A10 Networks, Inc 10-K for FY2021

A10 Networks, Inc. (ATEN)

10-K 2022-03-08 For: 2021-12-31

Added on April 04, 2026

About this 10-K

A10 Networks, Inc filed this 10-K on March 8, 2022, covering the fiscal year ended December 31, 2021 (FY2021).

Headline figures

Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $250.04M; up 10.9% from $225.53M a year earlier
Net income: $94.89M; up 432.6% from net income of $17.82M a year earlier
Diluted EPS: $1.19; up 440.9% from $0.22 a year earlier

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Delaware						20-1446869
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



		Page
Note Regarding Forward-Looking Statements		2
Note Regarding COVID-19		4
Risk Factor Summary		5

PART I
Item 1.	Business	7
Item 1A.	Risk Factors	19
Item 1B.	Unresolved Staff Comments	47
Item 2.	Properties	47
Item 3.	Legal Proceedings	47
Item 4.	Mine Safety Disclosures	47

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	48
Item 6.	[Reserved]	49
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	64
Item 8.	Financial Statements and Supplementary Data	65
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	101
Item 9A.	Controls and Procedures	102
Item 9B.	Other Information	104
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	104

PART I II
Item 10.	Directors, Executive Officers and Corporate Governance	105
Item 11.	Executive Compensation	105
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	105
Item 13.	Certain Relationships and Related Transactions, and Director Independence	105
Item 14.	Principal Accountant Fees and Services	105

PART IV
Item 15.	Exhibits, Financial Statement Schedules	106
Item 16.	Form 10-K Summary	108
Signatures		109


Periods	Total Number of Shares Purchased	Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2)
October 1 - 31, 2021	—	$	—	—

November 1 - 30, 2021	96	$	15.60	96

December 1 - 31, 2021	373	$	14.89	373

Total	469				$	92,946



	Years Ended December 31,
	2021				2020				Increase (Decrease)
	Amount		Percent of Total Revenue		Amount		Percent of Total Revenue		Amount		Percent
Revenue:
Products	$	148,398	59.3	%	$	129,876	57.6	%	$	18,522	14.3	%
Services	101,644		40.7		95,651		42.4		5,993		6.3	%
Total revenue	250,042		100.0		225,527		100.0		24,515		10.9	%
Cost of revenue:
Products	32,620		13.0		29,109		12.9		3,511		12.1	%
Services	20,885		8.4		21,039		9.3		(154)		(0.7)	%
Total cost of revenue	53,505		21.4		50,148		22.2		3,357		6.7	%
Gross profit	196,537		78.6		175,379		77.8		21,158		12.1	%
Operating expenses:
Sales and marketing	85,651		34.3		77,732		34.5		7,919		10.2	%
Research and development	54,077		21.6		58,063		25.7		(3,986)		(6.9)	%
General and administrative	23,421		9.4		21,851		9.7		1,570		7.2	%

Total operating expenses	163,149		65.3		157,646		69.8		5,503		3.5	%
Income from operations	33,388		13.3		17,733		7.9		15,655		88.3	%
Non-operating income (expense):
Interest expense	—		—		(1)		—		1		(100.0)	%
Interest and other income, net	(1,746)		(0.7)		1,407		0.6		(3,153)		(224.1)	%
Total non-operating income (expense), net	(1,746)		(0.7)		1,406		0.6		(3,152)		(224.2)	%
Income before income taxes	31,642		12.6		19,139		8.5		12,503		65.3	%
Provision for (benefit from) income taxes	(63,245)		(25.3)		1,323		0.6		(64,568)		(4,880.4)	%
Net income	$	94,887	37.9	%	$	17,816	7.9	%	$	77,071	432.6	%


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Years Ended December 31,
	2020				2019				Increase (Decrease)
	Amount		Percent of Total Revenue		Amount		Percent of Total Revenue		Amount		Percent
Revenue:
Products	$	129,876	57.6	%	$	121,920	57.3	%	$	7,956	6.5	%
Services	95,651		42.4		90,708		42.7		4,943		5.4	%
Total revenue	225,527		100.0		212,628		100.0		12,899		6.1	%
Cost of revenue:
Products	29,109		12.9		29,816		14.0		(707)		(2.4)	%
Services	21,039		9.3		19,065		9.0		1,974		10.4	%
Total cost of revenue	50,148		22.2		48,881		23.0		1,267		2.6	%
Gross profit	175,379		77.8		163,747		77.0		11,632		7.1	%
Operating expenses:
Sales and marketing	77,732		34.5		92,783		43.6		(15,051)		(16.2)	%
Research and development	58,063		25.7		61,824		29.1		(3,761)		(6.1)	%
General and administrative	21,851		9.7		23,704		11.1		(1,853)		(7.8)	%
Restructuring expense	—		—		2,530		1.2		(2,530)		*

Total operating expenses	157,646		69.8		180,841		85.0		(23,195)		(12.8)	%
Income (loss) from operations	17,733		7.9		(17,094)		(8.0)		34,827		(203.7)	%
Non-operating income (expense):
Interest expense	(1)		—		(237)		(0.1)		236		(99.6)	%
Interest and other income, net	1,407		0.6		919		0.4		488		53.1	%
Total non-operating income (expense), net	1,406		0.6		682		0.3		724		106.2	%
Income (loss) before income taxes	19,139		8.5		(16,412)		(7.7)		35,551		(216.6)	%
Provision for income taxes	1,323		0.6		1,407		0.7		(84)		(6.0)	%
Net income (loss)	$	17,816	7.9	%	$	(17,819)	(8.4)	%	$	35,635	(200.0)	%

* not meaningful


	Cost of revenue		Sales and marketing		Research and development		General and administrative		Total restructuring expense

Employee severance and related payroll taxes	$	28	$	1,355	$	340	$	194	$	1,917
Facilities closure expenses	—		435		89		—		524
Legal fees	—		—		—		89		89
	$	28	$	1,790	$	429	$	283	$	2,530


							Fair Value as of
	(150 BPS)		(100 BPS)		(50 BPS)		12/31/2021		50 BPS		100 BPS		150 BPS
Marketable securities	$	106,614	$	106,613	$	106,491	$	106,117	$	105,702	$	105,287	$	104,872


			Page
Report of Independent Registered Public Accounting Firm - Armanino LLP (PCAOB ID: 32)			66
Consolidated Balance Sheets as of December 31, 202 1 and 20 20			69
Consolidated Statements of Operations for the years ended December 31, 202 1 , 20 20 and 2019			70
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 202 1 , 20 20 and 2019			71
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 202 1 , 20 20 and 2019			72
Consolidated Statements of Cash Flows for the years ended December 31, 202 1 , 20 20 and 2019			73
Notes to Consolidated Financial Statements			74


	December 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	78,925	$	83,281
Marketable securities	106,117		74,851
Accounts receivable, net of allowances of $543 and $41, respectively	61,795		51,051
Inventory	22,462		20,730
Prepaid expenses and other current assets	14,720		12,390
Total current assets	284,019		242,303
Property and equipment, net	10,692		7,888
Goodwill	1,307		1,307
Intangible assets	—		862
Deferred tax assets, net	65,773		944
Other non-current assets	31,294		37,507
Total assets	$	393,085	$	290,811
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,852	$	4,851
Accrued liabilities	36,101		36,930
Deferred revenue, current	73,132		65,999
Total current liabilities	116,085		107,780
Deferred revenue, non-current	48,499		42,700
Other non-current liabilities	19,613		24,357
Total liabilities	184,197		174,837
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $0.00001 par value: 500,000 shares authorized; 84,717 and 81,924 shares issued and 77,423 and 76,346 shares outstanding, respectively	1		1
Treasury stock, at cost: 7,294 and 5,578 shares, respectively	(55,677)		(37,410)
Additional paid-in-capital	446,035		425,534
Dividends paid	(3,880)		—
Accumulated other comprehensive income (loss)	(229)		98
Accumulated deficit	(177,362)		(272,249)
Total stockholders' equity	208,888		115,974
Total liabilities and stockholders' equity	$	393,085	$	290,811



	Common Stock			Treasury stock, at cost		Additional Paid-in Capital		Dividends paid		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount














Balance at December 31, 2018	74,301	1		(4,870)		381,142		—		(144)		(272,246)		103,883
Stock-based compensation expense	—	—		—		16,529		—		—		—		16,529
Common stock issued under employee equity incentive plans	3,279	—		—		5,799		—		—		—		5,799
Unrealized gain on marketable securities, net of tax	—	—		—		—		—		395		—		395
Net loss	—	—		—		—		—		—		(17,819)		(17,819)
Balance at December 31, 2019	77,580	1		(4,870)		403,470		—		251		(290,065)		108,787
Stock-based compensation expense	—	—		—		12,473		—		—		—		12,473
Common stock issued under employee equity incentive plans	3,666	—		—		9,591		—		—		—		9,591
Repurchase of common stock	(4,900)	—		(32,540)		—		—		—		—		(32,540)
Unrealized loss on marketable securities, net of tax	—	—		—		—		—		(153)		—		(153)
Net Income	—	—		—		—		—		—		17,816		17,816
Balance at December 31, 2020	76,346	1		(37,410)		425,534		—		98		(272,249)		115,974
Stock-based compensation expense	—	—		—		14,737		—		—		—		14,737
Common stock issued under employee equity incentive plans	2,794	—		—		5,764		—		—		—		5,764
Repurchase of common stock	(1,717)	—		(18,267)		—		—		—		—		(18,267)
Dividends declared	—	—		—		—		(3,880)		—		—		(3,880)
Unrealized loss on marketable securities, net of tax	—	—		—		—		—		(327)		—		(327)
Net Income	—	—		—		—		—		—		94,887		94,887
Balance at December 31, 2021	77,423	$	1	$	(55,677)	$	446,035	$	(3,880)	$	(229)	$	(177,362)	$	208,888




Balance Sheet Line Reference	December 31, 2021		December 31, 2020
Accounts receivables, net	$	61,795	$	51,051
Deferred revenue, current	73,132		65,999
Deferred revenue, non-current	48,499		42,700


	December 31, 2021		December 31, 2020
Deferred revenue:
Products	$	6,164	$	7,358
Services	115,467		101,341
Total deferred revenue	121,631		108,699
Less: current portion	(73,132)		(65,999)
Non-current portion	$	48,499	$	42,700



	Years Ended December 31,
	2021		2020		2019
Cash provided by (used in):
Operating activities	$	50,097	$	55,286	$	(426)
Investing activities	(38,070)		5,202		(251)
Financing activities	(16,383)		(22,949)		5,798
Net increase (decrease) in cash and cash equivalents	$	(4,356)	$	37,539	$	5,121



	Years Ended December 31,
	2021		2020		2019
Cash flows from operating activities:
Net income (loss)	$	94,887	$	17,816	$	(17,819)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	8,907		11,303		10,028
Stock-based compensation	14,422		12,310		16,529
Provision for doubtful accounts and sales returns	(616)		(78)		(190)
Release of deferred tax asset valuation allowance and other adjustments	(64,186)		—		—
Other non-cash items	1,688		1,144		(153)
Changes in operating assets and liabilities:
Accounts receivable	(10,399)		2,346		599
Inventory	(1,826)		543		(5,648)
Prepaid expenses and other assets	(2,134)		1,141		(452)
Accounts payable	1,995		(2,683)		(621)
Accrued and other liabilities	(5,573)		3,909		(5,897)
Deferred revenue	12,932		7,535		3,198

Net cash provided by (used in) operating activities	50,097		55,286		(426)
Cash flows from investing activities:
Proceeds from sales of marketable securities	6,865		9,051		32,200
Proceeds from maturities of marketable securities	88,790		57,707		43,525
Purchases of marketable securities	(128,554)		(57,992)		(71,636)

Purchases of property and equipment	(5,171)		(3,564)		(4,340)


Net cash provided by (used in) investing activities	(38,070)		5,202		(251)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee equity incentive plans	5,764		9,591		5,799
Repurchases of common stock	(18,267)		(32,540)		—
Payments for dividends	(3,880)		—		—
Other	—		—		(1)
Net cash provided by (used in) financing activities	(16,383)		(22,949)		5,798
Net increase (decrease) in cash and cash equivalents	(4,356)		37,539		5,121
Cash and cash equivalents - beginning of year	83,281		45,742		40,621
Cash and cash equivalents - end of year	$	78,925	$	83,281	$	45,742
Supplemental Disclosures:


	December 31, 2021
Within 1 year	$	73,132
Next 2 to 3 years	38,270
Thereafter	10,229
Total	$	121,631


	December 31, 2021								December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Certificates of deposit	$	—	$	—	$	—	$	—	$	2,150	$	—	$	—	$	2,150
Corporate securities	62,588		1		(168)		62,421		45,070		83		(8)		45,145
U.S. Treasury and agency securities	13,904		—		(59)		13,845		9,493		12		—		9,505
Commercial paper	23,570		—		—		23,570		12,136		—		—		12,136
Asset-backed securities	6,285		—		(4)		6,281		5,904		11		—		5,915
Total	$	106,347	$	1	$	(231)	$	106,117	$	74,753	$	106	$	(8)	$	74,851


	Amortized Cost		Fair Value
Less than 1 year	$	63,586	$	63,553
Mature in 1 - 3 years	42,761		42,564
Total	$	106,347	$	106,117


	Less Than 12 Months				12 Months or More				Total
As of December 31, 2021	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

Corporate securities	$	62,012	$	(168)	$	—	$	—	$	62,012	$	(168)
U.S. Treasury and agency securities	13,845		(59)		—		—		13,845		(59)

Asset-backed securities	6,281		(4)		—		—		6,281		(4)
Total	$	82,138	$	(231)	$	—	$	—	$	82,138	$	(231)


	December 31, 2021								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	62,021	$	—	$	—	$	62,021	$	62,388	$	—	$	—	$	62,388
Cash equivalents	16,904		—		—		16,904		20,893		—		—		20,893
Certificates of deposit	—		—		—		—		—		2,150		—		2,150
Corporate securities	—		62,421		—		62,421		—		45,145		—		45,145
U.S. Treasury and agency securities	—		13,845		—		13,845		—		9,505		—		9,505
Commercial paper	—		23,570		—		23,570		—		12,136		—		12,136
Asset-backed securities	—		6,281		—		6,281		—		5,915		—		5,915
Total	$	78,925	$	106,117	$	—	$	185,042	$	83,281	$	74,851	$	—	$	158,132


		December 31, 2021
Operating leases
Right-of-use assets:
	Other non-current assets	$	22,866
Total right-of-use assets		$	22,866

Lease liabilities:
	Accrued liabilities	$	3,983
	Other non-current liabilities		19,316
Total operating lease liabilities		$	23,299


2022	$	4,640
2023	4,414
2024	4,518
2025	4,625
2026	4,734
Thereafter	2,414
Total lease payments	25,345
Less: imputed interest	(2,046)
Present value of lease liabilities	$	23,299


	Year Ended December 31, 2021
Operating lease costs	$	4,747
Short-term lease costs			633
Total lease costs			$	5,380


	December 31, 2021
Weighted-average remaining term (in years)	5.5
Weighted-average discount rate	3.16	%


	Year Ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,131

Right-of-use assets obtained in exchange for new lease liabilities	$	—


	December 31, 2021		December 31, 2020
Allowance for doubtful accounts, beginning balance	$	41	$	52
Increase in provision	616		78
Write-offs	(114)		(89)
Allowance for doubtful accounts, ending balance	$	543	$	41


	December 31, 2021		December 31, 2020

Raw materials	$	10,774	$	8,395
Finished goods	11,688		12,335
Total inventory	$	22,462	$	20,730


	December 31, 2021		December 31, 2020
Prepaid expenses	$	4,326	$	3,818
Deferred contract acquisition costs	7,399		5,345
Other	2,995		3,227
Prepaid expenses and other current assets	$	14,720	$	12,390


	Useful Life	December 31, 2021		December 31, 2020
	(in years)
Equipment	1 - 5	$	25,407	$	25,286
Software	1 - 3	807		765
Furniture and fixtures	1 - 7	545		652
Leasehold improvements	Lease term	3,231		3,616
Construction in progress		4,823		1,677
Property and equipment, gross		34,813		31,996
Less: accumulated depreciation		(24,121)		(24,108)
Property and equipment, net		$	10,692	$	7,888


	December 31, 2021						December 31, 2020
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Developed technology	$	5,050	$	(5,050)	$	—	$	5,050	$	(4,545)	$	505
Patents	2,936		(2,936)		—		2,936		(2,579)		357
Total	$	7,986	$	(7,986)	$	—	$	7,986	$	(7,124)	$	862


	December 31, 2021		December 31, 2020

Right-of-use assets	$	22,866	$	28,240
Deferred contract acquisition costs	4,459		3,714
Deposits	2,036		2,746

Other	1,933		2,807
Total other non-current assets	$	31,294	$	37,507


	December 31, 2021		December 31, 2020
Accrued compensation and benefits	$	24,003	$	19,725
Accrued tax liabilities	1,020		3,748
Lease liabilities	3,983		5,260
Other	7,095		8,197
Total accrued liabilities	$	36,101	$	36,930


Years Ending December 31,	Operating Leases and Other Contractual Obligation
2022	$	4,640
2023	4,414
2024	4,518
2025	4,625
2026	4,734
Thereafter	2,414
Total	$	25,345


	Number of Shares (thousands)	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (1) (thousands)
Outstanding as of December 31, 2020	1,673	$	5.44
Granted	—	—
Exercised	(796)	4.70
Canceled	(6)	3.13
Outstanding as of December 31, 2021	871	$	6.13	2.37	$	9,102
Vested and exercisable as of December 31, 2021	871	$	6.13	2.37	$	9,102



	Number of Shares (thousands)	Weighted-Average Grant Date Fair Value Per Share		Weighted-Average Remaining Vesting Term (years)
Nonvested as of December 31, 2020	4,888	$	6.59
Granted	1,693	11.75
Released	(1,647)	7.01
Canceled	(1,217)	7.20
Nonvested as of December 31, 2021	3,717	$	8.56	1.24