significant deterioration of economic conditions in many countries[12](index=12&type=chunk) - The company implemented business practice modifications, including work-from-home policies and travel restrictions, which may still affect operations, contract manufacturers, and vendors[12](index=12&type=chunk) - Disruptions caused by COVID-19 may negatively affect revenue, results of operations, financial condition, liquidity, and capital investments in 2022 due to potential supply shortages or limitations on import/export/sales[12](index=12&type=chunk) - Measures taken include implementing work-from-home and social distancing, ensuring remote work capability, maintaining focus on profitability, and closely monitoring the supply chain[13](index=13&type=chunk) [PART I. FINANCIAL INFORMATION](index=8&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents A10 Networks' unaudited condensed consolidated financial statements, including balance sheets, income, equity, cash flows, and detailed accounting notes [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=8&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This chapter presents the company's core unaudited financial statements, including balance sheets, income, equity, and cash flows for specified periods [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | **Assets:** | | | | Cash and cash equivalents | **$32,131** | **$78,925** | | Marketable securities | **$95,642** | **$106,117** | | Accounts receivable, net | **$73,500** | **$61,795** | | Inventory | **$21,289** | **$22,462** | | Total current assets | **$237,585** | **$284,019** | | Property and equipment, net | **$17,958** | **$10,692** | | Total assets | **$352,661** | **$393,085** | | **Liabilities:** | | | | Total current liabilities | **$122,279** | **$116,085** | | Total liabilities | **$191,927** | **$184,197** | | **Stockholders' Equity:** | | | | Total stockholders' equity | **$160,734** | **$208,888** | | Total liabilities and stockholders' equity | **$352,661** | **$393,085** | [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | **Revenue:** | | | | | | Products | **$45,104** | **$39,815** | **$123,624** | **$104,718** | | Services | **$26,955** | **$25,545** | **$79,080** | **$74,653** | | Total revenue | **$72,059** | **$65,360** | **$202,704** | **$179,371** | | **Gross Profit:** | | | | | | Gross profit | **$57,294** | **$52,166** | **$161,615** | **$140,048** | | **Operating Expenses:** | | | | | | Sales and marketing | **$21,605** | **$21,354** | **$66,159** | **$60,195** | | Research and development | **$14,360** | **$13,578** | **$41,483** | **$41,050** | | General and administrative | **$5,661** | **$6,931** | **$17,160** | **$17,260** | | Total operating expenses | **$41,626** | **$41,863** | **$124,802** | **$118,505** | | **Income from Operations:** | | | | | | Income from operations | **$15,668** | **$10,303** | **$36,813** | **$21,543** | | **Net Income:** | | | | | | Net income | **$12,113** | **$74,886** | **$28,878** | **$84,159** | | **Net Income Per Share:** | | | | | | Basic EPS | **$0.16** | **$0.97** | **$0.38** | **$1.09** | | Diluted EPS | **$0.16** | **$0.94** | **$0.37** | **$1.05** | [Condensed Consolidated Statements of Comprehensive Income](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income | **$12,113** | **$74,886** | **$28,878** | **$84,159** | | Unrealized gain (loss) on marketable securities | (**$135**) | **$11** | (**$1,112**) | (**$96**) | | Comprehensive income | **$11,978** | **$74,897** | **$27,766** | **$84,063** | [Condensed Consolidated Statements of Stockholders' Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total stockholders' equity (Beginning Balance) | **$194,759** | **$124,505** | **$208,888** | **$115,974** | | Repurchase of common stock | (**$47,499**) | — | (**$79,257**) | (**$11,213**) | | Payments for dividends | (**$3,849**) | — | (**$11,512**) | — | | Net income | **$12,113** | **$74,886** | **$28,878** | **$84,159** | | Total stockholders' equity (Ending Balance) | **$160,734** | **$203,595** | **$160,734** | **$203,595** | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Activity | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | **$38,773** | **$41,203** | | Net cash provided by (used in) investing activities | **$540** | (**$31,384**) | | Net cash used in financing activities | (**$86,107**) | (**$7,463**) | | Net increase (decrease) in cash and cash equivalents | (**$46,794**) | **$2,356** | | Cash and cash equivalents—end of period | **$32,131** | **$85,637** | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details disclosures for consolidated financial statements, including accounting policies, financial instruments, commitments, equity plans, and revenue recognition [Description of Business and Summary of Significant Accounting Policies](index=13&type=section&id=Description%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) - A10 Networks, Inc. provides networking solutions focused on reliability, availability, scalability, and cybersecurity for cloud, on-premise, or hybrid environments[35](index=35&type=chunk) - The product portfolio includes Thunder Application Delivery Controller (ADC), Carrier-Grade Network Access Translation (CGNAT)/Convergent Firewall (CFW), Thunder Threat Protection System (TPS) for DDOS protection/Secure Socket Layer Insight (SSLi), and management tools like Harmony Controller and aGalaxy[36](index=36&type=chunk) - Revenue is derived from two sources: products (hardware, perpetual software, subscription offerings) and services (post contract support (PCS), professional services, training)[37](index=37&type=chunk) - The company sells globally to service providers and enterprises, with over **7,950** end-customers worldwide since inception, primarily through a high-touch sales organization and distribution channel partners[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) | Customer | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Customer A (distribution partner) | * | **13%** | * | **10%** | | Customer B (end-customer) | **10%** | * | **10%** | * | | Customer C (end-customer) | * | **10%** | **13%** | * | [Leases](index=15&type=section&id=Leases) - The company leases various operating spaces in the United States, Asia, and Europe under non-cancellable operating lease arrangements expiring through July **2027**[55](index=55&type=chunk) | Metric | September 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------- | | Right-of-use assets | **$22,388** | | Current lease liabilities (Accrued liabilities) | **$4,653** | | Non-current lease liabilities (Other non-current liabilities) | **$17,972** | | Total operating lease liabilities | **$22,625** | - The weighted-average remaining lease term is **4.64** years, and the weighted-average discount rate is **3.2%** as of September 30, 2022[59](index=59&type=chunk) | Metric | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total lease costs | **$3,665** | **$9,024** | [Marketable Securities and Fair Value Measurements](index=17&type=section&id=Marketable%20Securities%20and%20Fair%20Value%20Measurements) | Type | Sep 30, 2022 Fair Value (in thousands) | Dec 31, 2021 Fair Value (in thousands) | | :----------------------------------- | :------------------------------------- | :------------------------------------- | | Corporate securities | **$30,198** | **$62,421** | | U.S. Treasury and agency securities | **$40,715** | **$13,845** | | Commercial paper | **$16,524** | **$23,570** | | Asset-backed securities | **$8,205** | **$6,281** | | Total | **$95,642** | **$106,117** | - All available-for-sale securities are classified as current assets[63](index=63&type=chunk) - Gross unrealized losses on marketable securities totaled **$1,341 thousand** as of September 30, 2022[65](index=65&type=chunk) - No other-than-temporary impairment charges were recognized during the three and nine months ended September 30, 2022 and 2021[68](index=68&type=chunk) [Condensed Consolidated Financial Statement Details](index=18&type=section&id=Condensed%20Consolidated%20Financial%20Statement%20Details) This section provides further details on specific line items from the condensed consolidated financial statements, including inventory, prepaid expenses and other current assets, property and equipment, intangible assets, accrued liabilities, and deferred revenue [Inventory](index=18&type=section&id=Inventory) | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Raw materials | **$11,933** | **$10,774** | | Finished goods | **$9,356** | **$11,688** | | Total inventory | **$21,289** | **$22,462** | [Prepaid Expenses and Other Current Assets](index=18&type=section&id=Prepaid%20Expenses%20and%20Other%20Current%20Assets) | Metric | September 30, 2022 (in thousands) | | :----------------------------------- | :-------------------------------- | | Prepaid expenses | **$4,795** | | Deferred contract acquisition costs | **$7,805** | | Other | **$2,423** | | Total prepaid expenses and other current assets | **$15,023** | [Property and Equipment, Net](index=19&type=section&id=Property%20and%20Equipment,%20Net) | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Equipment | **$26,810** | **$25,407** | | Construction in process | **$9,807** | **$4,823** | | Property and equipment, gross | **$41,281** | **$34,813** | | Less: accumulated depreciation | (**$23,323**) | (**$24,121**) | | Property and equipment, net | **$17,958** | **$10,692** | - Construction in process primarily consists of deferred software development costs related to several projects expected to be available for release in the fourth quarter of **2022**[74](index=74&type=chunk) - Depreciation expense was **$0.7 million** for the three months ended September 30, 2022, and **$2.0 million** for the nine months ended September 30, 2022[75](index=75&type=chunk) [Intangible Assets](index=19&type=section&id=Intangible%20Assets) - Purchased intangible assets, including developed technology and patents, were fully amortized as of December 31, 2021[76](index=76&type=chunk) - Amortization expense related to these assets was **$0.4 million** for the three months ended September 30, 2021, and **$0.7 million** for the nine months ended September 30, 2021[76](index=76&type=chunk) [Accrued Liabilities](index=19&type=section&id=Accrued%20Liabilities) | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Accrued compensation and benefits | **$23,251** | **$24,003** | | Accrued tax liabilities | **$6,930** | **$1,020** | | Lease liability | **$4,653** | **$3,983** | | Other | **$6,638** | **$7,095** | | Total accrued liabilities | **$41,472** | **$36,101** | [Deferred Revenue](index=20&type=section&id=Deferred%20Revenue) | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Products | **$9,794** | **$6,164** | | Services | **$116,373** | **$115,467** | | Total deferred revenue | **$126,167** | **$121,631** | | Less: current portion | (**$74,762**) | (**$73,132**) | | Non-current portion | **$51,405** | **$48,499** | [Commitments and Contingencies](index=20&type=section&id=Commitments%20and%20Contingencies) - The company has non-cancellable operating lease arrangements expiring through July **2027**, with rent expense of **$1.2 million** for Q3 2022 and **$3.7 million** for 9M 2022[80](index=80&type=chunk) - Open purchase commitments with Taiwan manufacturers totaled **$37.9 million** as of September 30, 2022, for finished goods, spare parts, and accessories, expected to be paid within one year[81](index=81&type=chunk) - The company provides indemnifications to customers against intellectual property infringement claims and guarantees of product/service performance, with no significant financial impact to date[82](index=82&type=chunk) [Equity Incentive Plans, Stock-Based Compensation and Stock Repurchase Program](index=20&type=section&id=Equity%20Incentive%20Plans,%20Stock-Based%20Compensation%20and%20Stock%20Repurchase%20Program) This section details the company's equity incentive plans, stock-based compensation expenses, stock option and award activities, and stock repurchase programs [Equity Incentive Plans](index=20&type=section&id=Equity%20Incentive%20Plans) - As of September 30, 2022, **13,293,128** shares were available for future grant under the **2014** Equity Incentive Plan[84](index=84&type=chunk) - As of September 30, 2022, **1,251,660** shares were available for future issuance under the Amended **2014** Employee Stock Purchase Plan[85](index=85&type=chunk) [Stock-Based Compensation](index=21&type=section&id=Stock-Based%20Compensation) | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total stock-based compensation | **$3,505** | **$3,958** | **$9,818** | **$10,848** | | Cost of revenue | **$434** | **$351** | **$1,155** | **$1,197** | | Sales and marketing | **$1,193** | **$1,148** | **$3,335** | **$3,181** | | Research and development | **$826** | **$916** | **$2,455** | **$2,923** | | General and administrative | **$1,052** | **$1,543** | **$2,873** | **$3,547** | - As of September 30, 2022, unrecognized stock-based compensation expense was **$30.6 million**, to be recognized over a weighted-average period of **2.41** years[86](index=86&type=chunk) [Stock Options](index=21&type=section&id=Stock%20Options) - As of September 30, 2022, **377 thousand** stock options were outstanding, with a weighted-average exercise price of **$6.30** and an aggregate intrinsic value of **$2.632 million**[87](index=87&type=chunk) - The intrinsic value of options exercised was **$2.8 million** for the three months ended September 30, 2022, and **$4.5 million** for the nine months ended September 30, 2022[89](index=89&type=chunk) [Stock Awards](index=22&type=section&id=Stock%20Awards) - As of September 30, 2022, there were **2,515,276** RSUs and **815,162** PSUs outstanding[90](index=90&type=chunk) - Nonvested stock awards totaled **3,331 thousand** shares with an aggregate fair value of **$44.195 million** as of September 30, 2022[91](index=91&type=chunk) - The aggregate fair value of stock awards released was **$7.6 million** for the three months ended September 30, 2022, and **$11.5 million** for the nine months ended September 30, 2022[91](index=91&type=chunk) [Stock Repurchase Program](index=22&type=section&id=Stock%20Repurchase%20Program) - The **2021** Program authorized up to **$100 million** in common stock repurchases over twelve months and expired in October **2022**[92](index=92&type=chunk)[93](index=93&type=chunk) - During the nine months ended September 30, 2022, the company repurchased **6.1 million** shares for a total cost of **$79.3 million** under the **2021** Program[93](index=93&type=chunk) - A new **$50 million** share repurchase program (**2022** Program) was authorized on November 1, 2022, for the next twelve months[92](index=92&type=chunk)[93](index=93&type=chunk) [Net Income Per Share](index=22&type=section&id=Net%20Income%20Per%20Share) | Metric | 3 Months Ended Sep 30, 2022 (in thousands, except per share amounts) | 3 Months Ended Sep 30, 2021 (in thousands, except per share amounts) | 9 Months Ended Sep 30, 2022 (in thousands, except per share amounts) | 9 Months Ended Sep 30, 2021 (in thousands, except per share amounts) | | :----------------------------------- | :------------------------------------------------------------------- | :------------------------------------------------------------------- | :------------------------------------------------------------------- | :------------------------------------------------------------------- | | Net income | **$12,113** | **$74,886** | **$28,878** | **$84,159** | | Weighted-average shares outstanding - basic | **75,881** | **77,149** | **76,191** | **76,885** | | Weighted-average shares outstanding - diluted | **77,679** | **79,927** | **78,454** | **79,803** | | Basic EPS | **$0.16** | **$0.97** | **$0.38** | **$1.09** | | Diluted EPS | **$0.16** | **$0.94** | **$0.37** | **$1.05** | - Potentially dilutive shares excluded from diluted net income per share calculation due to anti-dilutive effects were **4 thousand** for the three months ended September 30, 2022, and **84 thousand** for the nine months ended September 30, 2022[97](index=97&type=chunk) [Income Taxes](index=23&type=section&id=Income%20Taxes) - Income tax expense was **$3.1 million** for the three months ended September 30, 2022, and **$7.5 million** for the nine months ended September 30, 2022, primarily consisting of U.S. state and federal taxes[98](index=98&type=chunk) - Income tax benefit was **$64.8 million** for the three months ended September 30, 2021, and **$64.1 million** for the nine months ended September 30, 2021, mainly due to a valuation allowance release on U.S. deferred tax assets[98](index=98&type=chunk) - The company had **$7.7 million** of unrecognized tax benefits as of September 30, 2022, with no material change anticipated over the next twelve months[99](index=99&type=chunk) - The company is currently under examination for transfer pricing practices in Japan for the years **2019** through **2021**, expected to conclude by the end of **2022**[100](index=100&type=chunk) [Geographic Information](index=24&type=section&id=Geographic%20Information) | Region | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Americas | **$35,995** (**50%**) | **$32,261** (**49%**) | **$107,506** (**53%**) | **$87,367** (**49%**) | | APJ | **$24,860** (**34%**) | **$22,111** (**34%**) | **$64,263** (**32%**) | **$65,332** (**36%**) | | EMEA | **$11,204** (**16%**) | **$10,988** (**17%**) | **$30,935** (**15%**) | **$26,672** (**15%**) | | Total revenue | **$72,059** (**100%**) | **$65,360** (**100%**) | **$202,704** (**100%**) | **$179,371** (**100%**) | - The company changed its geographic revenue presentation in Q1 **2022** to align with business management, with no impact on key metrics[103](index=103&type=chunk) | Asset Location | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | United States | **$36,866** | **$32,255** | | Japan | **$1,959** | **$422** | | India | **$856** | **$513** | | Other | **$665** | **$368** | | Total | **$40,346** | **$33,558** | [Revenue](index=24&type=section&id=Revenue) This section discusses contract balances, deferred contract acquisition costs, and remaining performance obligations, providing insights into revenue recognition [Contract Balances](index=24&type=section&id=Contract%20Balances) | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Accounts receivable, net | **$73,500** | **$61,795** | | Deferred revenue, current | **$74,762** | **$73,132** | | Deferred revenue, non-current | **$51,405** | **$48,499** | - Revenue recognized from deferred revenues was **$20.3 million** for the three months ended September 30, 2022, and **$59.5 million** for the nine months ended September 30, 2022[109](index=109&type=chunk) [Deferred Contract Acquisition Costs](index=25&type=section&id=Deferred%20Contract%20Acquisition%20Costs) - Current deferred contract acquisition costs were **$7.8 million** and non-current were **$4.6 million** as of September 30, 2022[111](index=111&type=chunk) - Amortization expense for deferred commissions was **$2.7 million** for the three months ended September 30, 2022, and **$6.8 million** for the nine months ended September 30, 2022[111](index=111&type=chunk) [Remaining Performance Obligations](index=25&type=section&id=Remaining%20Performance%20Obligations) | Period | September 30, 2022 (in thousands) | | :-------------------------- | :-------------------------------- | | Within 1 year | **$74,762** | | Next 2 to 3 years | **$40,864** | | Thereafter | **$10,541** | | Total | **$126,167** | [Subsequent Events](index=25&type=section&id=Subsequent%20Events) - On November 1, 2022, the Board of Directors declared a quarterly cash dividend of **$0.06** per share, payable on December 1, 2022[114](index=114&type=chunk) - A new **$50 million** share repurchase program (**2022** Program) was authorized on November 1, 2022, for the next **12** months[115](index=115&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and operations, including business overview, revenue, cost, expense analysis, and liquidity [Overview](index=27&type=section&id=Overview) - A10 Networks is a leading provider of networking solutions focused on reliability, availability, scalability, and cybersecurity for cloud, on-premise, or hybrid environments[118](index=118&type=chunk) - The product portfolio includes Thunder ADC, CGNAT/CFW, Thunder TPS for DDOS protection/SSLi, and management tools like Harmony Controller and aGalaxy, offered in various form factors and payment models[119](index=119&type=chunk) - Revenue is derived from products (hardware, perpetual software, subscription offerings) and services (post contract support (PCS), professional services, training), sold globally to service providers and enterprises[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - Geographic revenue split for Q3 **2022**: Americas **50%** (United States **41%**), APJ **34%** (Japan **21%**), and EMEA **16%**. Enterprise customers accounted for **38%** and service providers for **62%** of total revenue in Q3 **2022**[125](index=125&type=chunk) - Purchases by the ten largest end-customers accounted for **36%** of total revenue for the three months ended September 30, 2022, down from **45%** in the same period of **2021**[126](index=126&type=chunk) - As of September 30, 2022, cash and cash equivalents were **$32.1 million**, and marketable securities were **$95.6 million**. Cash provided by operating activities was **$38.8 million** for the nine months ended September 30, 2022[127](index=127&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) This chapter analyzes the company's financial performance for Q3 and 9M 2022 versus 2021, focusing on revenue, costs, gross profit, operating expenses, non-operating income, and income taxes [Revenue](index=30&type=section&id=Revenue) | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Products revenue | **$45,104** | **$39,815** | **$123,624** | **$104,718** | | Services revenue | **$26,955** | **$25,545** | **$79,080** | **$74,653** | | Total revenue | **$72,059** | **$65,360** | **$202,704** | **$179,371** | - Total revenue increased by **$6.7 million** (**10%**) for the three months ended September 30, 2022, and by **$23.3 million** (**13%**) for the nine months ended September 30, 2022, compared to the same periods in 2021[138](index=138&type=chunk)[141](index=141&type=chunk) - Products revenue increased by **$5.3 million** (**13%**) in Q3 2022 and **$18.9 million** (**18%**) in 9M 2022, driven by increased demand from Enterprise customers in EMEA and Americas, and service provider customers in Americas, respectively[140](index=140&type=chunk)[142](index=142&type=chunk) - Services revenue increased by **$1.4 million** (**6%**) in Q3 2022 and **$4.4 million** (**6%**) in 9M 2022, primarily due to increased PCS sales from a growing installed customer base in the Americas and EMEA regions[142](index=142&type=chunk) | Region | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Americas | **$35,995** (**50%**) | **$32,261** (**49%**) | **$107,506** (**53%**) | **$87,367** (**49%**) | | APJ | **$24,860** (**34%**) | **$22,111** (**34%**) | **$64,263** (**32%**) | **$65,332** (**36%**) | | EMEA | **$11,204** (**16%**) | **$10,988** (**17%**) | **$30,935** (**15%**) | **$26,672** (**15%**) | [Cost of Revenue](index=33&type=section&id=Cost%20of%20Revenue) | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Products cost of revenue | **$10,191** | **$7,859** | **$28,342** | **$23,160** | | Services cost of revenue | **$4,574** | **$5,335** | **$12,747** | **$16,163** | | Total cost of revenue | **$14,765** | **$13,194** | **$41,089** | **$39,323** | - Products cost of revenue increased by **29.7%** in Q3 2022 and **22.4%** in 9M 2022, primarily due to increased products revenue and changes in geographic and product mix[148](index=148&type=chunk) - Services cost of revenue decreased by **14.3%** in Q3 2022 and **21.1%** in 9M 2022, primarily driven by the mix of services delivered[149](index=149&type=chunk) [Gross Profit and Gross Margin](index=33&type=section&id=Gross%20Profit%20and%20Gross%20Margin) | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total gross profit | **$57,294** | **$52,166** | **$161,615** | **$140,048** | | Total gross margin | **79.5%** | **79.8%** | **79.7%** | **78.1%** | | Products gross margin | **77.4%** | **80.3%** | **77.1%** | **77.9%** | | Services gross margin | **83.0%** | **79.1%** | **83.9%** | **78.3%** | - Products gross margin decreased by **2.9%** in Q3 2022 and **0.8%** in 9M 2022, primarily due to changes in product and geographic mix[152](index=152&type=chunk) - Services gross margin increased by **3.9%** in Q3 2022 and **5.6%** in 9M 2022, primarily driven by the mix of services delivered[153](index=153&type=chunk) [Operating Expenses](index=35&type=section&id=Operating%20Expenses) | Metric | 3 Months Ended Sep 30, 2022 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Sales and marketing | **$21,605** | **$21,354** | **$66,159** | **$60,195** | | Research and development | **$14,360** | **$13,578** | **$41,483** | **$41,050** | | General and administrative | **$5,661** | **$6,931** | **$17,160** | **$17,260** | | Total operating expenses | **$41,626** | **$41,863** | **$124,802** | **$118,505** | - Sales and marketing expenses increased by **$0.3 million** (**1.2%**) in Q3 2022 and **$6.0 million** (**9.9%**) in 9M 2022, primarily due to an increase in employee headcount[158](index=158&type=chunk) - Research and development expenses increased by **$0.8 million** (**5.8%**) in Q3 2022 and **$0.4 million** (**1.1%**) in 9M 2022, primarily due to increased consulting costs for outsourced R&D functions[161](index=161&type=chunk) - General and administrative expenses decreased by **$1.3 million** (**18.3%**) in Q3 2022 and **$0.1 million** (**0.6%**) in 9M 2022, primarily due to a decrease in employee headcount[162](index=162&type=chunk) [Non-Operating Income (Expense), Net](index=36&type=section&id=Non-Operating%20Income%20(Expense),%20Net) - Non-operating income (expense), net, had an unfavorable change of **$0.2 million** for Q3 2022 (driven by **$0.6 million** foreign exchange losses) and a favorable change of **$1.0 million** for 9M 2022 (driven by **$0.6 million** foreign exchange gains)[164](index=164&type=chunk) - Interest income increased by **$0.4 million** for both the three- and nine-month periods ended September 30, 2022[164](index=164&type=chunk) [Provision for Income Taxes](index=36&type=section&id=Provision%20for%20Income%20Taxes) - Income tax provision was **$3.1 million** for Q3 2022 and **$7.5 million** for 9M 2022, primarily U.S. federal and state taxes[165](index=165&type=chunk) - Income tax benefit was **$64.8 million** for Q3 2021 and **$64.1 million** for 9M 2021, mainly due to a **$62.9 million** valuation allowance release on U.S. deferred tax assets in Q3 2021[165](index=165&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2022, the company had **$32.1 million** in cash and cash equivalents (including **$2.7 million** held internationally), **$95.6 million** in marketable securities, and **$115.3 million** in working capital[166](index=166&type=chunk) - Management believes existing cash and marketable securities will be sufficient to meet anticipated cash needs for at least the next **12** months and beyond[167](index=167&type=chunk) - The **2021** Stock Repurchase Program, which authorized up to **$100 million**, expired in October **2022**, with **$13.7 million** remaining available as of September 30, 2022[168](index=168&type=chunk) - A new **$50 million** share repurchase program (**2022** Program) was authorized on November 1, 2022[168](index=168&type=chunk) - The company paid quarterly cash dividends of **$0.05** per share in December 2021, March 2022, June 2022, and September 2022. The next dividend of **$0.06** per share will be paid in December 2022[169](index=169&type=chunk) [Statements of Cash Flows](index=37&type=section&id=Statements%20of%20Cash%20Flows) | Activity | 9 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Operating activities | **$38,773** | **$41,203** | | Investing activities | **$540** | (**$31,384**) | | Financing activities | (**$86,107**) | (**$7,463**) | | Net increase (decrease) in cash and cash equivalents | (**$46,794**) | **$2,356** | - Cash provided by operating activities was **$38.8 million** for the nine months ended September 30, 2022, driven by net income (**$28.9 million**) and non-cash charges (**$15.4 million**), partially offset by a decrease from changes in operating assets and liabilities (**$5.5 million**)[174](index=174&type=chunk) - Cash provided by investing activities was **$0.5 million** for the nine months ended September 30, 2022, primarily from maturities and sales of marketable securities (**$54.5 million**) offset by purchases of marketable securities (**$45.7 million**) and property and equipment (**$8.3 million**)[178](index=178&type=chunk) - Cash used in financing activities was **$86.1 million** for the nine months ended September 30, 2022, mainly due to stock repurchases (**$79.3 million**) and cash dividend payments (**$11.5 million**), partially offset by proceeds from equity plans (**$4.7 million**)[179](index=179&type=chunk) [Contractual Obligations](index=39&type=section&id=Contractual%20Obligations) - Total contractual obligations amounted to **$24.3 million** as of September 30, 2022, primarily consisting of non-cancellable operating lease arrangements expiring through July **2027**[181](index=181&type=chunk) - The company also has **$7.7 million** in tax liabilities related to uncertain tax positions as of September 30, 2022, for which the timing of settlement cannot be reliably estimated[181](index=181&type=chunk) [Critical Accounting Policies and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and assumptions[182](index=182&type=chunk) - There have been no material changes to the company's significant accounting policies during the nine months ended September 30, 2021[182](index=182&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This chapter discusses the company's exposure to market risks, specifically foreign currency and interest rate sensitivity, and the measures taken to manage them [Foreign Currency Risk](index=39&type=section&id=Foreign%20Currency%20Risk) - The company's consolidated results are subject to fluctuations due to changes in foreign currency exchange rates, particularly the Japanese Yen, as most revenue contracts are in U.S. Dollars except for Japan[183](index=183&type=chunk) - Foreign currency exchange losses incurred were **$0.9 million** for the three months ended September 30, 2022, and **$1.0 million** for the nine months ended September 30, 2022[185](index=185&type=chunk) - A hypothetical **10%** change in exchange rates would not have a significant impact on the consolidated results of operations[185](index=185&type=chunk) [Interest Rate Sensitivity](index=39&type=section&id=Interest%20Rate%20Sensitivity) - The company's exposure to market risk for changes in interest rates primarily relates to its marketable securities portfolio, which includes corporate securities, U.S. Treasury and agency securities, commercial paper, and asset-backed securities[186](index=186&type=chunk) - As of September 30, 2022, the investment portfolio had an aggregate amortized cost basis of **$97.0 million** and a fair value of **$95.6 million**[186](index=186&type=chunk) - A hypothetical **10%** change in interest rates would not have a material impact on the company's interest expense[186](index=186&type=chunk) | Interest Rate Shift | Fair Value (in thousands) | | :------------------ | :------------------------ | | -150 BPS | **$96,359** | | -100 BPS | **$96,120** | | -50 BPS | **$95,882** | | 0 BPS (Actual) | **$95,642** | | +50 BPS | **$95,401** | | +100 BPS | **$95,160** | | +150 BPS | **$94,919** | [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This chapter discusses management's evaluation of disclosure controls, changes in internal control over financial reporting, and inherent limitations of controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022[190](index=190&type=chunk) - There were no material changes in internal control over financial reporting during the three months ended September 30, 2022[191](index=191&type=chunk) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and are subject to inherent limitations[192](index=192&type=chunk) [PART II. OTHER INFORMATION](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered sales of equity securities, use of proceeds, and a list of exhibits [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This chapter states the company is involved in various legal proceedings with uncertain outcomes, requiring management to assess potential losses - The company is involved in various legal proceedings with uncertain outcomes, requiring management to assess the probability and amount of potential losses[194](index=194&type=chunk) - Judgments are subjective and based on the status of proceedings, merits of defenses, and legal counsel, and actual outcomes may differ materially from estimates[194](index=194&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This chapter outlines significant risks that could materially harm the company's business, financial condition, operating results, and stock price, categorized into business, IP, and capitalization [Risk Factor Summary](index=6&type=section&id=Risk%20Factor%20Summary) - Risks related to Business, Operations and Industry include the effects of COVID-19, anticipating market needs, timely product development, maintaining profitability, operating results variability, reliance on end-of-quarter shipments, intense competition, cloud-based computing trends, brand reputation, customer concentration, changes in deployment/payment models, gross margin fluctuations, international operations, personnel, strategic alternatives, adverse economic conditions, third-party manufacturers, supply shortages, product defects, warranty claims, open source software, interoperability, inventory management, support quality, IT systems, acquisitions, credit risk, and catastrophic events[15](index=15&type=chunk) - Risks related to Intellectual Property, Litigation, Laws and Regulations include IP litigation, IP protection, UK political developments (Brexit), enhanced U.S. tariffs/trade barriers, data confidentiality/security, personal data protection, governmental sales, compliance with laws/regulations, export/import controls, environmental laws, net operating loss carryforwards, tax law changes, accounting principles changes, internal controls, charter/Delaware law discouraging takeovers, and increasing attention on ESG matters[16](index=16&type=chunk) - Risks related to Capitalization and Financial Markets include fluctuations in foreign currency exchange rates, ownership concentration, ability to raise additional funds/stockholder dilution, volatility of common stock price, potential substantial sales of common stock, reports by security/industry analysts, changes to dividend program, and stock repurchase programs[18](index=18&type=chunk) [Risks Related to Our Business, Operations and Industry](index=41&type=section&id=Risks%20Related%20to%20Our%20Business,%20Operations%20and%20Industry) This section details risks associated with the company's business model, operations, and industry, including COVID-19 impact, market acceptance, product development, competition, customer concentration, and supply chain - The COVID-19 pandemic continues to pose risks, potentially affecting operations, financial condition, liquidity, and capital investments due to economic disruption, supply chain issues, and remote work challenges[196](index=196&type=chunk)[197](index=197&type=chunk)[199](index=199&type=chunk) - Failure to successfully anticipate market needs, timely develop new products/features, or achieve widespread market acceptance for new offerings could significantly harm the business[201](index=201&type=chunk)[204](index=204&type=chunk) - The company may not maintain profitability in future periods due to investments in sales, marketing, and R&D, general economic conditions, increasing competition, or failure to capitalize on growth opportunities[206](index=206&type=chunk)[209](index=209&type=chunk) - Operating results are highly variable and unpredictable due to factors like the timing and size of large customer sales, seasonal variations, product mix, and reliance on end-of-quarter shipments[210](index=210&type=chunk)[212](index=212&type=chunk)[216](index=216&type=chunk) - Intense competition from larger, well-established companies and new market entrants could lead to fewer customer orders, price reductions, reduced margins, and loss of market share[217](index=217&type=chunk)[220](index=220&type=chunk)[224](index=224&type=chunk) - Cloud-based computing trends present competitive and execution risks, requiring significant resources to develop new cloud solutions and adapt to evolving pricing and delivery models[225](index=225&type=chunk) - A limited number of large end-customers make concentrated purchases, and any loss or delay of expected purchases from these customers could materially affect operating results[227](index=227&type=chunk)[228](index=228&type=chunk)[230](index=230&type=chunk) - Dependence on third-party manufacturers, particularly in Taiwan, exposes the company to risks of delays, disruptions, and reduced control over quality and costs, exacerbated by global supply chain issues[250](index=250&type=chunk) - Reliance on limited sources for key components makes the company susceptible to supply shortages, price increases, and quality problems, which could delay deliveries and result in lost sales[254](index=254&type=chunk)[256](index=256&type=chunk) - Real or perceived defects, errors, or vulnerabilities in products or services could harm reputation, lead to lost sales, increased expenses, and potential litigation[257](index=257&type=chunk)[261](index=261&type=chunk) [Risks Related to Intellectual Property, Litigation, Laws and Regulations](index=58&type=section&id=Risks%20Related%20to%20Intellectual%20Property,%20Litigation,%20Laws%20and%20Regulations) This section addresses risks concerning IP protection, litigation, compliance with laws (export controls, environmental, tax, data privacy), and corporate governance - The company is exposed to intellectual property litigation, which can be time-consuming, expensive, and potentially adverse, requiring significant resources to prosecute, defend, or make products non-infringing[301](index=301&type=chunk)[304](index=304&type=chunk) - Inadequate protection of intellectual property (patents, copyrights, trademarks, trade secrets) could harm the company's competitive position or require significant expenses to enforce rights, especially in foreign countries[307](index=307&type=chunk)[309](index=309&type=chunk) - Exposure to UK political developments, including Brexit, creates uncertain political and economic environments, potentially impairing business transactions and causing currency volatility[312](index=312&type=chunk)[313](index=313&type=chunk) - Enhanced U.S. tariffs, import/export restrictions, Chinese regulations, or other trade barriers could negatively affect global economic conditions, increase costs, delay orders, and harm the business[315](index=315&type=chunk)[316](index=316&type=chunk) - Failure to protect and ensure the confidentiality and security of data could lead to legal liability, damage reputation, and result in significant costs for protection or remediation[319](index=319&type=chunk)[320](index=320&type=chunk)[323](index=323&type=chunk) - Failure to adequately protect personal data and comply with evolving data protection laws (e.g., GDPR, CCPA) could result in enforcement actions, significant fines, and reputational damage[326](index=326&type=chunk) - Sales to governmental organizations are subject to challenges such as high competition, long sales cycles, budgetary constraints, and the need for security clearances[329](index=329&type=chunk) - Non-compliance with governmental export and import controls, particularly for encryption technology, could lead to liability, penalties, and impaired ability to compete in international markets[331](index=331&type=chunk) - The ability to use net operating loss carryforwards may be limited by ownership changes, potentially increasing future tax liability[335](index=335&type=chunk) - Changes in tax laws or regulations or adverse outcomes from tax examinations could negatively affect operating results and financial condition[336](index=336&type=chunk) - Inability to maintain effective internal controls over financial reporting could adversely affect investor confidence and the value of common stock[341](index=341&type=chunk)[342](index=342&type=chunk) - Increasing attention on environmental, social, and governance (ESG) matters may negatively impact the business, impose additional costs, and expose the company to risks related to investor sentiment and reputation[349](index=349&type=chunk)[352](index=352&type=chunk) [Risks Related to Capitalization and Financial Markets](index=66&type=section&id=Risks%20Related%20to%20Capitalization%20and%20Financial%20Markets) This section covers financial market risks, including currency exchange rate fluctuations, ownership concentration, funding needs, stock price volatility, and dividend/repurchase program impact - Fluctuations in currency exchange rates, particularly the Japanese Yen versus the U.S. Dollar, could negatively affect operating income, despite hedging practices[353](index=353&type=chunk)[354](index=354&type=chunk) - Concentration of ownership among executive officers, directors, and affiliates (**8%** as of Sep 30, 2022, or **29%** including other large holders) may prevent new investors from influencing significant corporate decisions[355](index=355&type=chunk)[356](index=356&type=chunk) - The company may need to raise additional funds in future private or public offerings, which could result in significant stockholder dilution or restrictive covenants[357](index=357&type=chunk)[358](index=358&type=chunk) - The price of common stock has been and may continue to be volatile due to various factors, including company announcements, market trends, litigation, and general economic conditions, potentially causing investment value to decline[359](index=359&type=chunk)[361](index=361&type=chunk) - Sales of a substantial amount of common stock in the public markets, or the perception of such sales, could reduce the stock price and dilute voting power and ownership interest[363](index=363&type=chunk) - A reduction in, suspension, or elimination of dividend payments could negatively affect the stock price, as future dividends are subject to Board discretion and various factors[368](index=368&type=chunk) - Share repurchase programs do not obligate the company to acquire specific shares and may be modified or discontinued, potentially affecting stock price volatility and diminishing cash reserves without assurance of enhanced long-term stockholder value[369](index=369&type=chunk)[371](index=371&type=chunk)[373](index=373&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This chapter reports on the company's stock repurchase activities under the 2021 Program and the authorization of the new 2022 Program - During the three months ended September 30, 2022, the company repurchased **3.7 million** shares for a total cost of **$47.5 million** under the **2021** Program, which expired in October **2022**[374](index=374&type=chunk) - On November 1, 2022, a new **$50 million** share repurchase program (**2022** Program) was authorized for the next **12** months[375](index=375&type=chunk) | Periods | Total Number of Shares Purchased (in thousands) | Average Price Per Share | Dollar Value That May Yet Be Purchased Under the Plans or Programs (in thousands) | | :------------------ | :---------------------------------------------- | :---------------------- | :------------------------------------------------------------------------------ | | Sep 1 - 30, 2022 | **3,720** | **$12.77** | **$13,690** | [Item 6. Exhibits](index=70&type=section&id=Item%206.%20Exhibits) This chapter lists exhibits filed with the Form 10-Q, including corporate documents, certifications, and XBRL documents - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, and a Common Stock Repurchase Agreement dated September 8, 2022[380](index=380&type=chunk) - Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sections **302** and **906** of the Sarbanes-Oxley Act are filed[380](index=380&type=chunk) - Inline XBRL Document Sets for the condensed consolidated financial statements and the cover page of the Quarterly Report on Form 10-Q are included[380](index=380&type=chunk) [Signatures](index=71&type=section&id=Signatures) This chapter contains the signatures of the President, CEO, and CFO, certifying the report - The report is signed by Dhrupad Trivedi, President and Chief Executive Officer, and Brian Becker, Chief Financial Officer, on November 3, 2022[383](index=383&type=chunk) ```