10q10k10q10k.net

What changed in A10 Networks, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of A10 Networks, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+301 added−326 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-27)

Top changes in A10 Networks, Inc.'s 2023 10-K

301 paragraphs added · 326 removed · 272 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

85 edited+12 added−14 removed46 unchanged
Biggest changeOur Harmony Controller is available in two deployment models: A10 managed software-as-a-service (“SaaS”), or as a self-managed, on-premise deployment. 2. aGalaxy TPS. a Galaxy TPS multi-device network management solution enables a network administrator to manage multiple Thunder TPS devices. aGalaxy TPS is designed to help lower operational costs by freeing up staff from repetitive tasks while increasing precision and accuracy with centralized and automated tasks, reducing the potential for human error. aGalaxy TPS is available as a hardware appliance or a software-only virtual machine. aGalaxy TPS highlights included advanced workflow and automated defense capabilities.
Biggest changeA10 Defend Orchestrator is designed to help lower operational costs by freeing up staff from repetitive tasks while increasing precision and accuracy with centralized and automated tasks, reducing the potential for human error. A10 Defend Orchestrator highlights included advanced workflow and automated defense capabilities. 3. A10 Defend Detector.
Below are some of the types of health and wellness related benefits offered to employees: • Medical, dental and vision insurance; • Retirement plan with Company matching contribution feature; • Flexible Spending Accounts for medical expenses, childcare, parking and transit; • Health Savings Account (with employer contribution); • Life insurance; • Short & long-term disability; • Paid time off and leave of absences; and • Employee assistance program Employees have an opportunity for financial inclusion at A10 Networks with an ownership interest in our company.
Below are some of the types of health and wellness related benefits offered to employees: • Medical, dental and vision insurance; • Retirement plan with Company matching contribution feature; • Flexible Spending Accounts for medical expenses, childcare, parking and transit; • Health Savings Account (with employer contribution); • Life insurance; 15 • Short & long-term disability; • Paid time off and leave of absences; and • Employee assistance program Employees have an opportunity for financial inclusion at A10 Networks with an ownership interest in our company.
Participants in the ESPP may purchase our stock at a 15% discount to market price. We believe our discounted stock purchase program helps to build an ownership mentality amongst participating employees. 16 Health, Safety and Wellness We are committed to maintaining a healthy, safe, and secure work environment that protects our employees and the public from harm.
Participants in the ESPP may purchase our stock at a 15% discount to market price. We believe our discounted stock purchase program helps to build an ownership mentality amongst participating employees. Health, Safety and Wellness We are committed to maintaining a healthy, safe, and secure work environment that protects our employees and the public from harm.
Some of these challenges relate to how a business effectively manages secure application services across various data centers and cloud types, whether private, public or hybrid clouds. Over time, more and more applications may be born in the cloud, while some applications that existed in traditional data centers may migrate to clouds as well.
Some of these challenges relate to how a business effectively manages secure application services across various data centers and cloud types, whether private, public or hybrid clouds. Over time, more and more applications may be born or provided in the cloud, while some applications that existed in traditional data centers may migrate to clouds as well.
Our professional services team provides a full range of fee-based consulting services, including pre-sale network assessment, comprehensive network analysis and capacity planning, post-sale migration and implementation services, on-site installation and ongoing support. Customers Our customers operate in a variety of industries, including telecommunications, technology, industrial, government, retail, financial, gaming, and education.
Our professional services team provides a full range of fee-based consulting services, including pre-sale network assessment, comprehensive network analysis and capacity planning, post-sale migration and implementation services, on-site installation and ongoing support. 11 Customers Our customers operate in a variety of industries, including telecommunications, technology, industrial, government, retail, financial, gaming, and education.
To address these requirements, mobile operators will need new solutions that provide hyperscale and increased performance, richer feature sets, and rich automation, analytics and threat intelligence. Need for Advanced Multi-Cloud Secure Application Service Solutions. To address these challenges, advanced and integrated solutions for managing secure application services across businesses’ application environments are needed.
To address these requirements, mobile and other operators will need new solutions that provide hyperscale and increased performance, richer feature sets, and rich automation, analytics and threat intelligence. Need for Advanced Multi-Cloud Secure Application Service Solutions. To address these challenges, advanced and integrated solutions for managing secure application services across businesses’ application environments are needed.
While our revenue to date has predominantly derived from delivery of our proprietary software on a perpetual license basis embedded in 8 optimized hardware, this model has begun to evolve in various ways, including among others, term licenses, subscriptions, and software-only models.
While our revenue to date has predominantly derived from delivery of our proprietary software on a perpetual license basis embedded in optimized hardware, this model has begun to evolve in various ways including among others, term licenses, subscriptions, and software-only models.
In addition, we strive to deliver products and services that minimize the impact to the environment throughout our value chain. Our environmental initiatives are aligned with the 1.5°C ambition as outlined in the Paris Agreement, and we have corporate goals to support the initiative.
In addition, we strive to deliver products and services that minimize the impact to the environment throughout our value chain. 14 Our environmental initiatives are aligned with the 1.5°C ambition as outlined in the Paris Agreement, and we have corporate goals to support the initiative.
These filings are also 17 available for download free of charge on our investor relations website. Additionally, copies of materials filed by us with the SEC may be accessed at the SEC’s website at www.sec.gov.
These filings are also available for download free of charge on our investor relations website. Additionally, copies of materials filed by us with the SEC may be accessed at the SEC’s website at www.sec.gov.
Traditional IT vendors may need to shift from hardware-centric models to software-defined approaches across several operating environments to improve agility for critical applications, and subsequently, their business operations. Ensuring product portfolios adapt and diversify to include newer virtualized software, container-based software and cloud-based offerings are key factors determining future market leadership and competitive landscapes. Growing Importance of Automation and Orchestration.
Traditional IT vendors may need to shift from hardware-centric models to software-defined approaches across several operating environments to improve agility for critical applications, and subsequently, their business operations. Enabling product portfolios to adapt and diversify to include newer virtualized software, container-based software and cloud-based offerings are key factors determining future market leadership and competitive landscapes. Growing Importance of Automation, Orchestration.
As cyber-attacks increase in volume and complexity, we integrate security as a key attribute in essentially all our solutions that further enable our customers to continue to adapt to market trends in the cloud, internet of things and the ever-increasing need for more data, building upon our strong global footprint and leadership in application and network infrastructure.
As cyber-attacks increase in volume and complexity, we integrate security as a key attribute in essentially all our solutions that further enable our customers to continue to adapt to market trends in the cloud, internet of things and the ever-increasing need for more efficient data processing, building upon our strong global footprint and leadership in application and network infrastructure.
The Gi/SGi firewall protects the mobile operator infrastructures from Internet-based DDoS and other security threats. • A high-performance IPsec VPN, a security product designed to strengthen security postures and protect application data. Intelligent Management and Automation Tools 1. Harmony Controller. Harmony Controller provides intelligent management, automation and analytics for secure application delivery in multi-cloud environments to help simplify operations.
The Gi/SGi firewall protects the mobile operator infrastructures from Internet-based DDoS and other security threats. • A high-performance IPsec VPN, a security product designed to strengthen security postures and protect application data. Intelligent Management and Automation Tool 1. Harmony Controller. Harmony Controller provides intelligent management, automation and analytics for secure application delivery in multi-cloud environments to help simplify operations.
Employees many submit concerns to generalcounsel@a10networks.com or via the company’s third-party hotline as noted the Employee Handbook. Corporate Information A10 Networks, Inc. was incorporated in the State of California in 2004 and subsequently reincorporated in the State of Delaware in March 2014. Our website is located at www.A10networks.com, and our investor relations website is located at https://investors.A10networks.com.
Employees may submit concerns to generalcounsel@a10networks.com or via the Company’s third-party hotline as noted the Employee Handbook. Corporate Information A10 Networks, Inc. was incorporated in the State of California in 2004 and subsequently reincorporated in the State of Delaware in March 2014. Our website is located at www.A10networks.com, and our investor relations website is located at https://investors.A10networks.com.
Information provided includes press releases and other information about financial performance, information on environmental, social and governance and details related to the Company’s annual meeting of shareholders.
Information provided includes press releases and other information about financial performance, information on environmental, social and governance and details related to the Company’s annual 16 meeting of shareholders.
Of the many solution requirements, some of the more critical include: • Ability to Centrally Manage Traditional and Cloud Environments. As more applications are born in the cloud, and they operate alongside traditional applications supported by on-premise and appliance-based data centers, application delivery and security solutions will be called upon to span traditional and cloud-based environments.
Of the many solution requirements, some of the more critical include: • Ability to Centrally Manage Traditional and Cloud Environments. As more applications are provided in the cloud, and they operate alongside traditional applications supported by on-premise and appliance-based data centers, application delivery and security solutions will be called upon to span traditional and cloud-based environments.
We invoice channel partners or customers directly for maintenance contracts at the time of hardware purchase, and all maintenance contracts are non-cancellable and are generally renewed through the same channel as originally purchased. Software updates are provided to all customers with a current maintenance contract on a when-and-if-available basis.
We invoice resellers or customers directly for maintenance contracts at the time of hardware purchase, and all maintenance contracts are non-cancellable and are generally renewed through the same channel as originally purchased. Software updates are provided to all customers with a current maintenance contract on a when-and-if-available basis.
The key competitive factors in our markets include: • Ability to innovate and respond to customer needs rapidly; • Ability to detect and mitigate large-scale cyber security threats; • Ability for products to scale with high-speed network traffic; • Ability to address on-premise and cloud application environments in a secure, centrally managed manner; • Ability to accommodate any IT delivery model or combination of models, regardless of form factor and customer consumption model; • Level of customer intimacy and application know-how; • Total cost of ownership including ease-of-use and a common platform approach for multiple products; • Brand awareness and reputation; and • Ability to attract and retain talented employees.
The key competitive factors in our markets include: • Ability to innovate and respond to customer needs rapidly; • Ability to prepare for, detect and mitigate large-scale cyber security threats; • Ability for products to scale to facilitate high-speed network traffic; • Ability to address on-premise and cloud application environments in a secure, centrally managed manner; • Ability to accommodate any IT delivery model or combination of models, regardless of form factor and customer consumption model; • Level of customer intimacy and application know-how; • Total cost of ownership including ease-of-use and a common platform approach for multiple products; • Brand awareness and reputation; and 12 • Ability to attract and retain talented employees.
Augmenting the standard support, the offering includes access to a dedicated team of DDoS mitigation experts specializing in DDoS prevention, offering immediate assistance for mitigating attacks, and a subscription to the A10 Threat Intelligence Service, leveraging collective intelligence to block known threats.
Augmenting the standard support, the offering includes access to a dedicated team of DDoS mitigation experts specializing in DDoS prevention, offering efficient assistance for mitigating attacks, and a subscription to the A10 Threat Intelligence Service, leveraging collective intelligence to block known threats.
We encourage investors and others to review the information we make public in these locations, as such information could be deemed to be material information. Please note that this list may be updated from time to time. 18
We encourage investors and others to review the information we make public in these locations, as such information could be deemed to be material information. Please note that this list may be updated from time to time. 17
Our sales team is comprised of inside sales and field sales personnel who are organized by geography and maintain sales presence in 28 countries as of 13 December 31, 2022, including in the following countries and regions: United States, Western Europe, the Middle East, Japan, Taiwan, South Korea, Southeast Asia and Latin America.
Our sales team is comprised of inside sales and field sales personnel who are organized by geography and maintain sales presence in 28 countries as of December 31, 2023, including in the following countries and regions: United States, Western Europe, the Middle East, Japan, Taiwan, South Korea, Southeast Asia and Latin America.
We may continue to grow our sales headcount, including in geographies where we currently do not have a sales presence. Some customer sales are originated and completed by our Original Equipment Manufacturer (“OEM”) and distribution channel partners with little or no direct engagement with our sales personnel.
We may continue to grow our sales headcount, including in geographies where we currently do not have a sales presence. Some customer sales are originated and completed by our Original Equipment Manufacturer (“OEM”) and distribution channels with little or no direct engagement by our sales personnel.
Our sales organization includes sales engineers with deep technical domain expertise who are responsible for pre-sales technical support, solutions engineering, proof-of-concept work and technical training for our distribution channel partners. Our sales team is also comprised of a channel sales organization that is expanding our market reach through partners.
Our sales organization includes sales engineers with deep technical domain expertise who are responsible for pre-sales technical support, solutions engineering, proof-of-concept work and technical training for our distribution channels. Our sales team is also comprised of a channel sales organization that is expanding our market reach through resellers.
Thunder SSLi decrypts SSL-encrypted traffic and forwards it to a third-party security device, such as a firewall, for deep packet inspection (“DPI”). Once the traffic has been analyzed and scrubbed, Thunder SSLi re-encrypts the traffic and forwards it to its intended destination. 6. Thunder Convergent Firewall.
Thunder SSLi decrypts SSL-encrypted traffic and forwards it to a third-party security device, such as a firewall, for deep packet inspection (“DPI”). Once the traffic has been analyzed and scrubbed, Thunder SSLi re-encrypts the traffic and forwards it to its intended destination. 8 4. Thunder Convergent Firewall.
We announce material information to the public about A10, our products and services and other matters through a variety of means, including our website ( www.A10networks.com ), the investor relations section of our website (https:// investors.A10networks.com ), press releases, filings with the Securities and Exchange Commission, public conference calls, and social media, including our corporate Twitter account ( @A10Networks) and our corporate Facebook page (https://www.facebook.com/a10networks).
We announce material information to the public about the Company, our products and services and other matters through a variety of means, including our website ( www.A10networks.com ), the investor relations section of our website (https:// investors.A10networks.com ), press releases, filings with the Securities and Exchange Commission, public conference calls, and social media, including our corporate X (formerly Twitter) account ( @A10Networks) and our corporate Facebook page (https://www.facebook.com/a10networks).
These companies manufacture and assemble our hardware products using design specifications, quality assurance programs and standards established by us. Our manufacturers procure components and assemble our products based on our demand forecasts and purchase orders.
These companies manufacture and assemble our hardware products using design specifications, quality assurance programs and standards established and owned or licensed by us. Our manufacturers procure components and assemble our products based on our demand forecasts and purchase orders.
We outsource delivery to a third-party logistics provider for deliveries in Japan. Backlog As of December 31, 2022 and 2021, we had product backlog of approximately $8.1 million and $10.9 million, respectively. Backlog represents orders confirmed with a purchase order for products to be shipped generally within 90 days to customers with approved credit status.
We outsource delivery to a third-party logistics provider for deliveries in Japan. Backlog As of December 31, 2023 and 2022, we had product backlog of approximately $3.8 million and $8.1 million, respectively. Backlog represents orders confirmed with a purchase order for products to be shipped generally within 90 days to customers with approved credit status.
In 2020, one distribution channel partner accounted for 10% of our total revenue. Competition As security, 5G and cloud trends continue to gain prominence, changes in application delivery needs, cyber security threats, and the technology landscape result in evolving customer requirements.
In 2021, one distribution channel partner accounted for 12% of our total revenue. Competition As security, 5G and cloud trends continue to gain prominence, changes in application delivery needs, cyber security threats, and the technology landscape result in evolving customer requirements.
During the years ended December 31, 2022, 2021 and 2020, purchases from our 10 largest end-customers accounted for approximately 41%, 39% and 41% of our total revenue, respectively. 12 In 2022, two distribution channel partners accounted for 15% and 13% of our total revenue. In 2021, one distribution channel partner accounted for 12% of our total revenue.
During the years ended December 31, 2023, 2022 and 2021, purchases from our 10 largest end-customers accounted for approximately 33%, 41% and 39% of our total revenue, respectively. In 2023, one distribution channel partner accounted for 19% of our total revenue. In 2022, two distribution channel partners accounted for 15% and 13% of our total revenue.
Solutions need to analyze application traffic quickly and enhance performance and security in traditional and cloud-based application environments in a centrally managed manner. With the rapid adoption of IoT devices, and the advent of 5G, we believe a solution’s ability to perform at scale will be increasingly imperative. • Sophisticated Security Functionality.
Customers want solutions that analyze application traffic quickly and enhance performance and security in traditional and cloud-based application environments in a centrally managed manner. With the rapid adoption of IoT devices, and the advent of 5G, we believe a solution’s ability to perform at scale will be increasingly important. • Sophisticated Security Functionality.
This approach allows us to benefit from the scale and experience of our manufacturing partners to reduce our costs, overhead and inventory while allowing us to adjust more quickly to changing customer demand. Our manufacturers are Lanner Electronics Inc. (“Lanner”), AEWIN Technologies Co., Ltd. (“AEWIN”) and iBase.
Manufacturing We outsource the manufacturing of our hardware products to original design manufacturers. This approach allows us to benefit from the scale and experience of our manufacturing partners to reduce our costs, overhead and inventory while allowing us to adjust more quickly to changing customer demand. Our manufacturers are Lanner Electronics Inc. (“Lanner”), AEWIN Technologies Co., Ltd. (“AEWIN”) and iBase.
Risk Factors included in this Annual Report on Form 10-K for additional information regarding the risks associated with protecting our intellectual property. Human Capital As of December 31, 2022, we had 575 full-time employees, including 252 engaged in research and development and customer support, 269 in sales and marketing and 54 in general and administrative and other activities.
Risk Factors included in this Annual Report on Form 10-K for additional information regarding the risks associated with protecting our intellectual property. Human Capital As of December 31, 2023, we had 525 full-time employees, including 236 engaged in research and development and customer support, 235 in sales and marketing and 54 in general and administrative and other activities.
In 2017, we enhanced the TPS solution with the launch of a dedicated detector function, improved workflow and automation in aGalaxy TPS. In 2018, we enhanced our TPS detection capabilities with the One-DDoS solution, which enables Thunder ADC, CGN, and CFW solutions to act as in-line detectors to enhance application and infrastructure detection.
In 2017, we enhanced the A10 Defend Mitigator solution with the launch of a dedicated detector function, improved workflow and automation in A10 9 Defend Orchestrator. In 2018, we enhanced our detection capabilities with the One-DDoS solution, which enables Thunder ADC, CGN, and CFW solutions to act as in-line detectors to enhance application and infrastructure detection.
We fulfill nearly all orders globally through our distribution channel partners, which include distributors, value added resellers and system integrators. Revenue fulfilled through our distribution channel partners accounted for 83%, 89% and 91% of our total revenue for the years ended December 31, 2022, 2021 and 2020, respectively.
We fulfill nearly all orders globally through our distribution channels, which include distributors, value added resellers and system integrators. Revenue fulfilled through our distribution channels accounted for 95%, 83% and 89% of our total revenue for the years ended December 31, 2023, 2022 and 2021, respectively.
The effectiveness of application performance and security depends greatly on the level of visibility a business has into its application traffic. That visibility must be able to span any number of data centers and cloud types to ensure a holistic view of security threats and performance issues affecting applications.
The effectiveness of application performance and security depends greatly on the level of visibility a business has into its application traffic. That visibility should effectively span any number of data centers and cloud types to provide a holistic view of security threats and performance issues affecting applications.
Our global footprint provides an additional level of sustainability for business performance, and we ensure that we are driving this responsibility across all our global locations.
Our global footprint provides an additional level of sustainability for business performance, and we drive this responsibility across all our global locations.
Our main competitors fall into the following categories: • Companies that sell network security solutions and services including DDoS protection, such as Arbor Networks Inc., a subsidiary of Netscout Systems, Symantec Corporation (through its acquisition of Blue Coat Systems, Inc. in 2016), F5 Networks, Inc.
Our main competitors fall into the following categories: • Companies that sell network security solutions and services including DDoS protection, such as Arbor Networks Inc., a subsidiary of Netscout Systems, F5 Networks, Inc.
The appliance family provides a variety of other security and performance options. vThunder virtual appliances operate on all major hypervisor platforms, including VMware, Microsoft Hyper-V and Linux KVM. vThunder is also available from cloud providers like Amazon Web Services (“AWS”), Microsoft Azure, and service providers. The vThunder Series products support throughput ranges from 200 Mbps to 100 Gbps.
The appliance family provides a variety of other security and performance options. vThunder virtual appliances operate on all major hypervisor platforms, including VMware, Microsoft Hyper-V and Linux KVM. vThunder is also available from cloud providers like Amazon Web Services (“AWS”), Microsoft Azure, Google Cloud Compute (“GCP”) and service providers.
ACOS features a modular software design, which improves reliability by ensuring that modifications made to one module will not have unwanted side effects on other system functions. Other noteworthy ACOS Technologies .
ACOS features a modular software design, which improves reliability by preventing modifications made to one module from causing unwanted side effects on other system functions. Other noteworthy ACOS Technologies .
Thunder for Bare Metal is a software version of our ADC and CGN solutions that is designed to run on a variety of Intel x86 servers, allowing the customer to design and select their own hardware platform.
The vThunder Series products support throughput ranges from 200 Mbps to 100 Gbps. Thunder for Bare Metal is a software version of our ADC and CGN solutions that is designed to run on a variety of Intel x86 servers, allowing the customer to design and select their own hardware platform.
We also added TPS Dynamic Attack Pattern Recognition (DAPR) for automatic attack learning, to identify and thwart zero-day attacks, and enhanced machine learning (ML) with always-on adaptive learning. TPS is augmented by the A10 Threat Intelligence Service which can block known 9 bad connections (i.e., IP addresses) from entering protected networks.
We also added A10 Defend Mitigator Dynamic Attack Pattern Recognition (“DAPR”) for automatic attack learning, to identify and thwart zero-day attacks, and enhanced machine learning (“ML”) with always-on adaptive learning. Defend Mitigator is augmented by the A10 Threat Control and software licensed from ThreatSTOP, Inc., which can block known bad connections (i.e., IP addresses) from entering protected networks.
A DDoS attack seeks to render a target network or website unavailable by orchestrating coordinated attacks from massive worldwide networks of compromised endpoints, called botnets. Compromised endpoints can be computing devices or “Internet of Things” driven devices like video cameras.
A DDoS attack seeks to render a target network or website unavailable by orchestrating coordinated attacks from massive worldwide networks of compromised endpoints, called botnets. Compromised endpoints can be computing devices or “Internet of Things” driven devices like video cameras. Any internet-connected device can be vulnerable to 6 hackers and utilized as part of a botnet.
The deeper and clearer the visibility, the better the analytics and actionable information that can be applied to enhancing application performance and protection. Secure application service solutions must be driven by solid visibility and per-app analytics. • Ability to Scale. Performance and security at scale are paramount in today’s dynamic application environments.
The deeper and clearer the visibility, the better the analytics and actionable information that can be applied to enhancing application performance and protection. Secure application service solutions should provide solid visibility and per-app analytics. • Ability to Scale. Performance and security at scale are highly desirable to our customers given today’s dynamic application environments.
As applications increasingly move to a multi-cloud environment, the deployment of orchestration and automation tools has become essential to efficiently automating the deployment and operations of security and application services.
As applications increasingly move to a multi-cloud environment, the deployment of orchestration and automation tools enable efficient automation for the deployment and operations of security and application services.
We license software from third parties for development of, or integration into, our products, including proprietary and open source software. We pursue registration of our trademarks and domain names in the United States and other jurisdictions. See Part I, Item 1A.
Our failure to enforce and protect our intellectual property rights could harm our business, operating results and financial condition. We license software from third parties for development of, or integration into, our products, including proprietary and open source software. We pursue registration of our trademarks and domain names in the United States and other jurisdictions. See Part I, Item 1A.
We optimize memory to be visible to all cores simultaneously, while minimizing communication overhead and contention among processors for allocated memory space. All processors share a common memory pool, which dynamically allocates memory space based on application processing requirements without constraints.
This avoids the overhead associated with Inter-Processor Communication architectures deployed in 10 first-generation approaches. We optimize memory to be visible to processor cores simultaneously, while minimizing communication overhead and contention among processors for allocated memory space. All processors share a common memory pool, which dynamically allocates memory space based on application processing requirements without constraints.
Product Form Factors Our products are offered in a variety of form factors and payment models, including physical appliances and perpetual and subscription-based software licenses, as well as pay-as-you-go licensing models and FlexPool, a flexible consumption-based software model.
Product Form Factors Our products are offered in a variety of form factors and payment models, including physical appliances and perpetual and subscription-based software licenses, as well as pay-as-you-go licensing models and FlexPool, a flexible consumption-based software model. FlexPool allows businesses to flexibly allocate and re-distribute capacity across applications, multiple clouds and data centers.
To ensure that every processor is utilized to perform every function and thereby achieve greater system utilization, ACOS uses all processor cores 11 symmetrically for all functions and services.
To enable every processor utilized to perform key functions and thereby achieve greater system utilization, ACOS uses processor cores symmetrically for functions and services.
By deploying newly developed secure application delivery automation and predictive analytics tools, enterprises are able to visualize their application performance, detect anomalous trends and fully automate their application delivery and network security. The Rise of DDoS Attacks. The cyberthreat landscape continues to intensify and grow.
By deploying newly developed secure application delivery automation and predictive analytics tools, enterprises can visualize their application performance, detect anomalous trends and automate their application delivery and network security. The Rise of DDoS Attacks and use of Artificial Intelligence. The cyberthreat landscape continues to plague enterprises and society as a whole.
The application networking and security industry is experiencing dynamic shifts in the way applications are developed, delivered, monetized and protected. Our corporate strategy and technology address these evolving needs of our customers and industry, including: Increased Adoption of Cloud Applications . For decades, businesses operated with applications based in physical, appliance-based data centers.
Our corporate strategy and technology address these evolving trends and the needs of our customers and industry, including: Increased Adoption of Cloud Applications . For decades, businesses operated with applications based in physical, appliance-based data centers.
As of December 31, 2022, we had sold our products to over 8,000 customers worldwide since our inception. Our customers include the top two United States wireless carriers, four of the top 10 United States cable providers, and the top four service providers in Japan, in addition to other global enterprises, gaming companies and governmental organizations.
Our customers include the top two United States wireless carriers, four of the top 10 United States cable providers, and the top four service providers in Japan, in addition to other global enterprises, gaming companies and governmental organizations.
Marketing Our strategy is focused on driving greater demand for our products and services, and enabling sales to win as that demand broadens. Our marketing drives global demand generation campaigns, as well as additional awareness and demand via joint marketing campaigns with channel partners and strategic alliance partners worldwide.
Marketing Our strategy is focused on driving greater demand for our products and services, and enabling sales to win as that demand broadens. Our marketing drives global demand generation campaigns, as well as additional awareness and demand via joint marketing campaigns worldwide. Our marketing also drives global awareness through industry analyst engagement, media outreach, blogs, social media and events.
We expect our suppliers to comply with our policy on responsible sourcing of minerals from conflict-affected and high-risk areas and to cooperate with our diligence inquiries and requests for information and certification as may be required by us to comply with reporting and disclosure obligations to which we are subject from time to time. 15 Our corporate headquarters in San Jose, California, is compliant with the California Building Energy Efficiency Standards - Title 24 to reduce wasteful and unnecessary energy consumption.
We expect our suppliers to comply with our policy on responsible sourcing of minerals from conflict-affected and high-risk areas and to cooperate with our diligence inquiries and requests for information and certification as may be required by us to comply with reporting and disclosure obligations to which we are subject from time to time.
The following is an overview of our portfolio: Secure application solutions: 1. Thunder Application Delivery Controller (“ADC”) 2. Lightning Application Delivery Controller (“Lightning ADC”) 3. Thunder Carrier Grade Networking (“CGN”) 4. Thunder Threat Protection System (“TPS”) 5. Thunder SSL Insight (“SSLi”) 6. Thunder Convergent Firewall (“CFW”) Intelligent management and automation tools: 1.
The following is an overview of our portfolio: Secure application solutions: 1. Thunder Application Delivery Controller (“ADC”) 2. Thunder Carrier Grade Networking (“CGN”) 3. Thunder SSL Insight (“SSLi”) 4. Thunder Convergent Firewall (“CFW”) Intelligent management and automation tool: 1. Harmony Controller A10 Defend Suite of Products: 1. A10 Defend Threat Control 2. A10 Defend Orchestrator (formerly aGalaxy management system) 3.
(“Cisco Systems”), Juniper Networks, Inc. (“Juniper Networks”) and Fortinet, Inc. (“Fortinet”); and • Companies that sell products in the traditional application delivery market, such as F5 Networks, Citrix Systems, Inc. (“Citrix Systems”), Avi Networks Inc. (“Avi Networks”) as well as many startups.
(“Cisco Systems”), Juniper Networks, Inc. (“Juniper Networks”) and Fortinet, Inc. (“Fortinet”); and • Companies that sell products in the traditional application delivery market, such as F5 Networks, NetScaler from Cloud Software Group, Inc., VMware from Broadcom (through its acquisition of Avi Networks) as well as many startups.
Orders may be subject to cancellation, rescheduling by customers and product specification changes by customers. Although we believe that the backlog orders are firm, purchase orders may be canceled by the customer prior to shipment without significant penalty. For this reason, we believe that our product backlog at any given date is not a reliable indicator of future revenues.
Orders may be subject to cancellation, rescheduling by customers and product specification changes by customers. Although we believe that the backlog orders are firm, purchase orders may be canceled by the customer prior to shipment without significant cost.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use trade secrets or other information that we regard as proprietary. In addition, the laws of some foreign countries do not protect our proprietary rights as fully as do the laws of the United States.
Our future success depends in part on our ability to protect our proprietary rights to the technologies used in our principal products. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use trade secrets or other information that we regard as proprietary.
FlexPool allows businesses to flexibly allocate and re-distribute capacity across applications, multiple clouds and data centers. 10 Thunder Series: ADC, CGN, TPS, SSLi, and CFW products are available on the Thunder Series family of physical appliances. The Thunder Series products support throughput ranges from 200 Mbps to 300 Gbps.
Thunder Series: ADC, CGN, TPS, SSLi, and CFW products are available on the Thunder Series family of physical appliances. The Thunder Series products support throughput ranges from 200 Mbps to 550 Gbps.
As a result, ACOS provides customers with products that can deliver superior price performance benefits over products that lack these capabilities. ACOS’ high-performance design enables our products to address a wide range of performance-driven networking challenges. The flexible software design of ACOS allows us to apply our portfolio to a variety of markets for a variety of needs.
This shared memory software architecture enables our products to utilize these multi-core CPUs efficiently and scale performance with increasing CPU cores. As a result, ACOS provides customers with products that can deliver superior price performance benefits over products that lack these capabilities. ACOS’ high-performance design enables our products to address a wide range of performance-driven networking challenges.
We believe that we employ a fair and merit-based total compensation system for our employees and offer a variable bonus plan for eligible employees. Employees are generally eligible for medical, dental, vision and other comprehensive benefits, most of which become effective on their start date.
Employees are generally eligible for medical, dental, vision and other comprehensive benefits, most of which become effective on their start date.
Sixty percent of our directors currently self-identify as being from one or multiple diverse groups, including gender. We continuously review and improve our corporate governance guidelines in response to changing requirements and feedback from employees, customers, partners, vendors and shareholders.
We continuously review and improve our corporate governance guidelines in response to changing requirements and feedback from employees, customers, partners, vendors and shareholders.
Harmony Controller 2. aGalaxy TPS The following is a further overview of our portfolio: Secure Application Solutions 1. Thunder Application Delivery Controller. Thunder ADC provides advanced server load balancing, including global server load balancing, high availability, aFleX scripting, aVCS, ADP multi-tenancy, SSL, offload, acceleration, caching and compression, web application firewall (“WAF”), domain name server (“DNS”) application firewall (“DAF”) and others.
Thunder ADC provides advanced server load balancing, including global server load balancing, high availability, aFleX scripting, aVCS, ADP multi-tenancy, SSL, offload, acceleration, caching and compression, web application firewall (“WAF”), domain name server (“DNS”) application firewall (“DAF”) and others. ADCs are typically deployed in front of a server farm within a data center, including web, application and database servers. 2.
We have ongoing outreach efforts to recruit a diverse candidate pool and are building questions into our engagement survey to promote a diverse and inclusive environment. We are committed to ensuring our team members are treated with fairness and respect. We believe that a cooperative work environment, based on trust and mutual respect, is essential to our success.
We have implemented Diversity, Equal Opportunity, and Inclusion action planning teams focused on analysis from diversity surveys and focus groups. We have ongoing outreach efforts to recruit a diverse candidate pool and are building questions into our engagement survey to promote a diverse and inclusive environment. We are committed to ensuring our team members are treated with fairness and respect.
We are an equal opportunity employer and a Vietnam Era Veterans' Readjustment Assistance Act (“VEVRAA”) federal subcontractor. All qualified applicants receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability status, protected veteran status, or any other characteristic protected by law.
All qualified applicants receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability status, protected veteran status, or any other characteristic protected by law. We also comply with all applicable state and local laws governing nondiscrimination in employment.
Operators must dramatically lower latency, reduce total cost of ownership, and improve efficiency which may require advanced consolidation of network functions at the core.
Capacity requirements increase dramatically in 5G networks due to substantial increases in concurrent sessions, lower packet size and higher connections per second. Operators must dramatically lower latency, reduce total cost of ownership, and improve efficiency which may require advanced consolidation of network functions at the core.
This service is based on software licensed from ThreatSTOP, Inc. and A10 threat research. 5. Thunder SSL Insight. Thunder SSLi eliminates the inherent blind spots created by SSL encryption by offloading CPU-intensive SSL decryption functions that enable security devices to inspect and remove malware within encrypted traffic.
It has been successfully implemented by many large service providers and enterprises around the world. 3. Thunder SSL Insight. Thunder SSLi focuses on the inherent blind spots created by SSL encryption by offloading CPU-intensive SSL decryption functions that enable security devices to inspect and remove malware within encrypted traffic.
We believe in the richness and quality of a working environment that is informed by people from all walks of life and strive to create a genuinely inclusive environment. We have implemented Diversity, Equal Opportunity, and Inclusion action planning teams focused on analysis from diversity surveys and focus groups.
We make employment decisions on the basis of a person’s qualifications, and our business needs. We believe in the richness and quality of a working environment that is informed by people from all walks of life and strive to create a genuinely inclusive environment.
Product Portfolio Our product portfolio seeks to address many of the aforementioned challenges and solution requirements. The portfolio consists of six secure application solutions and two intelligent management and automation tools.
To defend against the rising volume of sophisticated cyber-attacks, customers want solutions that provide exceptional performance and scale without dramatically increasing footprint and total cost of ownership. 7 Product Portfolio Our product portfolio seeks to address many of the aforementioned challenges and solution requirements. The portfolio consists of six secure application solutions and two intelligent management and automation tools.
This malicious trend drives demand for greater visibility within SSL-encrypted channels. Businesses need a way to decrypt traffic and apply outbound security policies efficiently, and require an effective way to inspect, identify, and remediate malicious traffic, then re-encrypt traffic and deliver it quickly to its destination.
Businesses need a way to decrypt traffic and apply outbound security policies efficiently, and require an effective way to inspect, identify, and remediate malicious traffic, then re-encrypt traffic and deliver it quickly to its destination. Conducting this process efficiently without placing a “security performance tax” on the user experience is a capability valued by our customers.
As new employees join us, they learn more about our policies and culture through orientation and onboarding, our Employee Handbook, Code of Business Conduct and Ethics, and compliance trainings. These all provide guidance on how we expect to operate in order to foster diversity, equity and inclusion across our company.
Furthermore, we expect employees to conduct themselves in a professional and dignified manner at all times; in doing so, we seek to avoid making employees feel uncomfortable at work. As new employees join us, they learn more about our policies and culture through orientation and onboarding, our Employee Handbook, Code of Business Conduct and Ethics, and compliance trainings.
Some notable details about ACOS include: High Performance and Intelligent Network Input/Output (“I/O”) Processing. In order to maximize the efficiency of high density, multi-core processors, we have developed a high-performance intelligent network I/O technology that can balance application traffic flows equitably across processor cores.
In order to maximize the efficiency of high density, multi-core processors, we have developed a high-performance intelligent network I/O technology that can balance application traffic flows equitably across processor cores. Our Flexible Traffic Accelerator logic can be implemented either as software running within a standard x86 processor or a Field Programmable Gate Array (“FPGA”) semiconductor.
We are aligned with the guidance from the Centers for Disease Control in the U.S. and all other local requirements where we do business across the globe. We use a multi-faceted approach to ensure the health and safety of our employees, from our Code of Conduct to our policies governing the way we act within and outside of our company.
We use a multi-faceted approach to ensure the health and safety of our employees, from our Code of Business Conduct and Ethics to our policies governing the way we act within and outside of our company. We comply with applicable health, safety, and environmental laws as well as related company policies and procedures.
With the exception of Lightning ADC, our products are built on the Advanced Core Operating System (“ACOS”) platform and leverage its performance optimization and security features. The ACOS platform is optimized for modern 64-bit central processing units (“CPUs”), which increasingly have multiple parallel processing cores that operate within a single CPU for higher efficiency and performance scalability.
The ACOS platform is optimized for modern 64-bit central processing units (“CPUs”), which increasingly have multiple parallel processing cores that operate within a single CPU for higher efficiency and performance scalability. To maximize the capabilities of these increasingly dense multi-core CPUs, ACOS implements a proprietary shared memory architecture that provides all cores with simultaneous access to common memory.
We embrace the diversity of our workforce and celebrate the creative value added by individuals with differing backgrounds. We expressly prohibit intimidation, hostility, harassment, discrimination and other inappropriate behavior. Furthermore, we expect employees to conduct themselves in a professional and dignified manner at all times; in doing so, we seek to avoid making employees feel uncomfortable at work.
We believe that a cooperative work environment, based on trust and mutual respect, is essential to our success. We embrace the diversity of our workforce and celebrate the creative value added by individuals with differing backgrounds. We expressly prohibit intimidation, hostility, harassment, discrimination and other inappropriate behavior.
Underlying Technology Since our inception, our solutions have been known for their high performance and scalability in some of the largest and most demanding networks. The value and significance of our high-performance offerings reside in our portfolio’s underlying software operating system.
Thunder container is software that can be deployed as a container for cCGN, cADC and cTPS on customers’ own hardware platforms and OS stacks. Underlying Technology Since our inception, our solutions have been known for their high performance and scalability in some of the largest and most demanding networks.
We also comply with all applicable state and local laws governing nondiscrimination in employment. Total Rewards We offer an attractive mix of compensation and benefit plans to support our employees and their families’ physical, mental, and financial well-being.
Total Rewards We offer an attractive mix of compensation and benefit plans to support our employees and their families’ physical, mental, and financial well-being. We believe that we employ a fair and merit-based total compensation system for our employees and offer a variable bonus plan for eligible employees.
Secure application service solutions must detect and mitigate sophisticated cybersecurity threats, such as malicious threats hiding in encrypted traffic and DDoS attacks. To defend against the rising volume of sophisticated cyber-attacks, solutions require exceptional performance and scale without dramatically increasing footprint and total cost of ownership.
Secure application service solutions must leverage machine learning and AI to rapidly detect and mitigate sophisticated cybersecurity threats, such as malicious threats hiding in encrypted traffic and DDoS attacks.
Conducting this process efficiently without placing a “security performance tax” on the user experience is a critical requirement. The Advent of 5G Networks and a Smart World . The growing deployment of commercial 5G networks will bring massive increases in network throughput and significant new business opportunities for mobile carriers.
The Advent of 5G Networks and a Smart World . The growing deployment of commercial 5G networks will bring massive increases in network throughput and significant new business opportunities for mobile carriers and others. It will also require a new generation of security infrastructure capable of handling the growing capacity requirements and complex management needs of 5G networks.
For the years ended December 31, 2022, 2021 and 2020, our total revenue was $280.3 million, $250.0 million, and $225.5 million, respectively, and our gross margin was 79.7%, 78.6%, and 77.8%, respectively. We had net income of $46.9 million, $94.9 million and $17.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.
For this reason, we believe that our product backlog at any given date is not a reliable indicator of future revenues. 13 For the years ended December 31, 2023, 2022 and 2021, our total revenue was $251.7 million, $280.3 million, and $250.0 million, respectively, and our gross margin was 80.9%, 79.7%, and 78.6%, respectively.
Any issued patent may not preserve our proprietary position, and competitors or others may develop technologies similar to or superior to our technology. Our failure to enforce and protect our intellectual property rights could harm our business, operating results and financial condition.
In addition, the laws of some foreign countries do not protect our proprietary rights as fully as do the laws of the United States. Any issued patent may not preserve our proprietary position, and competitors or others may develop technologies similar to or superior to our technology.
Our Flexible Traffic Accelerator logic can be implemented either as software running within a standard x86 processor or a Field Programmable Gate Array (“FPGA”) semiconductor. Our Flexible Traffic Accelerator (“FTA”) also performs certain hardware-based security checks for each packet and can isolate suspicious traffic before it can impact system performance. Scalable and Efficient Memory Usage.
Our Flexible Traffic Accelerator (“FTA”) also performs certain hardware-based security checks for each packet and can isolate suspicious traffic before it can impact system performance. Scalable and Efficient Memory Usage. To improve the performance of the multi-core processor architecture, we have developed a shared memory technology to allow processors to share common memory and the state of the system simultaneously.

… 31 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

99 edited+9 added−22 removed315 unchanged
Biggest changeTo the extent that we sell our solutions in adjacent markets, we expect to face intense competition in those markets as well. We believe that our main competitors fall into the following categories: • Companies that sell products in the traditional ADC market such as F5 Networks, Inc. (“F5 Networks”) and Citrix Systems, Inc.
Biggest changeWe believe that our main competitors fall into the following categories: • Companies that sell products in the traditional ADC market such as F5 Networks, Inc. (“F5 Networks”) and Citrix Systems, Inc. (“Citrix Systems”); • Companies that sell open source, software-only, cloud-based ADC services, such as Avi Networks Inc. (“Avi Networks”), NGINX Inc. (“NGiNX”), and HAProxy Technologies, Inc.
Our failure to comply with applicable laws and regulations, or to protect such data, could result in enforcement action against us, including significant fines, imprisonment of company officials and public censure, claims for damages by end-customers and other affected persons and entities, damage to our reputation and loss of goodwill (both in relation to existing and prospective channel partners and end-customers), and other forms of injunctive or operations-limiting relief, any of which could have a material adverse effect on our operations, financial performance, and business.
Our failure to comply with applicable laws and regulations, or to protect such data, could result in enforcement action against us, including significant fines, imprisonment of company officials and public censure, claims for damages by end-customers and other 37 affected persons and entities, damage to our reputation and loss of goodwill (both in relation to existing and prospective channel partners and end-customers), and other forms of injunctive or operations-limiting relief, any of which could have a material adverse effect on our operations, financial performance, and business.
While we believe our expertise and dedication of resources to developing new cloud-based solutions, together with the benefits that our existing solutions offer cloud providers, represent advantages that provide us with a strong foundation to compete, it is uncertain whether our efforts to develop new cloud-based solutions or our efforts to market and sell our existing solutions to cloud providers will attract the customers or generate the revenue necessary to successfully compete in this new business model.
While we believe our expertise and dedication of resources to developing new cloud-based solutions, together with the benefits that our existing solutions offer cloud providers, represent advantages that provide us with a strong foundation to compete, it is uncertain whether our efforts to develop new cloud-based and related solutions or our efforts to market and sell our existing solutions to cloud providers will attract the customers or generate the revenue necessary to successfully compete in this new business model.
One such applicable anticorruption law is the FCPA, which generally prohibits U.S. companies and their employees and intermediaries from making payments to foreign officials for the purpose of obtaining or keeping business, securing an advantage, or directing business to another, and requires public companies to maintain accurate books and records 26 and a system of internal accounting controls.
One such applicable anticorruption law is the FCPA, which generally prohibits U.S. companies and their employees and intermediaries from making payments to foreign officials for the purpose of obtaining or keeping business, securing an advantage, or directing business to another, and requires public companies to maintain accurate books and records and a system of internal accounting controls.
End-customers often view the purchase of our products as a significant and strategic decision that can have important implications on their existing networks and data centers and, as a result, require considerable time to evaluate, test and qualify our products prior to making a purchase decision and placing an order to ensure that our products will successfully interoperate with our end-customers’ complex network and data centers.
End-customers often view the purchase of our products as a significant and strategic 30 decision that can have important implications on their existing networks and data centers and, as a result, require considerable time to evaluate, test and qualify our products prior to making a purchase decision and placing an order to ensure that our products will successfully interoperate with our end-customers’ complex network and data centers.
These programs reflect our current initiatives and are not guarantees that we will be able to achieve them. Our ability to successfully execute these initiatives and accurately report our progress presents numerous operational, financial, legal, reputational and other risks, many of which are outside our control, and all of which could have a material negative impact on our business.
These programs reflect our current initiatives and are not guarantees that we will be able to achieve them. Our ability to successfully execute these initiatives and accurately report our progress presents numerous operational, 41 financial, legal, reputational and other risks, many of which are outside our control, and all of which could have a material negative impact on our business.
Additionally, the budgetary 32 decisions at these entities can be lengthy and require multiple organization reviews. The length of time that end-customers devote to their evaluation of our products and decision-making process varies significantly. The length of our products’ sales cycles typically ranges from three to 12 months but can be longer for our large end-customers.
Additionally, the budgetary decisions at these entities can be lengthy and require multiple organization reviews. The length of time that end-customers devote to their evaluation of our products and decision-making process varies significantly. The length of our products’ sales cycles typically ranges from three to 12 months but can be longer for our large end-customers.
If we are unable to protect our 36 intellectual property and other proprietary rights from unauthorized use, the value of those assets may be reduced, which could negatively impact our business. We also rely in part on confidentiality and/or assignment agreements with our technology partners, employees, consultants, advisors and others.
If we are unable to protect our intellectual property and other proprietary rights from unauthorized use, the value of those assets may be reduced, which could negatively impact our business. We also rely in part on confidentiality and/or assignment agreements with our technology partners, employees, consultants, advisors and others.
We rely on a combination of patent, copyright, trademark and trade secret laws, and contractual restrictions on disclosure of confidential and proprietary information, to protect our intellectual property. Despite the efforts we take to protect our intellectual property and other proprietary rights, these efforts may not be sufficient or effective at preventing their unauthorized use.
We rely on a combination of patent, copyright, trademark and trade secret laws, and contractual restrictions on disclosure of confidential and proprietary information, to protect our intellectual property. Despite the efforts we take to protect our intellectual property and other proprietary rights, these efforts may not be sufficient or effective at preventing their 34 unauthorized use.
Aspects of the CCPACPRA and its interpretation remain unclear. In addition, other states have enacted or proposed legislation that regulates the collection, use, and sale of personal information, and such regimes might not be compatible with either the GDPR or the CCPA/CPRA or may require us to undertake additional practices.
Aspects of the CCPA/CPRA and its interpretation remain unclear. In addition, other states have enacted or proposed legislation that regulates the collection, use, and sale of personal information, and such regimes might not be compatible with either the GDPR or the CCPA/CPRA or may require us to undertake additional practices.
Failure to comply with these environmental directives and other environmental laws could result in the imposition of fines and penalties, inability to sell covered products in certain countries, the loss of revenue, 40 or subject us to third-party property damage or personal injury claims, or require us to incur investigation, remediation or engineering costs.
Failure to comply with these environmental directives and other environmental laws could result in the imposition of fines and penalties, inability to sell covered products in certain countries, the loss of revenue, or subject us to third-party property damage or personal injury claims, or require us to incur investigation, remediation or engineering costs.
Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. If these losses exceed our expectations or our revenue growth 20 expectations are not met in future periods, our financial performance will be harmed and our stock price could be volatile or decline.
Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. If these losses exceed our expectations or our revenue growth expectations are not met in future periods, our financial performance will be harmed and our stock price could be volatile or decline.
(“Radware”); 22 • Companies that sell SSL decryption and inspection products, such as Symantec Corporation (through its acquisition of Blue Coat Systems Inc. in 2016) and F5 Networks; and • Companies that sell certain network security products, including Secure Web Gateways, SSL Insight/SSL Intercept, data center firewalls and Office 365 proxy solutions.
(“Radware”); • Companies that sell SSL decryption and inspection products, such as Symantec Corporation (through its acquisition of Blue Coat Systems Inc. in 2016) and F5 Networks; and • Companies that sell certain network security products, including Secure Web Gateways, SSL Insight/SSL Intercept, data center firewalls and Office 365 proxy solutions.
To the extent potential end-customers or industry 29 analysts believe that the occurrence of any actual or perceived failure of our products to detect or prevent malware, viruses, worms or similar threats is a flaw or indicates that our products do not provide significant value, our reputation and business could be harmed.
To the extent potential end-customers or industry analysts believe that the occurrence of any actual or perceived failure of our products to detect or prevent malware, viruses, worms or similar threats is a flaw or indicates that our products do not provide significant value, our reputation and business could be harmed.
These problems have in the past and may in the future cause us to incur significant warranty and repair costs, divert the attention of our engineering personnel from our product development efforts and cause significant customer relations problems. We may also be subject to liability claims for damages related to product errors or defects.
These problems have in the past and may in the future cause us to incur significant warranty and repair costs, divert the 28 attention of our engineering personnel from our product development efforts and cause significant customer relations problems. We may also be subject to liability claims for damages related to product errors or defects.
As we maintain our international operations, we are subject to a number of risks, including the following: • greater difficulty in enforcing contracts and accounts receivable collection and possible longer collection periods; • increased expenses incurred in establishing and maintaining office space and equipment for our international operations; • greater difficulty in recruiting local experienced personnel, and the costs and expenses associated with such activities; • general economic and political conditions in these foreign markets; • economic uncertainty around the world, including continued economic uncertainty as a result of the COVID-19 pandemic, sovereign debt issues in Europe, the United Kingdom’s exit from the European Union (commonly referred to as “Brexit”), and the war between Russia and Ukraine, and tensions between China and Taiwan; • management communication and integration problems resulting from cultural and geographic dispersion; • risks associated with trade restrictions and foreign legal requirements, including the importation, certification, and localization of our products required in foreign countries; • greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties; • the uncertainty of protection for intellectual property rights in some countries; • greater risk of a failure of foreign employees to comply with both U.S. and foreign laws, including antitrust regulations, the U.S.
As we maintain our international operations, we are subject to a number of risks, including the following: • greater difficulty in enforcing contracts and accounts receivable collection and possible longer collection periods; • increased expenses incurred in establishing and maintaining office space and equipment for our international operations; • greater difficulty in recruiting local experienced personnel, and the costs and expenses associated with such activities; • general economic and political conditions in these foreign markets; • economic uncertainty around the world, including continued economic uncertainty as a result of sovereign debt issues in Europe, the United Kingdom’s exit from the European Union (commonly referred to as “Brexit”), the war between Russia and Ukraine, and tensions between China and Taiwan; • management communication and integration problems resulting from cultural and geographic dispersion; • risks associated with trade restrictions and foreign legal requirements, including the importation, certification, and localization of our products required in foreign countries; • greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties; • the uncertainty of protection for intellectual property rights in some countries; • greater risk of a failure of foreign employees to comply with both U.S. and foreign laws, including antitrust regulations, the U.S.
Furthermore, if tariffs, trade restrictions, or trade barriers are placed on products such as ours by foreign governments, especially China, the 37 prices for our products may increase, which may result in the loss of customers and harm to our business, financial condition and results of operations.
Furthermore, if tariffs, trade restrictions, or trade barriers are placed on products such as ours by foreign governments, especially China, the prices for our products may increase, which may result in the loss of customers and harm to our business, financial condition and results of operations.
Even if not subject to 39 legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and inhibit adoption of our products by current and prospective end-customers. Our sales to governmental organizations are subject to a number of challenges and risks. We sell to governmental organization end-customers.
Even if not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and inhibit adoption of our products by current and prospective end-customers. Our sales to governmental organizations are subject to a number of challenges and risks. We sell to governmental organization end-customers.
Risks Related to Capitalization and Financial Markets 43 We are exposed to fluctuations in currency exchange rates, which could negatively affect our results of operations. Our consolidated results of operations, financial position and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Historically, the majority of our revenue contracts are denominated in U.S.
Risks Related to Capitalization and Financial Markets We are exposed to fluctuations in currency exchange rates, which could negatively affect our results of operations. Our consolidated results of operations, financial position and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Historically, the majority of our revenue contracts are denominated in U.S.
Dollar and the Japanese Yen, could impact the purchasing decisions of our customers. We generate a significant amount of revenue from sales to distributors, resellers, and end-customers outside of the United States, and we are therefore subject to a number of risks that could adversely affect these international sources of our revenue.
Dollar and the Japanese Yen, could impact the purchasing decisions of our customers. 23 We generate a significant amount of revenue from sales to distributors, resellers, and end-customers outside of the United States, and we are therefore subject to a number of risks that could adversely affect these international sources of our revenue.
As a result, most of our subscription revenue arises from agreements entered into during previous periods. A shortfall in orders for our subscription-based solutions in any one period would most likely not significantly reduce our subscription revenue for that period, but could adversely affect the revenue contribution in future periods.
As a result, most of our subscription revenue arises from agreements entered into during previous periods. A shortfall in orders for our subscription-based solutions in any one period would most likely not significantly reduce our subscription revenue for that period, but could adversely affect 31 the revenue contribution in future periods.
In addition, our component suppliers change their selling prices frequently in response to market trends, including industry-wide increases in demand, and because we do not necessarily have contracts with these suppliers, we are susceptible to price fluctuations related to raw materials and components.
Our component suppliers change their selling prices frequently in response to market trends, including industry-wide increases in demand, and because we do not necessarily have contracts with these suppliers, we are susceptible to price fluctuations related to raw materials and components.
To the extent this impacts our ability to react timely to specific market or business opportunities, our financial results may be harmed. 34 Future acquisitions we may undertake may not result in the financial and strategic goals that are contemplated at the time of the transaction.
To the extent this impacts our ability to react timely to specific market or business opportunities, our financial results may be harmed. Future acquisitions we may undertake may not result in the financial and strategic goals that are contemplated at the time of the transaction.
Moreover, conditions in our market could change rapidly and significantly as a result of technological advancements or other factors. In addition, current or potential competitors may be acquired by third parties that have greater resources available.
Moreover, conditions in our market could change rapidly and significantly as a result of technological advancements or other factors. 21 In addition, current or potential competitors may be acquired by third parties that have greater resources available.
If any companies or governments that are publicly known to use our platform are the subject of a cyber-attack that becomes publicized, our other current or potential channel partners or end-customers may look to our competitors for alternatives to our products.
If any companies or governments that are publicly known to use our platform are the subject of a cyber-attack that becomes publicized, our other current or potential channel partners or end-customers may look to our competitors for 27 alternatives to our products.
If securities or industry analysts do not publish research or reports about our business, or publish inaccurate or unfavorable research reports about our business, our share price and trading volume could decline. 45 The market for our common stock, to some extent, depends on the research and reports that securities or industry analysts publish about us or our business.
If securities or industry analysts do not publish research or reports about our business, or publish inaccurate or unfavorable research reports about our business, our share price and trading volume could decline. The market for our common stock, to some extent, depends on the research and reports that securities or industry analysts publish about us or our business.
Foreign Corrupt Practices Act (“FCPA”), and any trade regulations ensuring fair trade practices; and • heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements.
Foreign Corrupt Practices Act (“FCPA”), and any trade regulations ensuring fair trade practices; and 24 • heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements.
Trade Representative (the “USTR”) enacted tariffs on imports into the U.S. from China, including communications equipment products and components manufactured and imported from China. In October 2021 the USTR confirmed these enacted U.S. tariffs will stay in place for the time being.
Trade Representative (the “USTR”) enacted tariffs on imports into the U.S. from 35 China, including communications equipment products and components manufactured and imported from China. In October 2021 the USTR confirmed these enacted U.S. tariffs will stay in place for the time being.
Moreover, long-term supply and maintenance obligations to our end-customers increase the 28 duration for which specific components are required, which may further increase the risk we may incur component shortages or the cost of carrying inventory.
Moreover, long-term supply and maintenance obligations to our end-customers increase the duration for which specific components are required, which may further increase the risk we may incur component shortages or the cost of carrying inventory.
As a consequence, any acceleration or delay in anticipated product purchases by or requested deliveries to our largest end-customers could materially 24 affect our revenue and operating results in any quarter and cause our revenue and operating results to fluctuate from quarter to quarter.
As a consequence, any acceleration or delay in anticipated product purchases by or requested deliveries to our largest end-customers could materially affect our revenue and operating results in any quarter and cause our revenue and operating results to fluctuate from quarter to quarter.
Failure to adequately manage open source license compliance and our use of open source software may result in unanticipated obligations regarding our products and services, such as a requirement that we license proprietary portions of our products or services on unfavorable terms, that we make available source code for modifications or derivative works we created based upon, incorporating or using open source software, that we license such modifications or derivative works under the terms of the particular open source license and/or that we redesign the affected products or services, which could result, for example, in a loss of intellectual property rights, or delay in providing our products and services.
Failure to adequately manage open source license compliance and our use of open source or AI generated software may result in unanticipated obligations regarding our products and services, such as a requirement that we license proprietary portions of our products or services on unfavorable terms, that we make available source code for modifications or derivative works we created based upon, incorporating or using open source software, that we license such modifications or derivative works under the terms of the particular open source license and/or that we redesign the affected products or services, which could result, for example, in a loss of intellectual property rights, or delay in providing our products and services.
While we carry insurance policies 30 covering this type of liability, these policies may not provide sufficient protection should a claim be asserted. A material product liability claim may harm our business and results of operations.
While we carry insurance policies covering this type of liability, these policies may not provide sufficient protection should a claim be asserted. A material product liability claim may harm our business and results of operations.
We have and may be required to expend significant capital and other resources to protect against security and remedy breaches or to alleviate problems caused by security breaches, or to pay penalties as a result of such breaches.
We have and may be required to expend significant capital and other resources to protect against security incidents and remedy breaches or to alleviate problems caused by security breaches, or to pay penalties as a result of such breaches.
Any real or perceived defects, errors, or vulnerabilities in our products, or any failure of our products to detect a threat, could result in: • a loss of existing or potential end-customers or channel partners; • delayed or lost revenue; • a delay in attaining, or the failure to attain, market acceptance; • the expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate, or work around errors or defects, to address and eliminate vulnerabilities, to remediate harms potentially caused by those vulnerabilities, or to identify and ramp up production with third-party providers; • an increase in warranty claims, or an increase in the cost of servicing warranty claims, either of which would adversely affect our gross margins; • harm to our reputation or brand; and • litigation, regulatory inquiries, or investigations that may be costly and further harm our reputation.
Any real or perceived defects, errors, or vulnerabilities in our products, or any failure of our products to detect a threat, could result in: • a loss of existing or potential end-customers or channels; • delayed or lost revenue; • a delay in attaining, or the failure to attain, market acceptance; • the expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate, or work around errors or defects, to address and eliminate vulnerabilities, to remediate harms potentially caused by those vulnerabilities, or to identify and ramp up production with third-party providers; • an increase in warranty claims, or an increase in the cost of servicing warranty claims, either of which would adversely affect our gross margins; • harm to our reputation or brand; and • litigation, regulatory inquiries, or investigations that may be costly and further harm our reputation.
A subscription revenue model also makes it difficult for us to rapidly 33 increase our revenue through additional subscription sales in any one period, as revenue is generally recognized over a longer period.
A subscription revenue model also makes it difficult for us to rapidly increase our revenue through additional subscription sales in any one period, as revenue is generally recognized over a longer period.
Any errors, defects or vulnerabilities in our products could result in: • expenditures of significant financial and product development resources in efforts to analyze, correct, eliminate or work around errors and defects or to address and eliminate vulnerabilities; • loss of existing or potential end-customers or distribution channel partners; • delayed or lost revenue; • delay or failure to attain market acceptance; • indemnification obligations under our agreements with resellers, distributors and/or end-customers; • an increase in warranty claims compared with our historical experience or an increased cost of servicing warranty claims, either of which would adversely affect our gross margin; and • litigation, regulatory inquiries, or investigations that may be costly and harm our reputation.
Any errors, defects or vulnerabilities in our products could result in: • expenditures of significant financial and product development resources in efforts to analyze, correct, eliminate or work around errors and defects or to address and eliminate vulnerabilities; • loss of existing or potential end-customers or distribution channels; • delayed or lost revenue; • delay or failure to attain market acceptance; • indemnification obligations under our agreements with resellers, distributors and/or end-customers; • an increase in warranty claims compared with our historical experience or an increased cost of servicing warranty claims, either of which would adversely affect our gross margin; and • litigation, regulatory inquiries, or investigations that may be costly and harm our reputation.
If economic conditions in the United States, Europe and other key markets for our products continue to be volatile in response to COVID-19, geopolitical developments, macroeconomic trends, or otherwise, and do not improve, or those markets experience a prolonged downturn, many end-customers may delay or reduce their IT spending.
If economic conditions in the United States, Europe and other key markets for our products continue to be volatile in response to geopolitical developments, macroeconomic trends, or otherwise, and do not improve, or those markets experience a prolonged downturn, many end-customers may delay or reduce their IT spending.
There can be no assurance that any additional stock repurchases will, in fact, occur, or, if they occur, that they will enhance stockholder value. Although the stock repurchase programs is intended to enhance long term stockholder value, short-term stock price fluctuations could reduce the effectiveness. 46 Item 1B. Unresolved Staff Comments None.
There can be no assurance that any additional stock repurchases will, in fact, occur, or, if they occur, that they will enhance stockholder value. Although the stock repurchase programs is intended to enhance long term stockholder value, short-term stock price fluctuations could reduce the effectiveness. 44 Item 1B. Unresolved Staff Comments None.
Factors that could cause fluctuations in the trading price of our common stock include the following: • announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors; • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of technology companies in general and of companies in our industry; • fluctuations in the trading volume of our shares or the size of our public float; 44 • actual or anticipated changes or fluctuations in our results of operations; • whether our results of operations meet the expectations of securities analysts or investors; • actual or anticipated changes in the expectations of investors or securities analysts; • litigation or investigations involving us, our industry, or both; • regulatory developments in the United States, foreign countries or both; • general economic conditions and trends; • major catastrophic events, including COVID-19, acts of terrorism or war, or other events affecting the global economy, and the responses thereto; • cyberattacks and other information or security breaches; • sales of large blocks of our common stock; or • departures of key personnel.
Factors that could cause fluctuations in the trading price of our common stock include the following: 42 • announcements of new products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors; • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of technology companies in general and of companies in our industry; • fluctuations in the trading volume of our shares or the size of our public float; • actual or anticipated changes or fluctuations in our results of operations; • whether our results of operations meet the expectations of securities analysts or investors; • actual or anticipated changes in the expectations of investors or securities analysts; • litigation or investigations involving us, our industry, or both; • regulatory developments in the United States, foreign countries or both; • general economic conditions and trends; • major catastrophic events, including pandemics, acts of terrorism or war, or other events affecting the global economy, and the responses thereto; • cyberattacks and other information or security breaches; • sales of large blocks of our common stock; or • departures of key personnel.
We are exposed to the credit risk of our distribution channel partners and end-customers, which could result in material losses and negatively impact our operating results. Most of our sales are on an open credit basis, with typical payment terms ranging from 30 to 90 days depending on local customs or conditions that exist in the sale location.
We are exposed to the credit risk of our distribution channels and end-customers, which could result in material losses and negatively impact our operating results. Most of our sales are on an open credit basis, with typical payment terms ranging from 30 to 90 days depending on local customs or conditions that exist in the sale location.
Any disruption in the business of our supply chain, manufacturers, logistics providers, partners or end-customers that impacts sales at the end of a quarter could have a significant 35 adverse impact on our quarterly results. All of the aforementioned risks may be further increased if the disaster recovery plans for us and our suppliers prove to be inadequate.
Any disruption in the business of our supply chain, manufacturers, logistics providers, channels or end-customers that impacts sales at the end of a quarter could have a significant adverse impact on our quarterly results. All of the aforementioned risks may be further increased if the disaster recovery plans for us and our suppliers prove to be inadequate.
Volatility in the global economic market or other effects of global or regional economic weakness, including the impacts of COVID-19, limited availability of credit, a reduction in business confidence and activity, deficit-driven austerity measures that continue to affect governments and educational institutions, and other difficulties may affect one or more of the industries to which we sell our products and services.
Volatility in the global economic market or other effects of global or regional economic weakness, including limited availability of credit, a reduction in business confidence and activity, deficit-driven austerity measures that continue to affect governments and educational institutions, and other difficulties may affect one or more of the industries to which we sell our products and services.
Our reliance on these third-party manufacturers reduces our control over the manufacturing process and exposes us to risks, including reduced control over quality assurance, product costs, and product supply and timing. Any manufacturing disruption at these manufacturers, including but not limited to disruptions due to COVID-19 or tensions with China, could severely impair our ability to fulfill orders.
Our reliance on these third-party manufacturers reduces our control over the manufacturing process and exposes us to risks, including reduced control over quality assurance, product costs, and product supply and timing. Any manufacturing disruption at these manufacturers, including but not limited to disruptions due to tensions with China, could severely impair our ability to fulfill orders.
In addition, holders of certain shares of our outstanding common stock, including an aggregate of 3.9 million shares held by funds affiliated with Summit Partners, L.P. as of December 31, 2022 are entitled to rights with respect to registration of these shares under the Securities Act pursuant to an investors’ rights agreement.
In addition, holders of certain shares of our outstanding common stock, 43 including an aggregate of 3.9 million shares held by funds affiliated with Summit Partners, L.P. as of December 31, 2023 are entitled to rights with respect to registration of these shares under the Securities Act pursuant to an investors’ rights agreement.
In addition to other risks listed in this “Risk Factors” section, factors that may affect our operating results include: • The impact of COVID-19 on our business and on the business of our customers and business partners, as well as on the economy in general; • fluctuations in and timing of purchases from, or loss of, large customers; • the budgeting cycles and purchasing practices of end-customers; • our ability to attract and retain new end-customers; • our ability to provide and enhance efficient operations; • changes in demand for our products and services, including seasonal variations in customer spending patterns or cyclical fluctuations in our markets; • our reliance on shipments at the end of our quarters; • variations in product mix or geographic locations of our sales, which can affect the revenue we realize for those sales; • the timing and success of new product and service introductions by us or our competitors; • our ability to increase the size of our distribution channel and to maintain relationships with important distribution channels; • our ability to improve our overall sales productivity and successfully execute our marketing strategies; • the effect of currency exchange rates on our revenue and expenses; • changes in legal requirements, our compliance obligations and/or relevant tax schemas; • the cost and potential outcomes of existing and future litigation; • expenses related to our facilities, networks, and network operations; 21 • the effect of discounts negotiated by our largest end-customers for sales or pricing pressure from our competitors; • changes in the growth rate of the application networking or security markets or changes in market needs; • inventory write downs, which may be necessary for our older products when our new products are launched and adopted by our end-customers; • our ability to expand internationally and domestically; and • our third-party manufacturers’ and component suppliers’ capacity to meet our product demand forecasts on a timely basis, or at all.
In addition to other risks listed in this “Risk Factors” section, factors that may affect our operating results include: • fluctuations in and timing of purchases from, or loss of, large customers; • the budgeting cycles and purchasing practices of end-customers; • changes in end-customer preferences, practices or personnel; • our ability to attract and retain new end-customers; • our ability to provide and enhance efficient operations; • changes in demand for our products and services, including seasonal variations in customer spending patterns or cyclical fluctuations in our markets; • our reliance on shipments at the end of our quarters; • variations in product mix or geographic locations of our sales, which can affect the revenue we realize for those sales; • the timing and success of new product and service introductions by us or our competitors; • our ability to increase the size of our distribution channel and to maintain relationships with important distribution channels; • our ability to improve our overall sales productivity and successfully execute our marketing strategies; • the effect of currency exchange rates on our revenue and expenses; 19 • changes in legal requirements, our compliance obligations and/or relevant tax schemas; • the cost and potential outcomes of existing and future litigation; • expenses related to our facilities, networks, and network operations; • the effect of discounts negotiated by our largest end-customers for sales or pricing pressure from our competitors; • changes in the growth rate of the application networking or security markets or changes in market needs; • inventory write downs, which may be necessary for our older products when our new products are launched and adopted by our end-customers; • our ability to expand internationally and domestically; and • our third-party manufacturers’ and component suppliers’ capacity to meet our product demand forecasts on a timely basis, or at all.
From time to time, there have been claims against companies that distribute or use third-party open source software in their products and services, asserting that the open source software or its combination with the products or services infringes third parties’ patents or copyrights, or that the companies’ distribution or use of the open source software does not comply with the terms of the applicable open source licenses.
From time to time, there have been claims against companies that distribute or use third-party open source or other software in their products and services, asserting that the open source or AI generated software or its combination with the products or services infringes third parties’ patents or copyrights, or that the companies’ distribution or use of the open source software does not comply with the terms of the applicable licenses.
During the years ended December 31, 2022, 2021 and 2020, purchases by our ten largest end-customers accounted for approximately 41%, 39% and 41% of our total revenue, respectively. The composition of the group of these ten largest end-customers changes from period to period, but often includes service providers and enterprise customers.
During the years ended December 31, 2023, 2022 and 2021, purchases by our ten largest end-customers accounted for approximately 33%, 41% and 39% of our total revenue, respectively. The composition of the group of these ten largest end-customers changes from period to period, but often includes service providers and enterprise customers.
Additionally, future actual, potential or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. A significant number of our employees are currently working from home.
Additionally, future actual, potential or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. A significant number of our employees are currently working from home or other remote locations.
As a result of end-customer buying patterns and the efforts of our sales force and distribution channel partners to meet or exceed their sales objectives, we have historically received a substantial portion of purchase orders and generated a substantial portion of revenue during the last few weeks of each quarter.
As a result of end-customer buying patterns and the efforts of our sales force and distribution channels to meet or exceed their sales objectives, we have historically received a substantial portion of purchase orders and generated a substantial portion of revenue during the last few weeks of each quarter.
Any compromise or perceived compromise of our security could damage our reputation with our end-customers, and could subject us to significant liability, as well as regulatory action, including financial penalties, which would materially adversely affect our brand, results of operations, financial condition, business and prospects.
Any compromise or perceived compromise of our security could damage our reputation with our end-customers, and could subject us to significant liability, as well as regulatory action, including financial penalties, which could significantly adversely affect our brand, results of operations, financial condition, business and prospects.
In response to the January 2023 Cyber Incident, we launched an investigation and engaged the services of cyber-security experts and advisors, 38 incident response professionals and external counsel to support the investigation. While, to date, this incident has not had a material impact on our operations, it did result in additional expense incurred in connection with the investigation.
In response to the January 2023 Cyber Incident, we launched an investigation and engaged the services of cyber-security experts and advisors, incident response professionals and external counsel to support the investigation. While to date, this incident has not had a material impact on the Company, it did result in additional expense incurred in connection with the investigation.
As a result, we could also be subject to suits by parties claiming ownership of rights in what we believe to be open source software and so challenging our right to use such software in our products. If any such claims were asserted against us, we could be required to incur significant legal expenses defending against such a claim.
As a result, we could also be subject to suits by parties claiming ownership of rights in such software and so challenging our right to use such software in our products. If any such claims were asserted against us, we could be required to incur significant legal expenses defending against such a claim.
These provisions include: • the ability of our Board of Directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preference and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairman of our Board of Directors, our Chief Executive Officer, our president (in the absence of a chief executive officer), or a majority vote of our Board of Directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the ability of our Board of Directors, by majority vote, to amend the bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or not to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us. 42 In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law.
These provisions include: • the ability of our Board of Directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preference and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairman of our Board of Directors, our Chief Executive Officer, our president (in the absence of a chief executive officer), or a majority vote of our Board of Directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; 40 • the ability of our Board of Directors, by majority vote, to amend the bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or not to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Use of certain open source software can lead to greater risks than use of warranted third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of such open source software.
Use of certain open source or AI generated software can lead to greater risks than use of warranted third-party commercial software, as open source licensors and AI generated software generally do not provide warranties or controls on the origin of such software.
Our business is subject to regulation by various federal, state, local and foreign governmental entities, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, product safety, environmental laws, consumer protection laws, anti-bribery laws, import/export controls, federal securities laws, and tax laws and regulations.
Our business is subject to regulation by various federal, state, local and foreign governmental entities, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, product safety, environmental laws, consumer protection laws, anti-bribery laws, import/export controls, artificial intelligence, data privacy laws, federal securities laws, and tax laws and regulations.
Additionally, the current uncertainty about the future relationship between the United States and other countries with respect to the trade policies, treaties, taxes, government regulations and tariffs makes it difficult to plan for the future.
Additionally, the current uncertainty about the future relationship between the United States and China, as well as other countries, with respect to the trade policies, treaties, taxes, government regulations and tariffs makes it difficult to plan for the future.
If current or prospective channel partners and end-customers believe that our systems and solutions do not provide adequate security for their businesses’ needs, our business and our financial results could be harmed.
If current or prospective resellers and end-customers believe that our systems and solutions do not provide adequate security for their businesses’ needs, our business and our financial results could be harmed.
As part of this strategy, the Company announced on November 1, 2022 that its Board authorized a $50 million stock repurchase program under which we may repurchase up to $50 million of our outstanding common stock over the following 12 months.
As part of this strategy, the Company announced on November 7, 2023 that its Board authorized a $50 million stock repurchase program under which we may repurchase up to $50 million of our outstanding common stock over the following 12 months.
Our failure or the failure of our distribution channel partners to maintain high-quality support and services could have a material and adverse effect on our business, revenue and operating results.
Our failure or the failure of our distribution channels to maintain high-quality support and services could have a material and adverse effect on our business, revenue and operating results.
From time to time, there have been claims against companies that use open source software in their products, challenging the ownership of rights in such open source software.
From time to time, there have been claims against companies that use open source or AI generated software in their products, challenging the ownership of rights in such open source or AI generated software.
While the Cyber Incident we experienced in January 2023 did not result in material degradation of our systems, it did expose a vulnerability in our security measures.
While the Cyber Incident we experienced in January 2023 did not result in material degradation of our systems, it did expose a vulnerability in our security measures which we have corrected.
Our use of open source software in our products could negatively affect our ability to sell our products and subject us to possible litigation. We incorporate open source software such as the Linux operating system kernel into our products.
Our use of open source software and generative artificial intelligence (AI) in our products could negatively affect our ability to sell our products and subject us to possible litigation. We incorporate open source software such as the Linux operating system kernel into our products.
This could result in reductions in sales of our products and services, longer sales cycles, slower adoption of new technologies and increased price competition. Any of these events would likely harm our business, operating results and financial condition. In addition, there can be no assurance that IT spending levels will increase following any recovery.
From time to time this causes reductions in sales of our products and services, longer sales cycles, slower adoption of new technologies and increased price competition. Any of these events would likely harm our business, operating results and financial condition. In addition, there can be no assurance that IT spending levels will increase following any recovery.
A significant portion of our revenue is generated in international markets, including Japan, Western Europe, China, Taiwan and South Korea. During the years ended December 31, 2022, 2021, and 2020, approximately 54%, 60% and 63% of 25 our total revenue, respectively, was generated from customers located outside of the United States.
A significant portion of our revenue is generated in international markets, including Japan, Western Europe, Taiwan and South Korea. During the years ended December 31, 2023, 2022, and 2021, approximately 55%, 54% and 60% of our total revenue, respectively, was generated from customers located outside of the United States.
Revenue resulting from selling in local currencies and costs incurred in local currencies are exposed to foreign currency exchange rate fluctuations that can affect our operating income. The currency exchange impact of the foreign exchange rates on our net income was $0.5 million unfavorable during the year ended December 31, 2022.
Revenue resulting from selling in local currencies and costs incurred in local currencies are exposed to foreign currency exchange rate fluctuations that can affect our operating income. The currency exchange impact of the foreign exchange rates on our net income was $0.1 million favorable during the year ended December 31, 2023.
During the years ended December 31, 2022, 2021 and 2020, service providers accounted for approximately 66%, 63% and 61%, of our total revenue, respectively, and enterprise customers accounted for approximately 34%, 37% and 39% of our total revenue, respectively. Sales to these large end-customers have typically been characterized by large but irregular purchases with long initial sales cycles.
During the years ended December 31, 2023, 22 2022 and 2021, service providers accounted for approximately 58%, 66% and 63%, of our total revenue, respectively, and enterprise customers accounted for approximately 42%, 34% and 37% of our total revenue, respectively. Sales to these large end-customers have typically been characterized by large but irregular purchases with long initial sales cycles.
Breaches of our security measures or those of our third-party service providers, or other security incidents, has and could result in: unauthorized access to our sites, networks and systems; unauthorized access to, misuse or misappropriation of information, including personally identifiable information, or other confidential or proprietary information of ourselves or third parties; viruses, worms, spyware or other malware being served from our sites, networks or systems; deletion or modification of content or the display of unauthorized content on our sites; interruption, disruption or malfunction of operations; costs relating to notification of individuals, or other forms of breach remediation; deployment of additional personnel and protection technologies; response to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; litigation, regulatory investigations, prosecutions, and other actions; and other potential liabilities.
We may incur significant additional costs in the future to address problems caused by any actual or perceived security breaches . 36 Breaches of our security measures or those of our third-party service providers, or other security incidents, has and could result in: unauthorized access to our sites, networks and systems; unauthorized access to, misuse or misappropriation of information, including personally identifiable information, or other confidential or proprietary information of ourselves or third parties; viruses, worms, spyware or other malware being served from our sites, networks or systems; deletion or modification of content or the display of unauthorized content on our sites; interruption, disruption or malfunction of operations; costs relating to notification of individuals, or other forms of breach remediation; deployment of additional personnel and protection technologies; response to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; litigation, regulatory investigations, prosecutions, and other actions; and other potential liabilities.
As of December 31, 2022, our executive officers and directors, together with affiliated entities, owned 5.6% of our then outstanding common stock (34.1% if other holders of 5% or more of our outstanding common stock are also included).
As of December 31, 2023, our executive officers and directors, together with affiliated entities, owned 5.7% of our then outstanding common stock (40.6% if other holders of 5% or more of our outstanding common stock are also included).
(“Cisco Systems”), Juniper Networks, Inc. (“Juniper Networks”) and Fortinet, Inc. (“Fortinet”); • Companies that sell traditional DDoS protection products, such as Arbor Networks, Inc., a subsidiary of NetScout Systems, Inc. (“Arbor Networks”) and Radware, Ltd.
(“Fortinet”); • Companies that sell traditional DDoS protection products, such as Arbor Networks, Inc., a subsidiary of NetScout Systems, Inc. (“Arbor Networks”) and Radware, Ltd.
Our success depends to a significant degree upon the continued contributions of our key management, product development, sales, marketing and finance personnel, many of whom may be difficult to replace.
Our success depends on our key personnel and our ability to hire, retain and motivate qualified product development, sales, marketing and finance personnel. Our success depends to a significant degree upon the continued contributions of our key management, product development, sales, marketing and finance personnel, many of whom may be difficult to replace.
However, if we are unable to develop new products and features to address technological changes and new customer requirements in the application networking or security markets, or if our investments in research and development do not yield the expected benefits in a timely manner, our business and operating results could be adversely affected.
However, if we are unable to develop new products and features to address technological changes and new customer requirements in the application networking or security markets, or if our investments in research and development do not yield the expected benefits in a timely manner, our business and operating results could be adversely affected. 18 We have experienced net losses in the past and may not maintain profitability in future periods.
If we fall out of compliance with, or are deemed to be in violation of, any applicable export or import regulations, we may incur penalties and face other consequences that could harm our sales process and financial results. We are subject to various environmental laws and regulations that could impose substantial costs upon us.
If we fall out of compliance with, or are deemed to be in violation of, any applicable export or import regulations, we may incur penalties and face other consequences that could harm our sales process and financial results.
In addition, large-scale cybersecurity attacks, acts of war or terrorism, or other geo-political unrest could cause disruptions in our business or the business of our supply chain, manufacturers, logistics providers, partners, or end-customers or the economy as a whole.
In addition, large-scale cybersecurity attacks, acts of war or terrorism, 33 global pandemics such as the COVID-19 pandemic or other geo-political unrest could cause disruptions in our business or the business of our supply chain, manufacturers, logistics providers, channels, or end-customers or the economy as a whole.
If we do not successfully anticipate market needs and opportunities or if the market does not continue to adopt our application delivery solutions, our business, financial condition and results of operations could be significantly harmed. The application delivery market is rapidly evolving and difficult to predict. Technologies, customer requirements, security threats and industry standards are constantly changing.
Risks Related to Our Business, Operations and Industry If we do not successfully anticipate market needs and opportunities or if the market does not continue to adopt our application delivery solutions, our business, financial condition and results of operations could be significantly harmed. The application delivery market is rapidly evolving and difficult to predict.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States. 41 Generally accepted accounting principles (“GAAP”) in the United States are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
Generally accepted accounting principles (“GAAP”) in the United States are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
All outstanding shares and all shares issuable upon exercise of outstanding and vested options are freely tradable, subject in some cases to volume and other restrictions of Rules 144 and 701 under the Securities Act, as well as our insider trading policy.
As of December 31, 2023, there were approximately 74.4 million common shares outstanding as of such date. All outstanding shares and all shares issuable upon exercise of outstanding and vested options are freely tradable, subject in some cases to volume and other restrictions of Rules 144 and 701 under the Securities Act, as well as our insider trading policy.
In addition, reconfiguring or upgrading our information technology systems or other business processes in response to changing business needs may be time-consuming and costly and is subject to risks of delay or failed deployment.
This could harm our ability to ship or support our products, and our financial results may be harmed. 32 In addition, reconfiguring or upgrading our information technology systems or other business processes in response to changing business needs may be time-consuming and costly and is subject to risks of delay or failed deployment.
Our company must comply with local, state, federal, and international environmental laws and regulations in the countries in which we do business. We are also subject to laws, which restrict certain hazardous substances, including lead, used in the construction of our products, such as the European Union Restriction on the Use of Hazardous Substances in electrical and electronic equipment directive.
We are also subject to laws which restrict certain hazardous substances, including lead, used in the construction of our products, such as the European Union Restriction on the Use of Hazardous Substances in electrical and electronic equipment directive.
The need to engage in these or other remedies could increase our costs or otherwise adversely affect our business, operating results and financial condition. 31 Our products must interoperate with operating systems, software applications and hardware that are developed by others and if we are unable to devote the necessary resources to ensure that our products interoperate with such software and hardware, we may fail to increase, or we may lose market share and we may experience a weakening demand for our products.
Our products must interoperate with operating systems, software applications and hardware that are developed by others and if we are unable to devote the necessary resources to ensure that our products interoperate with such software and hardware, we may fail to increase, or we may lose market share and we may experience a weakening demand for our products.
If those systems fail or are interrupted, or if our ability to connect to or interact with one or more networks is interrupted, our processes may function at a diminished level or not at all. This could harm our ability to ship or support our products, and our financial results may be harmed.
If those systems fail or are interrupted, or if our ability to connect to or interact with one or more networks is interrupted, our processes may function at a diminished level or not at all.

… 50 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

0 edited+0 added−1 removed2 unchanged
Removed
We intend to expand our facilities or add new facilities as we add employees and enter new geographic markets. We believe that alternative or additional space suitable for our requirements will be available as needed to accommodate ongoing operations and any such growth. We do however expect to incur additional expenses in connection with any such new or expanded facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed3 unchanged
Biggest changeCommitments and Contingencies, in the notes to consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated by reference. Item 4. Mine Safety Disclosures Not applicable. 47 PART II
Biggest changeCommitments and Contingencies, in the notes to consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated by reference.
Due to the inherent uncertainties of the legal processes in the multiple jurisdictions in which we operate, our judgments may be materially different than the actual outcomes, which could have material adverse effects on our business, financial conditions and results of operations. Additional information with respect to this Item may be found in Note 6.
Due to the inherent uncertainties of the legal processes in the multiple jurisdictions in which we operate, our judgments may be materially different than the actual outcomes, which could have material adverse effects on our business, financial conditions and results of operations. Additional information with respect to this Item may be found in Note 7.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+2 added−1 removed3 unchanged
Biggest changeTo date all cash dividends have been treated as a return of capital. We currently anticipate that we will continue to pay comparable quarterly cash dividends in the future. However, the payment, amount and timing of future dividends remain within the discretion of our Board and will depend upon our results of operations, financial condition, cash requirements, and other factors.
Biggest changeHowever, the payment, amount and timing of future dividends remain within the discretion of our Board of Directors and will depend on our results of operations, financial condition, cash requirements, and other factors. There were approximately 73 stockholders of record on February 16, 2024.
Because many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these holders of record. 48 Company Stock Performance The following graph compares the cumulative total return on our common stock, the NASDAQ Composite Index, the Russell 1000 Index and the NYSE Technology Index.
Because many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these holders of record. 48 Company Stock Performance The following graph compares the cumulative total return on our common stock, the NASDAQ Composite Index, the Russell 1000 Index, the Russell 2000 Index and the NYSE Technology Index.
The graph assumes $100 was invested on December 31, 2017 in our common stock and each index and all dividends were reinvested. The historic stock price performance is not necessarily indicative of future stock price performance.
The graph assumes $100 was invested on December 31, 2018 in our common stock and each index and all dividends were reinvested. The historic stock price performance is not necessarily indicative of future stock price performance.
No shares were repurchased by the Company during the three months ended December 31, 2022. Unregistered Sales of Equity Securities None. Item 6. [Reserved] 49
No shares were repurchased by the Company during the three months ended December 31, 2023. Unregistered Sales of Equity Securities None. Item 6. [Reserved] 49
Under the stock repurchase program, we may repurchase shares of common stock in the open market, privately negotiated transactions, in block trades or a combination of the foregoing.
As of December 31, 2023, the Company had $49.7 million available to repurchase shares under this program. Under the stock repurchase program, we may repurchase shares of common stock in the open market, privately negotiated transactions, in block trades or a combination of the foregoing.
Comparison Of Cumulative Total Return Among A10 Networks, Inc., NASDAQ Composite, Russell 1000 Index and NYSE Technology Index Issuer Purchases of Equity Securities On November 1, 2022, we announced that our Board of Directors authorized a new, $50 million stock repurchase program (the “2022 Program”) under which we may repurchase up to $50 million of our outstanding common stock during the next 12 months.
Comparison Of Cumulative Total Return Among A10 Networks, Inc., NASDAQ Composite, Russell 1000 Index, Russell 2000 Index and NYSE Technology Index Issuer Purchases of Equity Securities On November 7, 2023, the Company announced its Board of Directors had authorized a stock repurchase program of up to $50 million of its common stock over a period of twelve months.
The first dividend, in the amount of $0.05 per share of common stock outstanding, was paid in December 2021. On November 1, 2022, the Company announced that our Board of Directors declared a quarterly dividend in the amount of $0.06 per share, such dividend which was paid on December 1, 2022 to stockholders of record on November 15, 2022.
The first dividend, in the amount of $0.05 per share of common stock outstanding, was paid in December 2021, and on November 1, 2022, the Board of Directors increased the dividend amount to $0.06 per share. We currently anticipate that we will continue to pay comparable quarterly cash dividends in the future.
Removed
There were approximately 74 stockholders of record on February 17, 2023.
Added
The Company has elected to replace the Russell 1000 Index with the Russell 2000 because the Company is a component of the Russell 2000 Index and the Company believes the Russell 2000 represents a group of companies more aligned with our peer group.
Added
In this transition year, the stock performance graph below includes the new index and the previously reported index.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

74 edited+6 added−16 removed32 unchanged
Biggest changeOur investments in growth in these areas may affect our short-term profitability. 51 Results of Operations A summary of our consolidated statements of operations for the years ended December 31, 2022 and 2021 are as follows (dollars in thousands): Years Ended December 31, 2022 2021 Increase (Decrease) Amount Percent of Total Revenue Amount Percent of Total Revenue Amount Percent Revenue: Products $ 173,201 61.8 % $ 148,398 59.3 % $ 24,803 16.7 % Services 107,137 38.2 101,644 40.7 5,493 5.4 % Total revenue 280,338 100.0 250,042 100.0 30,296 12.1 % Cost of revenue: Products 40,135 14.3 32,620 13.0 7,515 23.0 % Services 16,697 6.0 20,885 8.4 (4,188) (20.1) % Total cost of revenue 56,832 20.3 53,505 21.4 3,327 6.2 % Gross profit 223,506 79.7 196,537 78.6 26,969 13.7 % Operating expenses: Sales and marketing 88,511 31.6 85,651 34.3 2,860 3.3 % Research and development 58,398 20.8 54,077 21.6 4,321 8.0 % General and administrative 23,518 8.4 23,421 9.4 97 0.4 % Total operating expenses 170,427 60.9 163,149 65.1 7,278 4.5 % Income from operations 53,079 18.8 33,388 13.4 19,691 59.0 % Non-operating income (expense): Interest income 1,304 0.5 409 0.2 895 218.8 % Interest and other income (expense), net (1,667) (0.6) (2,155) (0.9) 488 (22.6) % Total non-operating income (expense), net (363) (0.1) (1,746) (0.7) 1,383 (79.2) % Income before income taxes 52,716 18.7 31,642 12.7 21,074 66.6 % Provision for (benefit from) income taxes 5,808 2.1 (63,245) (25.3) 69,053 (109.2) % Net income $ 46,908 16.7 % $ 94,887 37.9 % $ (47,979) (50.6) % Revenue We derive revenue from two sources: (i) products revenue, which includes hardware, perpetual software license and subscription offerings, which include term-based license agreements and software-as-a-service; and (ii) services revenue, which includes post contract support (“PCS”), professional services, and training.
Biggest changeOur investments in growth in these areas may affect our short-term profitability. 51 Results of Operations A summary of our consolidated statements of operations for the years ended December 31, 2023 and 2022 are as follows (dollars in thousands): Years Ended December 31, 2023 2022 Increase (Decrease) Amount Percent of Total Revenue Amount Percent of Total Revenue Amount Percent Revenue: Products $ 141,082 56.1 % $ 173,201 61.8 % $ (32,119) (18.5) % Services 110,618 43.9 107,137 38.2 3,481 3.2 % Total revenue 251,700 100.0 280,338 100.0 (28,638) (10.2) % Cost of revenue: Products 31,468 12.5 40,135 14.3 (8,667) (21.6) % Services 16,494 6.6 16,697 6.0 (203) (1.2) % Total cost of revenue 47,962 19.1 56,832 20.3 (8,870) (15.6) % Gross profit 203,738 80.9 223,506 79.7 (19,768) (8.8) % Operating expenses: Sales and marketing 85,976 34.2 88,511 31.6 (2,535) (2.9) % Research and development 55,229 21.9 58,398 20.8 (3,169) (5.4) % General and administrative 23,885 9.5 23,518 8.4 367 1.6 % Total operating expenses 165,090 65.6 170,427 60.9 (5,337) (3.1) % Income from operations 38,648 15.4 53,079 18.8 (14,431) (27.2) % Non-operating income (expense): Interest income 5,078 2.0 1,304 0.5 3,774 289.4 % Interest and other income (expense), net 69 — (1,667) (0.6) 1,736 (104.1) % Total non-operating income (expense), net 5,147 2.0 (363) (0.1) 5,510 (1,517.9) % Income before income taxes 43,795 17.4 52,716 18.7 (8,921) (16.9) % Provision for income taxes 3,825 1.5 5,808 2.1 (1,983) (34.1) % Net income $ 39,970 15.9 % $ 46,908 16.7 % $ (6,938) (14.8) % Revenue We derive revenue from two sources: (i) products revenue, which includes hardware, perpetual software license and subscription offerings, which include term-based license agreements and software-as-a-service; and (ii) services revenue, which includes post contract support (“PCS”), professional services, and training.
Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis.
Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis.
Inventory write downs are included as a component of cost of products revenue in the consolidated statements of operations. 58 Revenue Recognition We derive revenue from two sources: (i) products revenue, which includes hardware, perpetual software license and subscription revenue; and (ii) services revenue, which includes post contract support (“PCS”), professional services, and training.
Inventory write downs are included as a component of cost of products revenue in the consolidated statements of operations. Revenue Recognition We derive revenue from two sources: (i) products revenue, which includes hardware, perpetual software license and subscription revenue; and (ii) services revenue, which includes post contract support (“PCS”), professional services, and training.
The portfolio consists of six secure application solutions; Thunder Application Delivery Controller (“ADC”), Lightning Application Delivery Controller (“Lightning ADC”), Thunder Carrier Grade Networking (“CGN”), Thunder Threat Protection System (“TPS”), Thunder SSL Insight (“SSLi”) and Thunder Convergent Firewall (“CFW”) and intelligent management, and automation tools; Harmony Controller and aGalaxy TPS.
The portfolio consists of six secure application solutions; Thunder Application Delivery Controller (“ADC”), Lightning Application Delivery Controller (“Lightning ADC”), Thunder Carrier Grade Networking (“CGN”), Thunder Threat Protection System (“TPS”), Thunder SSL Insight (“SSLi”) and Thunder Convergent Firewall (“CFW”), and two intelligent management and automation tools; Harmony Controller and aGalaxy TPS.
As a percentage of revenue, our products revenue may vary from quarter to quarter based on, among other things, the timing of orders and delivery of products, cyclicality and seasonality, changes in currency exchange rates and the impact of significant transactions with unique terms and conditions.
As a percentage of revenue, our 52 products revenue may vary from quarter to quarter based on, among other things, the timing of orders and delivery of products, cyclicality and seasonality, changes in currency exchange rates and the impact of significant transactions with unique terms and conditions.
We believe this sales approach allows us to obtain the benefits of channel distribution, such as expanding our market coverage, while still maintaining face-to-face relationships with our end-customers. We outsource the manufacturing of our hardware products to original design manufacturers.
We believe this sales approach allows us to obtain the benefits of channel distribution, such as expanding our market coverage, while still maintaining face-to-face relationships with our end-customers. We outsource the manufacturing of our hardware 50 products to original design manufacturers.
For our software-as-a-service offerings, our customers do not take possession of our software but rather we provide access to the service via a hosting arrangement. Revenue in these arrangements is recognized ratably as the services are 52 provided.
For our software-as-a-service offerings, our customers do not take possession of our software but rather we provide access to the service via a hosting arrangement. Revenue in these arrangements is recognized ratably as the services are provided.
We account for multiple contracts with a single partner as one arrangement if the contractual terms and/or substance of those agreements indicate that they may be so closely related that they are, in effect, parts of a single contract. We may occasionally accept returns to address customer satisfaction issues even though there is generally no contractual provision for such returns.
We account for multiple contracts with a single reseller as one arrangement if the contractual terms and/or substance of those agreements indicate that they may be so closely related that they are, in effect, parts of a single contract. We may occasionally accept returns to address customer satisfaction issues even though there is generally no contractual provision for such returns.
Revenue for term-based license agreements is recognized at a point in time when the Company delivers the software license to the customer and the subscription term has commenced. For our software-as-a-service offerings, our customers do not take possession of the Company’s software but rather we provide access to the service via a hosting arrangement.
Revenue for term-based license agreements is recognized at a point in time when the Company delivers the software license to the customer and over time once the subscription term has commenced. For our software-as-a-service offerings, our customers do not take possession of the Company’s software but rather we provide access to the service via a hosting arrangement.
Revenue in these arrangements is recognized ratably as the services are provided. A substantial portion of our revenue is from sales of our products and services through distribution channel partners, such as resellers and distributors. Our customers predominantly purchase PCS services in conjunction with purchases of our products.
Revenue in these arrangements is recognized over time as the services are provided. A substantial portion of our revenue is from sales of our products and services through distribution channel partners, such as resellers and distributors. Our customers predominantly purchase PCS services in conjunction with purchases of our products.
Cash Flows from Financing Activities During the year ended December 31, 2022, cash used in financing activities was $88.1 million consisting primarily of $79.3 million of cash used to repurchase our common stock and $15.9 million used for the payments of cash dividends, partially offset by $7.0 million of cash proceeds from common stock issuances under our equity incentive plans.
During the year ended December 31, 2022, cash used in financing activities was $88.1 million consisting primarily of $79.3 million of cash used to repurchase our common stock in the open market and from Summit, and $15.9 million used for the payments of cash dividends, partially offset by $7.0 million of cash proceeds from common stock issuances under our equity incentive plans.
These may include the mix of revenue from each of our regions, the mix of our products sold within a period, discounts provided to customers, inventory write-downs and foreign currency exchange rates. Our sales are generally denominated in U.S. Dollars, however, in Japan they are denominated in Japanese Yen.
These may include the mix of revenue from each of our regions, the mix of our products sold within a period, discounts provided to customers, cost of inventory for the hardware component of our products, inventory write-downs and foreign currency exchange rates. Our sales are generally denominated in U.S. dollars, however, in Japan they are denominated in Japanese yen.
Additionally, currently a small portion of our products revenue comes from subscription revenue for our Cloud service offerings. We offer several products by subscription, primarily through either term-based license agreements or as a service through our cloud-based platform.
Additionally, a small portion of our products revenue comes from subscription revenue. We offer several products by subscription, primarily through either term-based license agreements or as a service through our cloud-based platform.
This section of the Form 10-K generally discusses fiscal 2022 and 2021 items and year-to-year comparisons between fiscal 2022 and 2021.
This section of the Form 10-K generally discusses fiscal 2023 and 2022 items and year-to-year comparisons between fiscal 2023 and 2022.
Discussions of fiscal 2020 items and year-to-year comparisons between fiscal 2021 and 2020 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 8, 2022.
Discussions of fiscal 2021 items and year-to-year comparisons between fiscal 2022 and 2021 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 27, 2023.
Cash Flows from Investing Activities During the year ended December 31, 2022, cash used in investing activities was $11.1 million, consisting of purchases of marketable securities of $55.4 million and property and equipment of $10.8 million, partially offset by proceeds from maturities of marketable securities of $71.0 million and sales of marketable securities of $6.3 million.
During the year ended December 31, 2022, cash used in investing activities was $11.1 million, consisting of purchases of marketable securities of $55.4 million and capital expenditures of $10.8 million, partially offset by proceeds from maturities of marketable securities of $71.0 million and sales of marketable securities of $6.3 million.
During the year ended December 31, 2022, the Company repurchased 6.1 million shares for a total cost of $79.3 million. During the year ended December 31, 2021, the Company repurchased 1.7 million shares for a total cost of $18.3 million. In October 2021, our Board approved the initiation of a regular quarterly cash dividend on our common stock.
During the year ended December 31, 2023, the Company repurchased 1.3 million shares for a total cost of $16.0 million. During the year ended December 31, 2022, the Company repurchased 6.1 million shares for a total cost of $79.3 million. 56 In October 2021, our Board approved the initiation of a regular quarterly cash dividend on our common stock.
In 2023, we expect sales and marketing expenses to increase from 2022 levels in line with overall revenue growth as we apply a disciplined approach to focus our investments in areas that offer the greatest opportunities. Research and Development Research and development efforts are focused on new product development and on developing additional functionality for our existing products.
In 2024, we expect sales and marketing expenses to increase from 2023 levels as we continue to apply a disciplined approach to focus our investments in areas that offer the greatest opportunities. Research and Development Research and development efforts are focused on new product development and on developing additional functionality for our existing products.
The increase was primarily due to higher products revenue driven by an increase in demand from our service provider customers. 53 Cost of Revenue, Gross Profit and Gross Margin Cost of Revenue Cost of products revenue is primarily comprised of cost of third-party manufacturing services and cost of inventory for the hardware component of our products.
The decrease was primarily due to lower products revenue driven by a decrease in demand from our service provider customers driven by decreased demand. 53 Cost of Revenue, Gross Profit and Gross Margin Cost of Revenue Cost of products revenue is primarily comprised of cost of third-party manufacturing services and cost of inventory for the hardware component of our products.
Services gross margin increased by 4.9% in 2022 compared to 2021 primarily due to a decrease in personnel related support costs. Operating Expenses Our operating expenses consist of sales and marketing, research and development, general and administrative, and restructuring expenses.
Services gross margin percentage increased by 0.7% in 2023 compared to 2022 primarily due to a decrease in personnel-related support costs. Operating Expenses Our operating expenses consist of sales and marketing, research and development, general and administrative, and restructuring expenses.
The net change in our operating assets and liabilities primarily reflects cash outflows from changes in accounts receivable of $10.4 million, accrued and other liabilities of $5.6 million, prepaid expenses and other assets of $2.1 million and inventory of $1.8 million, partially offset by cash inflows from changes in deferred revenue of $12.9 million and changes in accounts payable of $2.0 million.
The net change in our operating assets and liabilities primarily reflects cash outflows from changes in accrued and other liabilities of $20.8 million, inventory of $6.3 million, accounts payable of $3.0 million and prepaid expenses and other assets of $1.9 million, partially offset by cash inflows from changes in deferred revenue of $14.3 million.
Revenue is recognized, net of applicable taxes, upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products or services.
Our customers predominantly purchase PCS services in conjunction with purchases of our products. 58 Revenue is recognized, net of applicable taxes, upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products or services.
The largest component of our operating expenses is personnel costs which consist of wages, benefits, 54 bonuses, and, with respect to sales and marketing expenses, sales commissions. Personnel costs also include stock-based compensation.
The largest component of our operating expenses is personnel costs which consist of wages, benefits, bonuses, and, with respect to sales and marketing expenses, sales commissions.
During the year ended December 31, 2021, cash used in financing activities was $16.4 million consisting primarily of $18.3 million of cash used to repurchase our common stock and $3.9 million used for the payments of cash dividends, partially offset by $5.8 million of cash proceeds from common stock issuances under our equity incentive plans.
Cash Flows from Financing Activities During the year ended December 31, 2023, cash used in financing activities was $28.8 million consisting primarily of $17.8 million of cash used for the payments of cash dividends and $16.0 million of cash used to repurchase our common stock in the open market, partially offset by $4.9 million of cash proceeds from common stock issuances under our equity incentive plans.
Liquidity and Capital Resources As of December 31, 2022, we had cash and cash equivalents of $68.0 million, including $2.9 million held outside the United States in our foreign subsidiaries, and $83.0 million of marketable securities. We currently do not have any plans to repatriate our earnings from our foreign operations.
Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents of $97.2 million, including $3.4 million held outside the United States in our foreign subsidiaries, and $62.1 million of marketable securities. We currently do not have any plans to repatriate our earnings from our foreign operations.
Shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. To date, all repurchases under these programs, other than the repurchase from Summit, have occurred in the open market.
The Company’s stock repurchase programs do not obligate us to acquire any specific number of shares. Shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. To date, all repurchases under these programs, other than the repurchase from Summit, have occurred in the open market.
The unfavorable change in accounts receivable was due to the timing of collections from our customers. The favorable change in deferred revenues was primarily driven by increased bookings.
The unfavorable change in accounts receivable was due to the timing of collections from our customers. The favorable change in deferred revenues was attributable to the timing of service contract bookings.
Our income tax provision for the years ended December 31, 2021 primarily consisted of foreign income taxes. See Note 9 Income Taxes, of the notes to consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further details regarding the Company’s taxes.
See Note 9 Income Taxes, of the notes to consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further details regarding the Company’s taxes.
Services revenue increased $5.5 million, or 5%, in 2022 compared to 2021. The increase was primarily attributable to the increase in PCS sales in connection with our increased installed customer base in the Americas and EMEA regions. During 2022, $148.7 million, or 53% of total revenue, was generated from the Americas, which represents a 23% increase compared to 2021.
The increase was primarily attributable to the increase in PCS sales in connection with our increased installed customer base in the Japan, Americas and EMEA regions. During 2023, $132.7 million, or 53% of total revenue, was generated from the Americas region, which represents an 11% decrease compared to 2022.
Revenue in these arrangements is recognized ratably as the services are provided. A substantial portion of our revenue is from sales of our products and services through distribution channel partners, such as resellers and distributors. Our customers predominantly purchase PCS services in conjunction with purchases of our products.
Revenue in these arrangements is recognized ratably as the services are provided. A substantial portion of our revenue is from sales of our products and services through distribution channels, such as resellers and distributors.
Statements of Cash Flows The following table summarizes our cash flow related activities (in thousands): Years Ended December 31, 2022 2021 Cash provided by (used in): Operating activities $ 66,100 $ 50,097 Investing activities 11,087 (38,070) Financing activities (88,141) (16,383) Net decrease in cash and cash equivalents $ (10,954) $ (4,356) Cash Flows from Operating Activities Our cash provided by operating activities is driven primarily by sales of our products and management of working capital investments.
Statements of Cash Flows The following table summarizes our cash flow related activities (in thousands): Years Ended December 31, 2023 2022 Cash provided by (used in): Operating activities $ 44,514 $ 66,100 Investing activities 13,608 11,087 Financing activities (28,849) (88,141) Net increase (decrease) in cash and cash equivalents $ 29,273 $ (10,954) Cash Flows from Operating Activities Our cash provided by operating activities is driven primarily by sales of our products and management of working capital investments.
As of December 31, 2022, we had working capital of $138.7 million, accumulated deficit of $130.5 million and total stockholders’ equity of $181.0 million. We plan to continue to invest for long-term growth, and our investment may increase.
As of December 31, 2023, we had working capital of $160.8 million, accumulated deficit of $90.5 million and total stockholders’ equity of $207.9 million. We plan to continue to invest for long-term growth, and our investment may increase.
Pursuant to the Repurchase Agreement, we repurchased 3.5 million shares of common stock from Summit for approximately $44.6 million.
Pursuant to the Repurchase Agreement, we repurchased 3.5 million shares of common stock from Summit for approximately $44.6 million. The common shares repurchased are held in treasury and accounted for under the cost method.
Cost of services revenue also includes the costs of inventory used to provide hardware replacements to end- customers under PCS contracts and certain allocated facilities and information technology infrastructure costs.
Cost of services revenue is primarily comprised of personnel costs for our technical support, training and professional service teams. Cost of services revenue also includes the costs of inventory used to provide hardware replacements to end- customers under PCS contracts and certain allocated facilities and information technology infrastructure costs.
We currently anticipate that we will continue to pay comparable quarterly cash dividends in the future. However, the payment, amount and timing of future dividends remain within the discretion of our Board and will depend upon our results of operations, financial condition, cash requirements, and other factors.
However, the payment, amount and timing of future dividends remain within the discretion of our Board and will depend on our results of operations, financial condition, cash requirements, and other factors.
This increase was due to a $24.8 million increase in products revenue and a $5.5 million increase in services revenue. Products revenue increased $24.8 million, or 17%, in 2022 compared to 2021 primarily driven by higher demand from our service provider customers in the Americas, APAC and EMEA regions, partially offset by lower demand from service provider customers in Japan.
Products revenue decreased $32.1 million, or 19%, in 2023 compared to 2022 primarily driven by lower demand from our service provider customers in the Americas, APAC and EMEA regions, partially offset by higher demand from enterprise customers in Japan. Services revenue increased $3.5 million, or 3%, in 2023 compared to 2022.
The increase was primarily due to higher products revenue driven by an increase in demand from our service provider customers. During 2022, $89.7 million, or 32% of total revenue, was generated from APJ, which represents a 1% decrease compared to 2021. The decrease was mainly due to decreased revenue from our service provider customers.
The decrease was primarily due to lower products revenue driven by a decrease in demand from our service provider customers. During 2023, $77.6 million, or 31% of total revenue, was generated from APJ, which represents a 13% decrease compared to 2022. The decrease was mainly due to decreased revenue from both our enterprise and service provider customers.
A summary of our gross profit and gross margin is as follows (dollars in thousands): Years Ended December 31, 2022 2021 Increase (Decrease) Amount Gross Margin Amount Gross Margin Amount Gross Margin Gross profit: Products $ 133,066 76.8 % $ 115,778 78.0 % $ 17,288 (1.2) % Services 90,440 84.4 % 80,759 79.5 % 9,681 4.9 % Total gross profit $ 223,506 79.7 % $ 196,537 78.6 % $ 26,969 1.1 % Products gross margin decreased by 1.2% in 2022 compared to 2021 primarily driven by changes in product and geographic mix.
A summary of our gross profit and gross margin is as follows (dollars in thousands): Years Ended December 31, 2023 2022 Increase (Decrease) Amount Gross Margin Amount Gross Margin Amount Gross Margin Gross profit: Products $ 109,614 77.7 % $ 133,066 76.8 % $ (23,452) 0.9 % Services 94,124 85.1 % 90,440 84.4 % 3,684 0.7 % Total gross profit $ 203,738 80.9 % $ 223,506 79.7 % $ (19,768) 1.2 % Products gross margin percentage decreased by 0.9% in 2023 compared to 2022 primarily driven by changes in product and geographic mix.
Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements.
Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
A summary of our cost of revenue is as follows (dollars in thousands): Years Ended December 31, Increase (Decrease) 2022 2021 Amount Percent Cost of revenue: Products $ 40,135 $ 32,620 $ 7,515 23 % Services 16,697 20,885 (4,188) (20) % Total cost of revenue $ 56,832 $ 53,505 $ 3,327 6 % Gross Margin Gross margin may vary and be unpredictable from period to period due to a variety of factors.
A summary of our cost of revenue is as follows (dollars in thousands): Years Ended December 31, Increase (Decrease) 2023 2022 Amount Percent Cost of revenue: Products $ 31,468 $ 40,135 $ (8,667) (22) % Services 16,494 16,697 (203) (1) % Total cost of revenue $ 47,962 $ 56,832 $ (8,870) (16) % Gross Margin Gross margin may vary and be unpredictable from period to period due to a variety of factors.
A summary of our operating expenses is as follows (dollars in thousands): Years Ended December 31, Increase (Decrease) 2022 2021 Amount Percent Operating expenses: 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 — % Total operating expenses $ 170,427 $ 163,149 $ 7,278 4 % Sales and Marketing Sales and marketing expenses are our largest functional category of operating expenses and primarily consist of personnel costs.
Personnel costs also include stock-based compensation. 54 A summary of our operating expenses is as follows (dollars in thousands): Years Ended December 31, Increase (Decrease) 2023 2022 Amount Percent Operating expenses: Sales and marketing $ 85,976 $ 88,511 $ (2,535) (3) % Research and development 55,229 58,398 (3,169) (5) % General and administrative 23,885 23,518 367 2 % Total operating expenses $ 165,090 $ 170,427 $ (5,337) (3) % Sales and Marketing Sales and marketing expenses are our largest functional category of operating expenses and primarily consist of personnel costs.
This repurchase program was also active for twelve months and expired in the second half of 2022. On November 1, 2022, the Company announced its Board of Directors authorized a new stock repurchase program of up to $50 million of its common stock over a period of twelve months (the “2022 Program”).
On November 1, 2022, the Company announced its Board of Directors authorized a stock repurchase program of up to $50 million of its common stock over a period of twelve months, at which point it expired.
We sell our products globally to service providers and enterprises that depend on data center applications and networks to generate revenue and manage operations efficiently. We report two customer verticals: service providers and enterprises and we report customer revenues in three broad geographic regions: the Americas, APJ and EMEA regions.
We sell our products globally to service providers and enterprises that depend on data center applications and networks to generate revenue and manage operations efficiently.
As of December 31, 2022, we had sold products to over 8,000 customers worldwide since our inception. 50 We sell substantially all of our solutions through our high-touch sales organization as well as distribution channel partners, including distributors, value-added resellers and system integrators, and fulfill nearly all orders globally through such partners.
We sell substantially all of our solutions through our high-touch sales organization as well as distribution channels, including distributors, value-added resellers and system integrators, and fulfill nearly all orders globally through such resellers.
Our end-customers operate in a variety of industries, including telecommunications, technology, industrial, retail, financial, gaming, education and government. Since inception, our customer base has grown rapidly.
We believe this vertical and geographic view aligns with how we manage the business and maps our product portfolio to customer verticals. Our end-customers operate in a variety of industries, including telecommunications, technology, industrial, retail, financial, gaming, education and government. Since inception, our customer base has grown rapidly.
The first dividend, in the amount of $0.05 per share of common stock outstanding, was paid in December 2021 and was treated as a return of capital. In October 2022, our Board approved an increase in the amount of the quarterly cash dividend to $0.06 per share.
The first dividend, in the amount of $0.05 per share of common stock outstanding, was paid in December 2021 and was treated as a return of capital, and on November 1, 2022, the Board of Directors increased the dividend amount to $0.06 per share. We currently anticipate that we will continue to pay comparable quarterly cash dividends in the future.
Recent Accounting Pronouncements Refer to Note 1 Description of Business and Summary of Significant Accounting Policies, in the notes to consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for information related to recent accounting pronouncements. 60
Note 1, Description of Business and Summary of Significant Accounting Policies , in Notes to Consolidated Financial Statements in Item 8 of Part II of this Report, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements.
We estimate returns for sales to customers based on historical return rates applied against current-period shipments. Specific customer returns and allowances are considered when determining our sales return reserve estimate. 59 Our policy applies to the accounting for individual contracts.
We estimate returns for sales to customers based on historical return rates applied against current-period shipments. Specific customer returns and allowances are considered when determining our sales return reserve estimate. Consequently, we have chosen to apply the portfolio approach when possible, which we do not believe will happen frequently.
This increase was partially offset by a $1.4 million decrease in salary and benefit expenses as a result of a decrease in headcount. In 2023, we expect research and development expenses to increase from 2022 levels reflecting strategic investments in our growth priorities, including cybersecurity technology.
This decrease was partially offset by increases of $3.4 million in depreciation expense and $1.9 million in consulting expense as the Company transitions to using non-employee consultants for certain research and development activities. In 2024, we expect research and development expenses to increase from 2023 levels reflecting strategic investments in our growth priorities, including cybersecurity technology.
Consequently, we have chosen to apply the portfolio approach when possible, which we do not believe will happen frequently. Additionally, we will evaluate a portfolio of data, when possible, in various situations, including accounting for commissions, rights of return and transactions with variable consideration. We report revenue net of sales taxes.
Additionally, we will evaluate a portfolio of data, when possible, in various situations, including accounting for commissions, rights of return and transactions with variable consideration. We report revenue net of sales taxes. We include shipping charges billed to customers in revenue and the related shipping costs are included in cost of product revenue. 59
In addition, we may expand our global sales and marketing organizations, expand our distribution channel partner programs and increase awareness of our solutions on a global basis.
We have invested and expect to continue to invest in our product development efforts to deliver new products and additional features in our current products to address customer needs. In addition, we may expand our global sales and marketing organizations, expand our distribution channel partner programs and increase awareness of our solutions on a global basis.
The common shares repurchased are held in treasury and accounted for under the cost method. 56 On September 17, 2020, the Company’s Board of Directors authorized a stock repurchase program of up to $50 million of its common stock over a period of twelve months.
On November 7, 2023, the Company announced its Board of Directors had authorized a stock repurchase program of up to $50 million of its common stock over a period of twelve months. As of December 31, 2023, the Company had $49.7 million available to repurchase shares. Under these repurchase programs, repurchased shares are held in treasury at cost.
Consequently, any acceleration or delay in anticipated product purchases by or deliveries to our largest customers could materially impact our revenue and operating results in any quarterly period. This may cause our quarterly revenue and operating results to fluctuate from quarter to quarter and make them difficult to predict.
The timing of these purchases and the delivery of the purchased products are difficult to predict and rely upon customer growth and network enhancements. Consequently, any acceleration or delay in anticipated product purchases by or deliveries to our largest customers could materially impact our revenue and operating results in any quarterly period.
The favorable change in deferred revenues was attributable to the timing of service contract bookings. 57 During the year ended December 31, 2021, cash provided by operating activities was $50.1 million, consisting of net income of $94.9 million, partially offset by a non-cash benefit of $39.8 million and an unfavorable net change in operating assets and liabilities of $5.0 million.
During the year ended December 31, 2023, cash provided by operating activities was $44.5 million, consisting of net income of $40.0 million and non-cash benefits totaling $22.8 million, partially offset by an unfavorable net change in operating assets and liabilities of $18.3 million.
During 2022, $42.0 million, or 15% of total revenue, was generated from EMEA, which represented an 9% increase compared to 2021.
During 2023, $41.3 million, or 16% of total revenue, was generated from EMEA, which represented a 1% decrease compared to 2022.
A summary of our total revenue is as follows (dollars in thousands): Years Ended December 31, 2022 2021 Increase (Decrease) Amount Percent of Total Revenue Amount Percent of Total Revenue Amount Percent Revenue: Products $ 173,201 62 % $ 148,398 59 % $ 24,803 17 % Services 107,137 38 101,644 41 5,493 5 % Total revenue $ 280,338 100 % $ 250,042 100 % $ 30,296 12 % Revenue by geographic region: Americas $ 148,673 53 % $ 121,169 48 % $ 27,504 23 % United States 129,397 46 % 99,484 40 % 29,913 30 % Americas-other 19,276 7 % 21,685 8 % (2,409) (11) % APJ 89,702 32 % 90,374 37 % (672) (1) % APAC 32,986 12 % 28,674 12 % 4,312 15 % Japan 56,716 20 % 61,700 25 % (4,984) (8) % EMEA 41,963 15 % 38,499 15 % 3,464 9 % Total revenue $ 280,338 100 % $ 250,042 100 % $ 30,296 12 % Total revenue increased by $30.3 million, or 12%, in 2022 compared to 2021.
A summary of our total revenue is as follows (dollars in thousands): Years Ended December 31, 2023 2022 Increase (Decrease) Amount Percent of Total Revenue Amount Percent of Total Revenue Amount Percent Revenue: Products $ 141,082 56 % $ 173,201 62 % $ (32,119) (19) % Services 110,618 44 107,137 38 3,481 3 % Total revenue $ 251,700 100 % $ 280,338 100 % $ (28,638) (10) % Revenue by geographic region: Americas $ 132,745 53 % $ 148,673 53 % $ (15,928) (11) % United States 113,766 45 % 129,397 46 % (15,631) (12) % Americas-other 18,979 8 % 19,276 7 % (297) (2) % APJ 77,606 31 % 89,702 32 % (12,096) (13) % APAC 29,748 12 % 32,986 12 % (3,238) (10) % Japan 47,858 19 % 56,716 20 % (8,858) (16) % EMEA 41,349 16 % 41,963 15 % (614) (1) % Total revenue $ 251,700 100 % $ 280,338 100 % $ (28,638) (10) % Total revenue decreased by $28.6 million, or 10%, in 2023 compared to 2022.
Provision for (Benefit from) Income Taxes We recorded an income tax provision of $5.8 million for the year ended December 31, 2022 and recorded an income tax benefit of $(63.2) million for the year ended December 31, 2021.
Additionally, we recorded impairment expense of $1.0 million in the year ended December 31, 2022 related to an equity investment in a private company held by the Company. Provision for (Benefit from) Income Taxes We recorded income tax provisions of $3.8 million for the year ended December 31, 2023 and $5.8 million for the year ended December 31, 2022.
Cost of products revenue also includes warehouse personnel costs, shipping costs, inventory write-downs, certain allocated facilities and information technology infrastructure costs, and expenses associated with logistics and quality control. Cost of services revenue is primarily comprised of personnel costs for our technical support, training and professional service teams.
Our component suppliers change their selling prices frequently in response to market trends, including industry-wide increases in demand. Cost of products revenue also includes warehouse personnel costs, shipping costs, inventory write-downs, certain allocated facilities and information technology infrastructure costs, and expenses associated with logistics and quality control.
The $2.9 million increase in sales and marketing expenses in 2022 compared to 2021 was primarily due to increases of $1.6 million in travel and related expenses, $1.0 million in marketing activities and events and $0.3 million in consulting expense.
The $2.5 million decrease in sales and marketing expenses in 2023 compared to 2022 was primarily due to decreases of $3.5 million in personnel costs as a result of a decrease in headcount and $0.4 million in marketing expenses, partially offset by increases of $0.9 million in credit loss expense and $0.5 million in travel-related expense.
Interest and other income (expense), net, had a favorable change of $0.5 million, or 23%, in 2022 compared to 2021 primarily 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 held by the Company.
Non-Operating Income (Expense) - Interest and Other Income (Expense), Net In the years ended December 31, 2023 and 2022, interest and other income (expense), net consisted primarily of foreign currency exchange gains and losses, which had a favorable change of $0.6 million in the year ended December 31, 2023 compared to 2022.
The $0.1 million increase in general and administrative expenses in 2022 compared to 2021 was primarily due to a $2.8 million increase in consulting expense as the Company transitions to using non-employee consultants for certain general and administrative activities. Additionally, business expenses increased $1.7 million primarily related to an increase in property tax expense.
The $0.4 million increase in general and administrative expenses in 2023 compared to 2022 was primarily due to an increase of $1.3 million in professional services expense as a result of increases in accounting and tax fees. Additionally, facility expense increased $0.7 million primarily related to rent expense, equipment expense increased $0.4 million and depreciation expense increased $0.3 million.
We perform quality assurance and testing at our San Jose, Taiwan and Japan distribution centers, as well as at our manufacturers’ locations.
We perform quality assurance and testing at our San Jose, Taiwan and Japan distribution centers, as well as at our manufacturers’ locations. As a result of the nature of our target market and the current stage of our development, a substantial portion of our revenue comes from a limited number of large customers and service providers.
Our non-cash benefit consisted primarily of a benefit of $64.2 million related to the release our of deferred tax asset valuation allowance plus other adjustments, and non-cash charges of $14.4 million for stock-based compensation and $8.9 million of depreciation and amortization expense.
Our non-cash benefits primarily consisted of non-cash charges of $14.1 million for stock-based compensation and $9.3 million of depreciation and amortization expense.
Non-Operating Income (Expense) - Interest Income Interest income consists primarily of interest income earned on our cash and cash equivalents and marketable securities. Interest income was $1.3 million and $0.4 million in the years ended December 31, 2022 and 2021, respectively.
Interest income was $5.1 million and $1.3 million in the years ended December 31, 2023 and 2022, respectively.
Sales to these large end-customers have typically been characterized by large but irregular purchases with long sales cycles. The timing of these purchases and the delivery of the purchased products are difficult to predict.
Purchases from our ten largest end-customers accounted for 33%, 41% and 39% of our total revenue for 2023, 2022 and 2021, respectively. Sales to these large end-customers have typically been characterized by large but irregular purchases with long sales cycles.
During the year ended December 31, 2021, cash used in investing activities was $38.1 million, consisting of purchases of marketable securities of $128.6 million and property and equipment of $5.2 million, partially offset by proceeds from sales and maturities of marketable securities of $95.7 million.
The favorable change in deferred revenues was attributable to the timing of service contract bookings. 57 Cash Flows from Investing Activities During the year ended December 31, 2023, cash provided in investing activities was $13.6 million, consisting of proceeds from maturities of marketable securities of $64.5 million and proceeds from the sales of marketable securities of $45.4 million, partially offset by purchases of marketable securities of $85.4 million and capital expenditures of $10.9 million.
The $4.3 million increase in research and development expenses in 2022 compared to 2021 was primarily due to a $5.0 million increase in consulting expense as the Company transitions to using non-employee consultants for certain research and developments activities and a $0.8 million increase in software expenses.
The $3.2 million decrease in research and development expenses in 2023 compared to 2022 was primarily due to a decrease of $8.5 million increase in personnel costs as a result of a decrease in headcount.
In the three months ended March 31, 2022, we changed the way we present revenue by geographic region. The Americas region comprises the United States and all other countries in America (excluding the United States). The APJ region comprises Japan and all other countries in APAC (excluding Japan).
The Americas region comprises the United States and all other countries in the Americas (excluding the United States). The APJ region comprises Japan and all other countries in APAC (excluding Japan). The EMEA region comprises Europe, Middle East and Africa.
Our enterprise customers accounted for 34%, 37% and 39% of our total revenue during 2022, 2021 and 2020, respectively. Our service provider customers accounted for 66%, 63% and 61% of our total revenue during 2022, 2021 and 2020, respectively.
We report two customer verticals: service providers, which accounted for 58% and 66% of our total revenue during 2023 and 2022, respectively, and enterprise, which accounted for 42% and 34% of our total revenue during 2023 and 2022, respectively.
These increases were partially offset by a decrease of $4.4 million in salary and benefit expenses as a result of a decrease in headcount. 55 In 2023, we expect general and administrative expenses to remain stable as we apply a disciplined approach to focus our investments in areas that offer the greatest opportunities.
In 2024, we expect general and administrative expenses to increase from 2023 levels as we continue to apply a disciplined approach to focus our investments in areas that offer the greatest opportunities. 55 Non-Operating Income (Expense) - Interest Income Interest income consists primarily of interest income earned on our invested cash, cash equivalents and marketable securities.
Certain state deferred tax assets continue to be subject to a valuation allowance. Our deferred tax assets primarily consist of U.S. net operating loss (“NOL”) and tax credit carryforwards. The Company’s income tax provision for the year ended December 31, 2022 primarily consisted of federal income taxes.
Our deferred tax assets primarily consist of research and development credits, capitalized research and development expenses and accruals and reserves. The Company’s income tax provision for the years ended December 31, 2023 and 2022 primarily consisted of state and foreign income taxes.
Inventory write-downs, once established, are not reversed as they establish a new cost basis for the inventory.
Most of our inventory provisions relate to excess quantities of certain products, based on our inventory levels and future product purchase commitments compared to assumptions based on management’s assessment of future demand and market conditions. Inventory write-downs, once established, are not reversed as they establish a new cost basis for the inventory.
Our customers include leading service providers (cloud, telecommunications, multiple system operators, cable), government organizations, and enterprises. Our product portfolio seeks to address many of the cyber protection challenges and solution requirements.
Our solutions are available in a variety of form factors, such as optimized hardware appliances, bare metal software, containerized software, virtual appliances and cloud-native software. Our customers include leading service providers (cloud, telecommunications, multiple system operators, cable), government organizations, and enterprises.
Inventory Inventory consists primarily of finished goods and related component parts and is stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or estimated net realizable value. We evaluate inventory for excess and obsolete products, based on management’s assessment of future demand and market conditions.
We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements. Inventory Inventory is stated at the lower of cost or net realizable value. Inventory cost is determined using a first-in, first-out method. We regularly evaluate inventory for excess and obsolete products.
Removed
Overview We are a leading provider of networking solutions that enable next-generation networks focused on reliability, availability, scalability and cybersecurity. Our portfolio supports customers operating in the cloud, on-premise or in hybrid environments providing rapid return on their investment as well as investment protection with best-in-class technical performance.
Added
Overview We are a leading provider of secure application solutions and services that enable a new generation of intelligently connected companies with the ability to continuously improve cyber protection and digital responsiveness across dynamic Information Technology (“IT”) and network infrastructures. Our product portfolio seeks to address many of the cyber protection challenges and solution requirements.
Removed
As cyber-attacks increase in volume and complexity, we integrate security as a key attribute in our solutions that further enable our customers to continue to adapt to market trends in cloud, internet of things and the ever increasing need for more data, building upon our strong global footprint and leadership in application and network infrastructure.
Added
During 2023, we experienced an increase in demand from our enterprise customers and a decrease in demand from our service provider customers related to lower service provider capital spending and longer sales cycles.
Removed
Our products are offered in a variety of form factors and payment models, including physical appliances and perpetual and subscription-based software licenses, as well as pay-as-you-go licensing models and FlexPool, a flexible consumption-based software model.
Added
While we expect total demand to remain strong as the need for cybersecurity solutions continues to increase, we expect the demand shift trend from service provider to enterprise to continue in the near term. We report customer revenues in three broad geographic regions: the Americas, APJ and EMEA regions.

… 16 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed4 unchanged
Biggest changeOur marketable securities are comprised of certificates of deposit, corporate securities, U.S. Treasury and agency securities, commercial paper and asset-backed securities. We do not enter into investments for trading or speculative purposes. At December 31, 2022, our investment portfolio included marketable securities with an aggregate fair market value and amortized cost basis of $83.0 million and $84.0 million, respectively.
Biggest changeInterest Rate Sensitivity Our exposure to market risk for changes in interest rates relates primarily to our marketable securities. Our marketable securities are comprised of certificates of deposit, corporate securities, U.S. Treasury and agency securities, commercial paper and asset-backed securities and equity securities of publicly traded companies. We do not enter into investments for trading or speculative purposes.
A significant fluctuation in the exchange rates between our subsidiaries’ local currencies, especially the Japanese Yen, British Pound and Euro, and the U.S. Dollar could have an adverse impact on our consolidated financial position and results of operations. We recorded $0.5 million and $1.9 million of net foreign exchange losses during the years ended December 31, 2022 and 2021, respectively.
A significant fluctuation in the exchange rates between our subsidiaries’ local currencies, especially the Japanese Yen, British Pound and Euro, and the U.S. Dollar could have an adverse impact on our consolidated financial position and results of operations. We recorded $0.1 million of net foreign exchange gains in the year ended December 31, 2023.
The following table presents the hypothetical fair values of our marketable securities assuming immediate parallel shifts in the yield curve of 50 basis points (“BPS”), 100 BPS and 150 BPS as of December 31, 2022 (in thousands): Fair Value as of (150 BPS) (100 BPS) (50 BPS) 12/31/2022 50 BPS 100 BPS 150 BPS Marketable securities $ 83,529 $ 83,359 $ 83,188 $ 83,018 $ 82,847 $ 82,676 $ 82,506 61
The following table presents the hypothetical fair values of our marketable securities assuming immediate parallel shifts in the yield curve of 50 basis points (“BPS”), 100 BPS and 150 BPS as of December 31, 2023 (in thousands): Fair Value as of (150 BPS) (100 BPS) (50 BPS) 12/31/2023 50 BPS 100 BPS 150 BPS Marketable securities $ 62,289 $ 62,211 $ 62,134 $ 62,056 $ 61,978 $ 61,899 $ 61,821 60
During the year ended December 31, 2020, we recorded an immaterial foreign exchange gain. The effect of a hypothetical 10% change in our exchange rate would not have a significant impact on our consolidated results of operations. Interest Rate Sensitivity Our exposure to market risk for changes in interest rates relates primarily to our marketable securities.
We recorded $0.5 million and $1.9 million of net foreign exchange losses during the years ended December 31, 2022 and 2021, respectively. The effect of a hypothetical 10% change in our exchange rate would not have a significant impact on our consolidated results of operations.
The effect of a hypothetical 10% change in interest rates would not have had any impact on our interest expense.
At December 31, 2023, our investment portfolio included marketable securities with an aggregate fair market value and amortized cost basis of $62.1 million and $62.1 million, respectively. The effect of a hypothetical 10% change in interest rates would not have had any impact on our interest expense.

Other ATEN 10-K year-over-year comparisons