A10 Networks(ATEN) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion, market risk disclosures, and internal controls ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) This section presents A10 Networks' unaudited condensed consolidated financial statements, covering balance sheets, income, comprehensive income, equity, cash flows, and related notes Condensed Consolidated Balance Sheets This section details the company's financial position, presenting assets, liabilities, and stockholders' equity at quarter-end and year-end | ASSETS (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $122,909 | $97,244 | | Marketable securities | $59,163 | $62,056 | | Accounts receivable, net | $55,906 | $74,307 | | Inventory | $24,895 | $23,522 | | Total current assets | $276,098 | $271,824 | | Total assets | $395,658 | $389,809 | | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | | | | Accounts payable | $5,049 | $7,024 | | Accrued liabilities | $24,466 | $21,388 | | Deferred revenue | $83,345 | $82,657 | | Total current liabilities | $112,860 | $111,069 | | Total liabilities | $181,349 | $181,933 | | Total stockholders' equity | $214,309 | $207,876 | | Total liabilities and stockholders' equity | $395,658 | $389,809 | Condensed Consolidated Statements of Operations This section presents the company's financial performance, detailing net revenue, gross profit, operating income, and net income for the three-month periods | (in thousands, except per share amounts) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net revenue: | | | | Products | $30,069 | $31,182 | | Services | $30,606 | $26,509 | | Total net revenue | $60,675 | $57,691 | | Gross profit | $49,231 | $47,475 | | Income from operations | $7,213 | $6,167 | | Non-operating income (expense), net | $4,007 | $(1,245) | | Income before provision for income taxes | $11,220 | $4,922 | | Provision for income taxes | $1,494 | $964 | | Net income | $9,726 | $3,958 | | Net income per share: | | | | Basic | $0.13 | $0.05 | | Diluted | $0.13 | $0.05 | - Net income increased by 145.7% to $9.7 million for the three months ended March 31, 2024, compared to $3.9 million in the same period of 2023[18][121] - Total net revenue increased by 5.2% to $60.7 million, driven by a 15.5% increase in services revenue, partially offset by a 3.6% decrease in products revenue[18][121] Condensed Consolidated Statements of Comprehensive Income This section details the company's comprehensive income, including net income and other comprehensive income (loss) components for the three-month periods | (unaudited, in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Net income | $9,726 | $3,958 | | Other comprehensive income (loss), net of tax: | | | | Unrealized gain (loss) on marketable securities, net of tax | $(39) | $527 | | Unrealized gain on cash flow hedge, net of tax | $51 | $36 | | Comprehensive income | $9,738 | $4,521 | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including net income, stock repurchases, and dividends, for the three-month period | (in thousands) | Balance at Dec 31, 2023 | Common stock issued | Repurchase of common stock | Stock-based compensation expense | Payments for dividends | Unrealized loss on marketable securities | Unrealized gain on cash flow hedge | Net Income | Balance at Mar 31, 2024 | | :------------- | :---------------------- | :------------------ | :------------------------- | :------------------------------- | :--------------------- | :--------------------------------------- | :--------------------------------- | :--------- | :---------------------- | | Total Stockholders' Equity | $207,876 | $89 | $(3,039) | $4,117 | $(4,472) | $(39) | $51 | $9,726 | $214,309 | - Total stockholders' equity increased from $207.9 million at December 31, 2023, to $214.3 million at March 31, 2024, primarily due to net income and stock-based compensation, partially offset by stock repurchases and dividend payments[16][24] Condensed Consolidated Statements of Cash Flows This section presents the company's cash flow activities from operations, investing, and financing for the three-month periods | (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------- | :-------------------------------- | :-------------------------------- | | Cash flows from operating activities | $32,444 | $(846) | | Cash flows from investing activities | $643 | $5,367 | | Cash flows from financing activities | $(7,422) | $(3,973) | | Net increase in cash and cash equivalents | $25,665 | $548 | | Cash and cash equivalents—end of period | $122,909 | $68,519 | - Net cash provided by operating activities significantly increased to $32.4 million in Q1 2024 from cash used of $0.8 million in Q1 2023, driven by higher net income and favorable changes in working capital[26][153][155] Notes to Condensed Consolidated Financial Statements This section provides detailed explanatory notes supporting the condensed consolidated financial statements, covering accounting policies, leases, marketable securities, and other components 1. Description of Business and Summary of Significant Accounting Policies A10 Networks provides secure application solutions and services globally, generating revenue from products and services, with financial statements prepared under U.S. GAAP and no material accounting policy changes in Q1 2024 - A10 Networks is a leading provider of secure application solutions and services, addressing cyber protection and digital responsiveness across IT and network infrastructures[30] - Revenue is generated from two main sources: products (hardware, perpetual/term software licenses) and services (post-contract support, professional services, training, SaaS)[31] - Sales are primarily conducted globally through distribution channel partners to service providers and enterprises, with revenue reported across Americas, APJ, and EMEA regions[32][33] Significant Customers (Revenue Contribution) | Significant Customers (Revenue Contribution) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | Customer A | 14% | <10% | | Customer B | 11% | 15% | - As of March 31, 2024, one customer accounted for 19% of total gross accounts receivable, consistent with December 31, 2023[43] - The company is evaluating the impact of new FASB ASUs 2023-07 (Segment Reporting) and 2023-09 (Income Tax Disclosures), effective for fiscal years beginning after December 15, 2024[44][45] 2. Leases The company leases operating spaces globally, with total operating lease liabilities of $15.6 million as of March 31, 2024, and Q1 2024 lease costs of $1.2 million Operating Leases (in thousands) | Operating Leases (in thousands) | March 31, 2024 | December 31, 2023 | | :------------------------------ | :------------- | :---------------- | | Right-of-use assets | $15,155 | $16,376 | | Total operating lease liabilities | $15,558 | $16,820 | Lease Costs (in thousands) | Lease Costs (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------- | :-------------------------------- | :-------------------------------- | | Operating lease costs | $1,085 | $1,110 | | Short-term lease costs | $116 | $127 | | Total lease costs | $1,201 | $1,237 | - The weighted-average remaining lease term decreased to 3.15 years as of March 31, 2024, from 4.07 years as of March 31, 2023, with a consistent weighted-average discount rate of 3.2%[51] 3. Marketable Securities and Fair Value Measurements Marketable securities, primarily available-for-sale, totaled $59.2 million at fair value as of March 31, 2024, mainly corporate and U.S. Treasury securities, with no impairment charges Marketable Securities (in thousands) | Marketable Securities (in thousands) | Fair Value as of March 31, 2024 | Fair Value as of December 31, 2023 | | :----------------------------------- | :------------------------------ | :--------------------------------- | | Corporate securities | $12,734 | $15,393 | | U.S. Treasury and agency securities | $43,829 | $39,937 | | Commercial paper | $0 | $998 | | Publicly held equity securities | $2,600 | $5,728 | | Total marketable securities | $59,163 | $62,056 | - As of March 31, 2024, marketable securities in an unrealized loss position totaled $76 thousand, primarily from U.S. Treasury and agency securities[57] Fair Value Measurements (in thousands) | Fair Value Measurements (in thousands) | Level 1 (March 31, 2024) | Level 2 (March 31, 2024) | Total (March 31, 2024) | | :------------------------------------- | :----------------------- | :----------------------- | :--------------------- | | Cash | $77,050 | $0 | $77,050 | | Cash equivalents | $45,859 | $0 | $45,859 | | Corporate securities | $0 | $12,734 | $12,734 | | U.S. Treasury and agency securities | $13,233 | $30,596 | $43,829 | | Publicly held equity securities | $2,600 | $0 | $2,600 | | Total | $138,742 | $43,330 | $182,072 | 4. Derivatives The company uses foreign exchange forward contracts to manage currency exposures, with non-hedging notional amounts increasing to $43.3 million and resulting in $0.2 million net losses in Q1 2024 - Foreign exchange forward contracts not designated as hedging instruments had a total notional amount of $43.3 million as of March 31, 2024, up from $34.5 million at December 31, 2023[61] - The company recorded net losses of $0.2 million from non-hedging foreign exchange forward contracts for the three months ended March 31, 2024, compared to $0.6 million in losses for the same period in 2023[61] - No foreign exchange forward contracts designated as hedging instruments were outstanding as of March 31, 2024[62] 5. Condensed Consolidated Financial Statement Components This section details changes in key financial statement components, including increased allowance for credit losses and inventory, decreased prepaid expenses, and stable deferred revenue Accounts Receivable Allowance for Credit Losses (in thousands) | Accounts Receivable Allowance for Credit Losses (in thousands) | March 31, 2024 | December 31, 2023 | | :----------------------------------------------------------- | :------------- | :---------------- | | Beginning balance | $405 | $32 | | Increase (decrease) in allowance | $1,562 | $1,181 | | Write-offs | $(786) | $(808) | | Ending balance | $1,181 | $405 | Inventory (in thousands) | Inventory (in thousands) | March 31, 2024 | December 31, 2023 | | :----------------------- | :------------- | :---------------- | | Raw materials | $17,585 | $15,473 | | Finished goods | $7,310 | $8,049 | | Total inventory | $24,895 | $23,522 | Accrued Liabilities (in thousands) | Accrued Liabilities (in thousands) | March 31, 2024 | December 31, 2023 | | :--------------------------------- | :------------- | :---------------- | | Accrued compensation and benefits | $8,899 | $7,633 | | Accrued tax liabilities | $3,332 | $1,429 | | Lease liability | $5,000 | $4,998 | | Other | $7,235 | $7,328 | | Total accrued liabilities | $24,466 | $21,388 | Deferred Revenue (in thousands) | Deferred Revenue (in thousands) | March 31, 2024 | December 31, 2023 | | :------------------------------ | :------------- | :---------------- | | Products | $15,131 | $14,917 | | Services | $125,775 | $126,417 | | Total deferred revenue | $140,906 | $141,334 | | Less: current portion | $(83,345) | $(82,657) | | Non-current portion | $57,561 | $58,677 | 6. Commitments and Contingencies The company has $15.6 million in non-cancellable operating lease commitments and $11.1 million in open purchase commitments, with no significant impact from indemnification provisions to date - Total future lease payments for non-cancelable operating leases were $16.3 million as of March 31, 2024, with a present value of $15.6 million[49] - Rent expense was $1.2 million for both the three months ended March 31, 2024 and 2023[74] - Open purchase commitments with third-party contract manufacturers in Taiwan totaled $11.1 million as of March 31, 2024[75] 7. Equity Incentive Plans, Stock-Based Compensation and Stock Repurchase Program The company operates equity incentive and stock purchase plans, with 4.4 million shares available for grant, $3.8 million in Q1 2024 stock-based compensation, and $3.0 million in stock repurchases - As of March 31, 2024, 4,379,799 shares were available for future grant under the 2023 Stock Incentive Plan[77] - Stock-based compensation expense for the three months ended March 31, 2024, was $3.8 million, an increase from $3.7 million in the prior year period[80] - During Q1 2024, the company repurchased 0.2 million shares for a total cost of $3.0 million under the 2023 stock repurchase program[86] Stock Option Activity (thousands) | Stock Option Activity (thousands) | Number of Shares | Weighted-Average Exercise Price Per Share | | :-------------------------------- | :--------------- | :---------------------------------------- | | Outstanding as of Dec 31, 2023 | 80 | $4.63 | | Exercised | (20) | $4.40 | | Canceled | (3) | $12.19 | | Outstanding as of Mar 31, 2024 | 57 | $4.38 | | Vested and exercisable as of Mar 31, 2024 | 57 | $4.38 | 8. Net Income Per Share Basic and diluted net income per share for Q1 2024 significantly increased to $0.13 from $0.05 in Q1 2023, based on weighted-average shares outstanding Net Income Per Share (in thousands, except per share amounts) | Net Income Per Share (in thousands, except per share amounts) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income | $9,726 | $3,958 | | Weighted-average shares outstanding - basic | 74,451 | 74,001 | | Effect of dilutive potential common shares | 867 | 1,540 | | Weighted-average shares outstanding - diluted | 75,318 | 75,541 | | Net income per share: | | | | Basic | $0.13 | $0.05 | | Diluted | $0.13 | $0.05 | - Potentially dilutive shares excluded from diluted EPS calculation due to anti-dilutive effect decreased to 65 thousand in Q1 2024 from 186 thousand in Q1 2023[91] 9. Income Taxes The income tax provision increased to $1.5 million for Q1 2024, with unrecognized tax benefits totaling $8.1 million as of March 31, 2024, and no material change expected - Provision for income taxes increased to $1.5 million for Q1 2024, compared to $1.0 million for Q1 2023[92] - Unrecognized tax benefits were $8.1 million as of March 31, 2024, with no material change expected in the next 12 months[92] 10. Geographic Information A10 Networks reports revenue across Americas, APJ, and EMEA, with APJ revenue significantly increasing by 59% to $25.0 million in Q1 2024, while Americas and EMEA declined Net Revenue by Geographic Region (in thousands) | Net Revenue by Geographic Region (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Americas | $27,442 | $29,956 | | United States | $23,144 | $24,121 | | Americas-other | $4,298 | $5,835 | | APJ | $25,043 | $15,760 | | EMEA | $8,190 | $11,975 | | Total net revenue | $60,675 | $57,691 | - APJ region revenue increased by 59% year-over-year, primarily driven by Japan, while Americas and EMEA regions experienced decreases of 8% and 32% respectively[97][127] 11. Revenue Total net revenue for Q1 2024 increased by 5% to $60.7 million, driven by service provider and services revenue growth, with remaining performance obligations totaling $140.9 million Revenue by Customer Vertical (in thousands) | Revenue by Customer Vertical (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Service providers | $37,661 | $32,566 | | Enterprises | $23,014 | $25,125 | | Total | $60,675 | $57,691 | - Service provider revenue increased by $5.1 million, while enterprise revenue decreased by $2.1 million in Q1 2024 compared to Q1 2023[127] - Services revenue increased by 15% due to growing installed customer base and PCS sales, particularly in APJ and Americas regions[128] Remaining Performance Obligations (in thousands) | Remaining Performance Obligations (in thousands) | March 31, 2024 | | :----------------------------------------------- | :------------- | | Within 1 year | $83,345 | | Next 2 to 3 years | $54,135 | | Thereafter | $3,426 | | Total | $140,906 | 11. Subsequent Events The Board of Directors declared a quarterly cash dividend of $0.06 per share on April 30, 2024, payable on June 3, 2024, with future dividends subject to approval - A quarterly cash dividend of $0.06 per share was declared on April 30, 2024, to be paid on June 3, 2024[108] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's analysis of financial condition and results of operations for Q1 2024, covering revenue, expenses, liquidity, cash flows, and critical accounting policies Overview A10 Networks provides secure application solutions globally, with Q1 2024 revenue primarily from Americas and APJ, strong service provider contribution, and healthy cash and marketable securities balances - A10 Networks provides secure application solutions and services, including Thunder ADC, CGN, TPS, SSLi, CFW, and management tools like Harmony Controller and aGalaxy TPS[111] - Revenue sources include products (hardware, perpetual/term software licenses) and services (PCS, professional services, training, SaaS), with a substantial portion from distribution channel partners[112] Revenue Contribution (Q1 2024) | Revenue Contribution (Q1 2024) | Percentage of Total Revenue | | :----------------------------- | :-------------------------- | | Americas region | 45% | | APJ region | 41% | | EMEA region | 14% | | Service provider customers | 62% | | Enterprise customers | 38% | | Top ten end-customers | 44% | - Cash and cash equivalents were $122.9 million and marketable securities were $59.2 million as of March 31, 2024. Cash provided by operating activities was $32.4 million for Q1 2024, a significant improvement from cash used in Q1 2023[118] Results of Operations Q1 2024 saw total net revenue increase by 5.2% to $60.7 million, driven by services growth, leading to a 145.7% increase in net income to $9.7 million despite product revenue declines | Financial Metric (in thousands) | Q1 2024 Amount | Q1 2024 % of Revenue | Q1 2023 Amount | Q1 2023 % of Revenue | Change Amount | Change % | | :------------------------------ | :------------- | :------------------- | :------------- | :------------------- | :------------ | :------- | | Total net revenue | $60,675 | 100.0% | $57,691 | 100.0% | $2,984 | 5.2% | | Products revenue | $30,069 | 49.6% | $31,182 | 54.1% | $(1,113) | (3.6)% | | Services revenue | $30,606 | 50.4% | $26,509 | 45.9% | $4,097 | 15.5% | | Gross profit | $49,231 | 81.1% | $47,475 | 82.3% | $1,756 | 3.7% | | Income from operations | $7,213 | 11.9% | $6,167 | 10.7% | $1,046 | 17.0% | | Non-operating income (expense), net | $4,007 | 6.6% | $(1,245) | (2.2)% | $5,252 | (421.8)% | | Net income | $9,726 | 16.0% | $3,958 | 6.9% | $5,768 | 145.7% | Net Revenue Total net revenue increased by 5% year-over-year, driven by a 59% increase in the APJ region, while products revenue decreased and services revenue increased by 15% - Total net revenue increased by $3.0 million (5%) year-over-year, driven by a $9.3 million increase in the APJ region (59% growth), partially offset by decreases in EMEA ($3.8 million, 32% decline) and Americas ($2.5 million, 8% decline)[127] - Products revenue decreased by $1.1 million (4%) due to lower demand from enterprise customers in EMEA and Americas. Services revenue increased by $4.1 million (15%) due to higher PCS sales from a growing customer base, especially in APJ and Americas[127][128] Cost of Net Revenue, Gross Profit and Gross Margin Total cost of net revenue increased by 12%, leading to a 1.2% decrease in overall gross margin, despite a slight increase in services gross margin Cost of Net Revenue (in thousands) | Cost of Net Revenue (in thousands) | Q1 2024 Amount | Q1 2023 Amount | Change Amount | Change % | | :--------------------------------- | :------------- | :------------- | :------------ | :------- | | Products | $6,799 | $6,083 | $716 | 11.8% | | Services | $4,645 | $4,133 | $512 | 12.4% | | Total cost of net revenue | $11,444 | $10,216 | $1,228 | 12.0% | - Products cost of revenue increased by 11.8% due to higher products revenue, while services cost of revenue increased by 12.4% driven by the mix of services delivered[133][134] Gross Profit and Margin (in thousands) | Gross Profit and Margin (in thousands) | Q1 2024 Amount | Q1 2024 Gross Margin | Q1 2023 Amount | Q1 2023 Gross Margin | Change Amount | Change in Gross Margin | | :------------------------------------- | :------------- | :------------------- | :------------- | :------------------- | :------------ | :--------------------- | | Products | $23,270 | 77.4% | $25,099 | 80.5% | $(1,829) | (3.1)% | | Services | $25,961 | 84.8% | $22,376 | 84.4% | $3,585 | 0.4% | | Total gross profit | $49,231 | 81.1% | $47,475 | 82.3% | $1,756 | (1.2)% | - Products gross margin decreased by 3.1% due to product and regional mix, while services gross margin slightly increased by 0.4%[137] Operating Expenses Total operating expenses increased by 1.7%, driven by a 20.6% rise in R&D due to strategic investments, while sales and marketing, and G&A expenses decreased Operating Expenses (in thousands) | Operating Expenses (in thousands) | Q1 2024 Amount | Q1 2023 Amount | Change Amount | Change % | | :-------------------------------- | :------------- | :------------- | :------------ | :------- | | Sales and marketing | $21,214 | $22,334 | $(1,120) | (5.0)% | | Research and development | $14,063 | $11,665 | $2,398 | 20.6% | | General and administrative | $6,741 | $7,309 | $(568) | (7.8)% | | Total operating expenses | $42,018 | $41,308 | $710 | 1.7% | - Sales and marketing expenses decreased by 5.0% primarily due to lower personnel costs. Research and development expenses increased by 20.6% due to strategic investments in cybersecurity technology and personnel costs[140][141] - General and administrative expenses decreased by 7.8% mainly due to a decrease in professional services costs[142] Non-Operating Income (Expense), Net Non-operating income saw a favorable change of $5.3 million in Q1 2024, primarily due to foreign exchange gains and increased interest income - Non-operating income (expense), net, had a favorable change of $5.3 million in Q1 2024 compared to Q1 2023, primarily driven by a $3.8 million favorable change in foreign exchange gains and losses (mainly Japanese Yen vs. U.S. Dollar)[144] - Interest income increased by $0.7 million and fair value adjustments increased by $0.7 million in Q1 2024 compared to Q1 2023[144] Provision for Income Taxes The provision for income taxes increased to $1.5 million in Q1 2024, primarily due to U.S. federal and state taxes - The provision for income taxes increased to $1.5 million in Q1 2024 from $1.0 million in Q1 2023, primarily due to U.S. federal and state taxes[145] Liquidity and Capital Resources As of March 31, 2024, the company held $122.9 million in cash and $59.2 million in marketable securities, with sufficient capital for the next 12 months, while executing stock repurchases and dividend payments - As of March 31, 2024, the company had $122.9 million in cash and cash equivalents and $59.2 million in marketable securities, with working capital of $163.2 million[146] - The company believes its existing cash and marketable securities are sufficient to meet anticipated cash needs for at least the next 12 months and beyond[147] - During Q1 2024, the company repurchased $3.0 million of common stock under the 2023 Program and paid $4.5 million in cash dividends ($0.06 per share)[148][149] Statements of Cash Flows Q1 2024 saw operating cash flow significantly increase to $32.4 million, with investing activities providing $0.6 million, and financing activities using $7.4 million for dividends and repurchases Cash Flows (in thousands) | Cash Flows (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Operating activities | $32,444 | $(846) | | Investing activities | $643 | $5,367 | | Financing activities | $(7,422) | $(3,973) | | Net increase in cash | $25,665 | $548 | - Cash provided by operating activities in Q1 2024 was $32.4 million, a substantial increase from cash used of $0.8 million in Q1 2023, primarily due to higher net income and favorable changes in accounts receivable and accrued liabilities[153][154][155] - Cash provided by investing activities decreased to $0.6 million in Q1 2024 from $5.4 million in Q1 2023, mainly due to changes in purchases and maturities of marketable securities[158] - Cash used in financing activities increased to $7.4 million in Q1 2024 from $4.0 million in Q1 2023, driven by stock repurchases and dividend payments[159] Contractual Obligations Contractual obligations include $15.6 million in non-cancellable operating leases and $8.1 million in uncertain tax liabilities, with no reliable settlement timing estimate for the latter - Contractual obligations include $15.6 million in non-cancellable operating lease arrangements as of March 31, 2024[160] - The company has $8.1 million of tax liabilities related to uncertain tax positions, with no reliable estimate for timing of settlement[160] Critical Accounting Policies and Estimates Financial statements are prepared under U.S. GAAP, requiring estimates for revenue, credit losses, inventory, and stock-based compensation, with no material changes to accounting policies in Q1 2024 - Key estimates and assumptions affect revenue recognition, allowance for credit losses, inventory valuation, marketable securities, contingencies, accrued liabilities, deferred commissions, and stock-based compensation[161] - No material changes to the company's significant accounting policies occurred during the three months ended March 31, 2024[161] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details the company's exposure to market risks, including foreign currency fluctuations and interest rate sensitivity, with a hypothetical 10% change in either not expected to have a significant impact Foreign Currency Risk The company's financial results are subject to foreign currency fluctuations, particularly for sales and costs in various currencies, though a 10% change is not expected to have a significant impact - The company's financial results are subject to foreign currency fluctuations, particularly for sales in Japanese Yen and costs in local currencies across Americas, EMEA, and APJ[162] - Net foreign exchange gains of $1.6 million were recorded in Q1 2024, a favorable change from $2.2 million in net losses in Q1 2023[164] - A hypothetical 10% change in exchange rates is not expected to have a significant impact on consolidated results of operations[164] Interest Rate Sensitivity Market risk from interest rate changes primarily relates to $59.2 million in marketable securities, with a hypothetical 10% change not expected to materially impact interest expense - Market risk from interest rate changes primarily relates to marketable securities, which had an aggregate fair value of $59.2 million as of March 31, 2024[165] - A hypothetical 10% change in interest rates would not have a material impact on the company's interest expense[165] Marketable Securities (in thousands) | Marketable Securities (in thousands) | -150 BPS | -100 BPS | -50 BPS | Fair Value as of 3/31/2024 | +50 BPS | +100 BPS | +150 BPS | | :----------------------------------- | :------- | :------- | :------ | :------------------------- | :------ | :------- | :------- | | Marketable securities | $56,563 | $57,057 | $56,728 | $59,163 | $56,399 | $56,234 | $56,069 | ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting identified during Q1 2024 - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2024[170] - No material changes in internal control over financial reporting were identified during the three months ended March 31, 2024[171] - The report emphasizes that control systems provide reasonable, not absolute, assurance due to inherent limitations and resource constraints[173] PART II. OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, equity security sales, other disclosures, and exhibits ITEM 1. LEGAL PROCEEDINGS The company is involved in various legal proceedings with uncertain outcomes, requiring management to assess potential losses, which could materially impact financial results - The company is involved in various legal proceedings with uncertain outcomes, requiring management to assess the probability and estimability of potential losses[176] - Judgments are subjective and actual outcomes may differ materially, potentially having adverse effects on the company's financial condition and results of operations[176] ITEM 1A. RISK FACTORS Investing in the company's common stock involves a high degree of risk, with no material changes to previously disclosed risk factors in the 2023 Annual Report on Form 10-K - Investing in the company's common stock involves a high degree of risk[177] - No material changes to the risk factors disclosed in the 2023 Annual Report on Form 10-K have occurred[177] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The Board authorized a $50 million share repurchase program, under which 230 thousand shares were repurchased for $3.0 million in Q1 2024, leaving $46.7 million available - A new $50 million share repurchase program (2023 Program) was authorized on November 7, 2023[178] Periods | Periods | Total Number of Shares Purchased (thousands) | Average Price Paid Per Share | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (thousands) | | :------------------ | :------------------------------------------- | :--------------------------- | :------------------------------------------------------------------------------------------------- | | January 1 - 31, 2024 | — | — | $49,702 | | February 1 - 28, 2024 | 147 | $12.93 | $47,794 | | March 1 - 31, 2024 | 83 | $13.65 | $46,663 | | Total | 230 | | $46,663 | - As of March 31, 2024, $46.7 million remained available for repurchases under the 2023 Program[180] ITEM 5. OTHER INFORMATION This section reports on insider trading arrangements, specifically the sale of 60,606 shares by the President, CEO, and Chairman under a Rule 10b5-1(c) trading plan - Dhrupad Trivedi, President, CEO, and Chairman, sold 60,606 shares of common stock on March 5, 2024, under a Rule 10b5-1(c) trading plan adopted on November 27, 2023[181][183] ITEM 6. EXHIBITS This section lists exhibits filed with the Form 10-Q, including organizational documents, equity incentive plans, related agreements, CEO/CFO certifications, and Inline XBRL documents - Exhibits include organizational documents (Amended and Restated Certificate of Incorporation, Bylaws), equity incentive plans (2023 Stock Incentive Plan), and related agreements[185] - Certifications from the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act are included[185] - Inline XBRL Document Sets for financial statements and the cover page are also filed[185] Signatures The report was signed by Dhrupad Trivedi (President and CEO) and Brian Becker (CFO) on May 3, 2024, certifying its submission under the Securities Exchange Act of 1934 - The report was signed by Dhrupad Trivedi (President and CEO) and Brian Becker (CFO) on May 3, 2024[188]