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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-1446869
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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3 West Plumeria Drive
San Jose, California
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95134
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
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¨
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Accelerated filer
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x
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||||
Non-accelerated filer
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¨
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(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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A10 Networks, Inc.
Quarterly Report on Form 10-Q
For the Three and Nine Months Ended September 30, 2016
TABLE OF CONTENTS
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Page
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September 30,
2016 |
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December 31,
2015 |
||||
ASSETS
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|||||||
Current Assets:
|
|
|
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||||
Cash and cash equivalents
|
$
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31,380
|
|
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$
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98,117
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Marketable securities
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85,385
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|
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—
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|
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Accounts receivable, net of allowances of $4,048 and $4,067 as of September 30, 2016 and December 31, 2015
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48,903
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57,778
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Inventory
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14,537
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18,291
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Prepaid expenses and other current assets
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4,652
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5,064
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Total current assets
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184,857
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179,250
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Property and equipment, net
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8,851
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8,903
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Goodwill and intangible assets
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8,300
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867
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Other non-current assets
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3,752
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3,531
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Total Assets
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$
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205,760
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$
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192,551
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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|||||||
Current Liabilities:
|
|
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||||
Accounts payable
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$
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9,419
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$
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10,508
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Accrued liabilities
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29,427
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|
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27,757
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|
||
Deferred revenue, current
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53,484
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49,572
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Total current liabilities
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92,330
|
|
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87,837
|
|
||
Deferred revenue, non-current
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29,759
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23,232
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Other non-current liabilities
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1,052
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1,414
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|
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Total Liabilities
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123,141
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112,483
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|
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Commitments and contingencies (Note 5)
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||||
Stockholders' Equity:
|
|||||||
Common stock, par value $0.00001 — 500,000 shares authorized as of September 30, 2016 and December 31, 2015; 67,089 and 64,172 shares issued and outstanding as of September 30, 2016 and December 31, 2015
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1
|
|
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1
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|
||
Additional paid-in capital
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323,555
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|
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301,886
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|
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Accumulated other comprehensive income
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36
|
|
|
—
|
|
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Accumulated deficit
|
(240,973
|
)
|
|
(221,819
|
)
|
||
Total Stockholders' Equity
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82,619
|
|
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80,068
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|
||
Total Liabilities and Stockholders' Equity
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$
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205,760
|
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$
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192,551
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
||||||||||||
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2016
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2015
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2016
|
|
2015
|
||||||||
Revenue:
|
|
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||||
Products
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$
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35,275
|
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$
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34,990
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$
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110,446
|
|
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$
|
98,837
|
|
Services
|
19,793
|
|
|
15,788
|
|
|
55,556
|
|
|
43,494
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|
||||
Total revenue
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55,068
|
|
|
50,778
|
|
|
166,002
|
|
|
142,331
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
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|
||||
Products
|
8,795
|
|
|
8,529
|
|
|
27,297
|
|
|
23,501
|
|
||||
Services
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4,153
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|
|
4,186
|
|
|
13,087
|
|
|
11,601
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|
||||
Total cost of revenue
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12,948
|
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|
12,715
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|
|
40,384
|
|
|
35,102
|
|
||||
Gross profit
|
42,120
|
|
|
38,063
|
|
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125,618
|
|
|
107,229
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|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
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|
||||
Sales and marketing
|
24,331
|
|
|
25,774
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|
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77,872
|
|
|
75,258
|
|
||||
Research and development
|
15,968
|
|
|
13,562
|
|
|
45,231
|
|
|
41,542
|
|
||||
General and administrative
|
6,305
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|
|
6,892
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20,196
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|
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20,122
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|
||||
Litigation and settlement expense
|
66
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|
|
469
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2,059
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|
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1,939
|
|
||||
Total operating expenses
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46,670
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46,697
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145,358
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|
138,861
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|
||||
Loss from operations
|
(4,550
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)
|
|
(8,634
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)
|
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(19,740
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)
|
|
(31,632
|
)
|
||||
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
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|
||||
Interest expense
|
(145
|
)
|
|
(151
|
)
|
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(397
|
)
|
|
(382
|
)
|
||||
Interest income and other income (expense), net
|
309
|
|
|
22
|
|
|
1,544
|
|
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(167
|
)
|
||||
Total other income (expense), net
|
164
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|
|
(129
|
)
|
|
1,147
|
|
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(549
|
)
|
||||
Loss before income taxes
|
(4,386
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)
|
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(8,763
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)
|
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(18,593
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)
|
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(32,181
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)
|
||||
Provision for income taxes
|
298
|
|
|
204
|
|
|
561
|
|
|
497
|
|
||||
Net loss
|
$
|
(4,684
|
)
|
|
$
|
(8,967
|
)
|
|
$
|
(19,154
|
)
|
|
$
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(32,678
|
)
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted
|
$
|
(0.07
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.53
|
)
|
Weighted-average shares used in computing net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted
|
66,260
|
|
|
62,753
|
|
|
65,146
|
|
|
62,009
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net loss
|
$
|
(4,684
|
)
|
|
$
|
(8,967
|
)
|
|
$
|
(19,154
|
)
|
|
$
|
(32,678
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Unrealized gain (loss) on marketable securities
|
(52
|
)
|
|
—
|
|
|
36
|
|
|
—
|
|
||||
Comprehensive loss
|
$
|
(4,736
|
)
|
|
$
|
(8,967
|
)
|
|
$
|
(19,118
|
)
|
|
$
|
(32,678
|
)
|
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
||
Net loss
|
$
|
(19,154
|
)
|
|
$
|
(32,678
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
5,919
|
|
|
6,784
|
|
||
Stock-based compensation
|
13,069
|
|
|
13,246
|
|
||
Other non-cash items
|
1,798
|
|
|
1,589
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable, net
|
7,311
|
|
|
11,223
|
|
||
Inventory
|
2,303
|
|
|
922
|
|
||
Prepaid expenses and other assets
|
349
|
|
|
(97
|
)
|
||
Accounts payable
|
(878
|
)
|
|
(1,086
|
)
|
||
Accrued liabilities
|
906
|
|
|
(1,492
|
)
|
||
Deferred revenue
|
10,440
|
|
|
9,118
|
|
||
Other
|
(224
|
)
|
|
104
|
|
||
Net cash provided by operating activities
|
21,839
|
|
|
7,633
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Purchases of marketable securities
|
(109,268
|
)
|
|
—
|
|
||
Proceeds from sales and maturities of marketable securities
|
23,787
|
|
|
—
|
|
||
Payment for acquisition
|
(4,380
|
)
|
|
—
|
|
||
Purchases of property and equipment
|
(4,256
|
)
|
|
(2,558
|
)
|
||
Purchase of intangible asset
|
(1,500
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(95,617
|
)
|
|
(2,558
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Proceeds from issuance of common stock under employee equity incentive plans, net of repurchases
|
7,116
|
|
|
3,238
|
|
||
Other
|
(75
|
)
|
|
306
|
|
||
Net cash provided by financing activities
|
7,041
|
|
|
3,544
|
|
||
Net increase (decrease) in cash and cash equivalents
|
(66,737
|
)
|
|
8,619
|
|
||
Cash and cash equivalents—beginning of period
|
98,117
|
|
|
91,905
|
|
||
Cash and cash equivalents—end of period
|
$
|
31,380
|
|
|
$
|
100,524
|
|
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
||
Common stock issued under asset purchase agreement
|
$
|
1,313
|
|
|
$
|
—
|
|
Inventory transfers to property and equipment
|
$
|
1,451
|
|
|
$
|
2,213
|
|
Purchases of property and equipment included in accounts payable
|
$
|
275
|
|
|
$
|
327
|
|
Vesting of early exercised stock options
|
$
|
169
|
|
|
$
|
366
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Customer A (a distribution channel partner)
|
19%
|
|
*
|
|
13%
|
|
*
|
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
||||||||
Certificates of deposit
|
|
$
|
11,998
|
|
|
$
|
17
|
|
|
$
|
(1
|
)
|
|
12,014
|
|
|
Corporate securities
|
|
37,043
|
|
|
42
|
|
|
(14
|
)
|
|
37,071
|
|
||||
Commercial paper
|
|
20,549
|
|
|
4
|
|
|
(2
|
)
|
|
20,551
|
|
||||
Asset-backed securities
|
|
15,740
|
|
|
9
|
|
|
—
|
|
|
15,749
|
|
||||
|
|
$
|
85,330
|
|
|
$
|
72
|
|
|
$
|
(17
|
)
|
|
$
|
85,385
|
|
|
Amortized Cost
|
|
Fair Value
|
||||
Less than 1 year
|
$
|
56,291
|
|
|
$
|
56,323
|
|
Mature in 1 - 3 years
|
29,039
|
|
|
29,062
|
|
||
|
$
|
85,330
|
|
|
$
|
85,385
|
|
|
Fair Value
|
|
Unrealized Losses
|
||||
Certificates of deposit
|
$
|
2,999
|
|
|
$
|
(1
|
)
|
Corporate securities
|
8,391
|
|
|
(14
|
)
|
||
Commercial paper
|
$
|
5,374
|
|
|
(2
|
)
|
|
|
$
|
16,764
|
|
|
$
|
(17
|
)
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
|
Cash and Cash Equivalents
|
|
Marketable Securities
|
|
Total
|
|
Cash and Cash Equivalents
|
|
Marketable Securities
|
|
Total
|
||||||||||||
Cash
|
|
$
|
20,166
|
|
|
|
|
$
|
20,166
|
|
|
$
|
27,036
|
|
|
|
|
$
|
27,036
|
|
||||
Level I
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
|
$
|
11,214
|
|
|
$
|
—
|
|
|
$
|
11,214
|
|
|
$
|
71,081
|
|
|
$
|
—
|
|
|
$
|
71,081
|
|
|
|
11,214
|
|
|
—
|
|
|
11,214
|
|
|
71,081
|
|
|
—
|
|
|
71,081
|
|
||||||
Level II
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Certificates of deposit
|
|
—
|
|
|
12,014
|
|
|
12,014
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Corporate securities
|
|
—
|
|
|
37,071
|
|
|
37,071
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Commercial paper
|
|
—
|
|
|
20,551
|
|
|
20,551
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Asset-backed securities
|
|
—
|
|
|
15,749
|
|
|
15,749
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
—
|
|
|
85,385
|
|
|
85,385
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
$
|
31,380
|
|
|
$
|
85,385
|
|
|
$
|
116,765
|
|
|
$
|
98,117
|
|
|
$
|
—
|
|
|
$
|
98,117
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
6,451
|
|
|
$
|
9,418
|
|
Finished goods
|
8,086
|
|
|
8,873
|
|
||
Total inventory
|
$
|
14,537
|
|
|
$
|
18,291
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
(in thousands)
|
||||||
Equipment
|
$
|
40,901
|
|
|
$
|
35,836
|
|
Software
|
3,801
|
|
|
3,548
|
|
||
Furniture and fixtures
|
864
|
|
|
864
|
|
||
Leasehold improvements
|
2,567
|
|
|
2,492
|
|
||
Construction in progress
|
—
|
|
|
83
|
|
||
Property and equipment, gross
|
48,133
|
|
|
42,823
|
|
||
Less: accumulated depreciation and amortization
|
(39,282
|
)
|
|
(33,920
|
)
|
||
Property and equipment, net
|
$
|
8,851
|
|
|
$
|
8,903
|
|
Balance as of December 31, 2015
|
$
|
72
|
|
Acquisitions
|
1,235
|
|
|
Balance as of September 30, 2016
|
$
|
1,307
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||||||||
Developed technology
|
$
|
5,050
|
|
|
$
|
(253
|
)
|
|
$
|
4,797
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Customer relationships
|
1,746
|
|
|
(1,746
|
)
|
|
—
|
|
|
1,746
|
|
|
(1,746
|
)
|
|
—
|
|
||||||
Patents
|
2,936
|
|
|
(740
|
)
|
|
2,196
|
|
|
1,436
|
|
|
(641
|
)
|
|
795
|
|
||||||
Total
|
$
|
9,732
|
|
|
$
|
(2,739
|
)
|
|
$
|
6,993
|
|
|
$
|
3,182
|
|
|
$
|
(2,387
|
)
|
|
$
|
795
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
(in thousands)
|
||||||
Accrued compensation and benefits
|
$
|
20,458
|
|
|
$
|
18,134
|
|
Accrued tax liabilities
|
2,639
|
|
|
4,520
|
|
||
Other
|
6,330
|
|
|
5,103
|
|
||
Total accrued liabilities
|
$
|
29,427
|
|
|
$
|
27,757
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
(in thousands)
|
||||||
Deferred revenue:
|
|
|
|
||||
Products
|
$
|
2,899
|
|
|
$
|
3,233
|
|
Services
|
80,344
|
|
|
69,571
|
|
||
Total deferred revenue
|
83,243
|
|
|
72,804
|
|
||
Less: current portion
|
(53,484
|
)
|
|
(49,572
|
)
|
||
Non-current portion
|
$
|
29,759
|
|
|
$
|
23,232
|
|
Developed technology
|
|
$
|
5,050
|
|
Goodwill
|
|
1,235
|
|
|
Other tangible assets
|
|
58
|
|
|
Total assets acquired
|
|
$
|
6,343
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Stock-based compensation by type of award:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
$
|
1,028
|
|
|
$
|
1,347
|
|
|
$
|
3,209
|
|
|
$
|
4,326
|
|
Stock awards
|
3,231
|
|
|
2,412
|
|
|
9,614
|
|
|
6,477
|
|
||||
Employee stock purchase rights
|
329
|
|
|
849
|
|
|
246
|
|
|
2,443
|
|
||||
|
$
|
4,588
|
|
|
$
|
4,608
|
|
|
$
|
13,069
|
|
|
$
|
13,246
|
|
|
|
|
|
|
|
|
|
||||||||
Stock-based compensation by category of expense:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue
|
$
|
332
|
|
|
$
|
428
|
|
|
$
|
921
|
|
|
$
|
1,241
|
|
Sales and marketing
|
1,760
|
|
|
2,093
|
|
|
5,577
|
|
|
6,032
|
|
||||
Research and development
|
1,730
|
|
|
1,489
|
|
|
4,251
|
|
|
4,347
|
|
||||
General and administrative
|
766
|
|
|
598
|
|
|
2,320
|
|
|
1,626
|
|
||||
|
$
|
4,588
|
|
|
$
|
4,608
|
|
|
$
|
13,069
|
|
|
$
|
13,246
|
|
(1)
|
Our 2014 Purchase Plan provides twenty-four month offering periods which consist of four six-month purchase periods. We record periodic stock-based compensation expense based on estimated contributions determined at the beginning of each offering period and record purchase adjustments for the difference between the estimated and actual contributions at the end of each purchase period. For the purchase period ended on May 20, 2016, the actual contributions were significantly lower than the estimated contributions due to lower stock price which caused more employees to reach the maximum purchase contribution limit.
|
|
Number of Shares Underlying Outstanding Options
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
(Years) |
|
Aggregate Intrinsic Value
|
|||||
Outstanding as of December 31, 2015
|
9,291
|
|
|
$
|
4.78
|
|
|
|
|
|
||
Granted
|
672
|
|
|
$
|
5.52
|
|
|
|
|
|
|
|
Exercised
|
(1,191
|
)
|
|
$
|
4.17
|
|
|
|
|
|
||
Canceled (1)
|
(562
|
)
|
|
$
|
6.20
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2016
|
8,210
|
|
|
$
|
4.83
|
|
|
6.4
|
|
$
|
48,821
|
|
Vested and expected to vest as of September 30, 2016
|
8,063
|
|
|
$
|
4.82
|
|
|
6.4
|
|
$
|
47,985
|
|
Vested and exercisable as of September 30, 2016
|
5,590
|
|
|
$
|
4.50
|
|
|
5.7
|
|
$
|
35,114
|
|
(1)
|
Common shares granted under the 2008 Plan and canceled after March 20, 2014 are reallocated to the 2014 Plan’s share reserve as they become available for issuance under the 2014 Plan. During the nine months ended September 30, 2016, 244 of the canceled stock options were reallocated to the 2014 Plan.
|
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
Fair value of options granted
|
$
|
1,603
|
|
|
$
|
869
|
|
Weighted-average fair value of options granted
|
$
|
2.38
|
|
|
$
|
2.13
|
|
Intrinsic value of options exercised
|
$
|
5,003
|
|
|
$
|
1,535
|
|
|
Nine Months Ended
September 30, |
||
|
2016
|
|
2015
|
Expected term (in years)
|
4.9
|
|
4.8
|
Risk-free interest rate
|
1.42%
|
|
1.60%
|
Volatility
|
49%
|
|
50%
|
Dividend rate
|
—%
|
|
—%
|
|
Nine Months Ended September 30,
|
||
|
2016
|
|
2015
|
Expected term (in years)
|
1.3
|
|
1.2
|
Risk-free interest rate
|
0.65%
|
|
0.32%
|
Expected volatility
|
42.6%
|
|
39.6%
|
Dividend rate
|
—%
|
|
—%
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Basic and diluted net loss per share
|
|
|
|
|
|
|
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(4,684
|
)
|
|
$
|
(8,967
|
)
|
|
$
|
(19,154
|
)
|
|
$
|
(32,678
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding - basic and diluted
|
66,260
|
|
|
62,753
|
|
|
65,146
|
|
|
62,009
|
|
||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(0.07
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.53
|
)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Stock options, stock awards and employee stock purchase rights
|
14,163
|
|
|
11,058
|
|
|
12,878
|
|
|
11,063
|
|
Common stock subject to repurchase
|
21
|
|
|
90
|
|
|
21
|
|
|
90
|
|
|
14,184
|
|
|
11,148
|
|
|
12,899
|
|
|
11,153
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
United States
|
$
|
24,297
|
|
|
$
|
25,059
|
|
|
$
|
85,242
|
|
|
$
|
75,365
|
|
Japan
|
16,008
|
|
|
8,764
|
|
|
37,846
|
|
|
24,222
|
|
||||
Asia Pacific, excluding Japan
|
7,434
|
|
|
7,991
|
|
|
21,911
|
|
|
18,122
|
|
||||
EMEA
|
6,046
|
|
|
7,317
|
|
|
16,973
|
|
|
20,372
|
|
||||
Other
|
1,283
|
|
|
1,647
|
|
|
4,030
|
|
|
4,250
|
|
||||
Total revenue
|
$
|
55,068
|
|
|
$
|
50,778
|
|
|
$
|
166,002
|
|
|
$
|
142,331
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
our ability to maintain an adequate rate of revenue growth;
|
•
|
our ability to successfully anticipate market needs and opportunities;
|
•
|
our business plan and our ability to effectively manage our growth;
|
•
|
costs associated with defending intellectual property infringement and other claims;
|
•
|
our ability to attract and retain end-customers;
|
•
|
loss or delay of expected purchases by our largest end-customers;
|
•
|
our ability to further penetrate our existing customer base;
|
•
|
our ability to displace existing products in established markets;
|
•
|
our ability to expand our leadership position in next-generation application delivery and server load balancing solutions;
|
•
|
continued growth in markets relating to network security;
|
•
|
our ability to timely and effectively scale and adapt our existing technology;
|
•
|
our ability to innovate new products and bring them to market in a timely manner;
|
•
|
our ability to expand internationally;
|
•
|
the effects of increased competition in our market and our ability to compete effectively;
|
•
|
the effects of seasonal trends on our results of operations;
|
•
|
our expectations concerning relationships with third parties;
|
•
|
the attraction and retention of qualified employees and key personnel;
|
•
|
our ability to achieve or maintain profitability while continuing to invest in our sales, marketing and research and development teams;
|
•
|
variations in product mix or geographic locations of our sales;
|
•
|
fluctuations in currency exchange rates;
|
•
|
increased cost requirements of being a public company and future sales of substantial amounts of our common stock in the public markets;
|
•
|
the cost and potential outcomes of existing and future litigation;
|
•
|
our ability to maintain, protect, and enhance our brand and intellectual property; and
|
•
|
future acquisitions of or investments in complementary companies, products, services or technologies.
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||||||||
|
2016
|
|
2015
|
|
Increase (Decrease)
|
|||||||||||||||
|
Amount
|
|
Percent of Total Revenue
|
|
Amount
|
|
Percent of Total Revenue
|
|
Amount
|
|
Percent
|
|||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Products
|
$
|
35,275
|
|
|
64.1
|
%
|
|
$
|
34,990
|
|
|
68.9
|
%
|
|
$
|
285
|
|
|
1
|
%
|
Services
|
19,793
|
|
|
35.9
|
|
|
15,788
|
|
|
31.1
|
|
|
4,005
|
|
|
25
|
%
|
|||
Total revenue
|
55,068
|
|
|
100.0
|
|
|
50,778
|
|
|
100
|
%
|
|
4,290
|
|
|
8
|
%
|
|||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Products
|
8,795
|
|
|
16.0
|
|
|
8,529
|
|
|
16.8
|
|
|
266
|
|
|
3
|
%
|
|||
Services
|
4,153
|
|
|
7.5
|
|
|
4,186
|
|
|
8.2
|
|
|
(33
|
)
|
|
(1
|
)%
|
|||
Total cost of revenue
|
12,948
|
|
|
23.5
|
|
|
12,715
|
|
|
25.0
|
|
|
233
|
|
|
2
|
%
|
|||
Gross profit
|
42,120
|
|
|
76.5
|
|
|
38,063
|
|
|
75.0
|
|
|
4,057
|
|
|
11
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Sales and marketing
|
24,331
|
|
|
44.2
|
|
|
25,774
|
|
|
50.8
|
|
|
(1,443
|
)
|
|
(6
|
)%
|
|||
Research and development
|
15,968
|
|
|
29.0
|
|
|
13,562
|
|
|
26.7
|
|
|
2,406
|
|
|
18
|
%
|
|||
General and administrative
|
6,305
|
|
|
11.5
|
|
|
6,892
|
|
|
13.6
|
|
|
(587
|
)
|
|
(9
|
)%
|
|||
Litigation and settlement expense
|
66
|
|
|
0.1
|
|
|
469
|
|
|
0.9
|
|
|
(403
|
)
|
|
(86
|
)%
|
|||
Total operating expenses
|
46,670
|
|
|
84.8
|
|
|
46,697
|
|
|
92.0
|
|
|
(27
|
)
|
|
0
|
%
|
|||
Loss from operations
|
(4,550
|
)
|
|
(8.3
|
)
|
|
(8,634
|
)
|
|
(17.0
|
)
|
|
4,084
|
|
|
(47
|
)%
|
|||
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
(145
|
)
|
|
(0.3
|
)
|
|
(151
|
)
|
|
(0.3
|
)
|
|
6
|
|
|
(4
|
)%
|
|||
Interest income and other income (expense), net
|
309
|
|
|
0.6
|
|
|
22
|
|
|
—
|
|
|
287
|
|
|
1,305
|
%
|
|||
Total other income (expense), net
|
164
|
|
|
0.3
|
|
|
(129
|
)
|
|
(0.3
|
)
|
|
293
|
|
|
(227
|
)%
|
|||
Loss before income taxes
|
(4,386
|
)
|
|
(8.0
|
)
|
|
(8,763
|
)
|
|
(17.3
|
)
|
|
4,377
|
|
|
(50
|
)%
|
|||
Provision for income taxes
|
298
|
|
|
0.5
|
|
|
204
|
|
|
0.4
|
%
|
|
94
|
|
|
46
|
%
|
|||
Net loss
|
$
|
(4,684
|
)
|
|
(8.5
|
)%
|
|
$
|
(8,967
|
)
|
|
(17.7
|
)%
|
|
$
|
4,283
|
|
|
(48
|
)%
|
|
Nine Months Ended September 30,
|
|
|
|
|
||||||||||||||
|
2016
|
|
2015
|
|
Increase (Decrease)
|
||||||||||||||
|
Amount
|
|
Percent of Total Revenue
|
|
Amount
|
|
Percent of Total Revenue
|
|
Amount
|
|
Percent
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Products
|
$
|
110,446
|
|
|
66.5
|
%
|
|
$
|
98,837
|
|
|
69.4
|
%
|
|
$
|
11,609
|
|
|
12%
|
Services
|
55,556
|
|
|
33.5
|
|
|
43,494
|
|
|
30.6
|
|
|
12,062
|
|
|
28%
|
|||
Total revenue
|
166,002
|
|
|
100.0
|
|
|
142,331
|
|
|
100.0
|
|
|
23,671
|
|
|
17%
|
|||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Products
|
27,297
|
|
|
16.4
|
|
|
23,501
|
|
|
16.5
|
|
|
3,796
|
|
|
16%
|
|||
Services
|
13,087
|
|
|
7.9
|
|
|
11,601
|
|
|
8.2
|
|
|
1,486
|
|
|
13%
|
|||
Total cost of revenue
|
40,384
|
|
|
24.3
|
|
|
35,102
|
|
|
24.7
|
|
|
5,282
|
|
|
15%
|
|||
Gross profit
|
125,618
|
|
|
75.7
|
|
|
107,229
|
|
|
75.3
|
|
|
18,389
|
|
|
17%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Sales and marketing
|
77,872
|
|
|
47.0
|
|
|
75,258
|
|
|
52.9
|
|
|
2,614
|
|
|
3%
|
|||
Research and development
|
45,231
|
|
|
27.2
|
|
|
41,542
|
|
|
29.2
|
|
|
3,689
|
|
|
9%
|
|||
General and administrative
|
20,196
|
|
|
12.2
|
|
|
20,122
|
|
|
14.1
|
|
|
74
|
|
|
—%
|
|||
Litigation and settlement expense
|
2,059
|
|
|
1.2
|
|
|
1,939
|
|
|
1.4
|
|
|
120
|
|
|
6%
|
|||
Total operating expenses
|
145,358
|
|
|
87.6
|
|
|
138,861
|
|
|
97.6
|
|
|
6,497
|
|
|
5%
|
|||
Loss from operations
|
(19,740
|
)
|
|
(11.9
|
)
|
|
(31,632
|
)
|
|
(22.2
|
)
|
|
11,892
|
|
|
(38)%
|
|||
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense
|
(397
|
)
|
|
(0.2
|
)
|
|
(382
|
)
|
|
(0.3
|
)
|
|
(15
|
)
|
|
4%
|
|||
Interest income and other income (expense), net
|
1,544
|
|
|
0.9
|
|
|
(167
|
)
|
|
(0.1
|
)
|
|
1,711
|
|
|
(1,025)%
|
|||
Total other income (expense), net
|
1,147
|
|
|
0.7
|
|
|
(549
|
)
|
|
(0.4
|
)
|
|
1,696
|
|
|
(309)%
|
|||
Loss before income taxes
|
(18,593
|
)
|
|
(11.2
|
)
|
|
(32,181
|
)
|
|
(22.6
|
)
|
|
13,588
|
|
|
(42)%
|
|||
Provision for income taxes
|
561
|
|
|
0.3
|
|
|
497
|
|
|
0.3
|
|
|
64
|
|
|
13%
|
|||
Net loss
|
$
|
(19,154
|
)
|
|
(11.5
|
)%
|
|
$
|
(32,678
|
)
|
|
(23.0
|
)%
|
|
$
|
13,524
|
|
|
(41)%
|
|
Three Months Ended September 30,
|
|
|
||||||||||||||||
|
2016
|
|
2015
|
|
Increase (Decrease)
|
||||||||||||||
|
Amount
|
|
Percent of Total Revenue
|
|
Amount
|
|
Percent of Total Revenue
|
|
Amount
|
|
Percent
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Products
|
$
|
35,275
|
|
|
64.1
|
%
|
|
$
|
34,990
|
|
|
68.9
|
%
|
|
$
|
285
|
|
|
1%
|
Services
|
19,793
|
|
|
35.9
|
|
|
15,788
|
|
|
31.1
|
|
|
4,005
|
|
|
25%
|
|||
Total revenue
|
$
|
55,068
|
|
|
100.0
|
%
|
|
$
|
50,778
|
|
|
100.0
|
%
|
|
$
|
4,290
|
|
|
8%
|
Revenue by geographic region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
United States
|
$
|
24,297
|
|
|
44.1
|
%
|
|
$
|
25,059
|
|
|
49.4
|
%
|
|
$
|
(762
|
)
|
|
(3)%
|
Japan
|
16,008
|
|
|
29.1
|
|
|
8,764
|
|
|
17.3
|
|
|
7,244
|
|
|
83%
|
|||
Asia Pacific, excluding Japan
|
7,434
|
|
|
13.5
|
|
|
7,991
|
|
|
15.7
|
|
|
(557
|
)
|
|
(7)%
|
|||
EMEA
|
6,046
|
|
|
11.0
|
|
|
7,317
|
|
|
14.4
|
|
|
(1,271
|
)
|
|
(17)%
|
|||
Other
|
1,283
|
|
|
2.3
|
|
|
1,647
|
|
|
3.2
|
|
|
(364
|
)
|
|
(22)%
|
|||
Total revenue
|
$
|
55,068
|
|
|
100.0
|
%
|
|
$
|
50,778
|
|
|
100.0
|
%
|
|
$
|
4,290
|
|
|
8%
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||||
|
2016
|
|
2015
|
|
Increase (Decrease)
|
||||||||||||||
|
Amount
|
|
Percent of Total Revenue
|
|
Amount
|
|
Percent of Total Revenue
|
|
Amount
|
|
Percent
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Products
|
$
|
110,446
|
|
|
66.5
|
%
|
|
$
|
98,837
|
|
|
69.4
|
%
|
|
$
|
11,609
|
|
|
12%
|
Services
|
55,556
|
|
|
33.5
|
|
|
43,494
|
|
|
30.6
|
|
|
12,062
|
|
|
28%
|
|||
Total revenue
|
$
|
166,002
|
|
|
100.0
|
%
|
|
$
|
142,331
|
|
|
100.0
|
%
|
|
$
|
23,671
|
|
|
17%
|
Revenue by geographic location:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
United States
|
$
|
85,242
|
|
|
51.4
|
%
|
|
$
|
75,365
|
|
|
53.0
|
%
|
|
$
|
9,877
|
|
|
13%
|
Japan
|
37,846
|
|
|
22.8
|
|
|
24,222
|
|
|
17.0
|
|
|
13,624
|
|
|
56%
|
|||
Asia Pacific, excluding Japan
|
21,911
|
|
|
13.2
|
|
|
18,122
|
|
|
12.7
|
|
|
3,789
|
|
|
21%
|
|||
EMEA
|
16,973
|
|
|
10.2
|
|
|
20,372
|
|
|
14.3
|
|
|
(3,399
|
)
|
|
(17)%
|
|||
Other
|
4,030
|
|
|
2.4
|
|
|
4,250
|
|
|
3.0
|
|
|
(220
|
)
|
|
(5)%
|
|||
Total revenue
|
$
|
166,002
|
|
|
100.0
|
%
|
|
$
|
142,331
|
|
|
100.0
|
%
|
|
$
|
23,671
|
|
|
17%
|
|
Three Months Ended September 30,
|
|
Increase (Decrease)
|
||||||||||
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||
Products
|
$
|
8,795
|
|
|
$
|
8,529
|
|
|
$
|
266
|
|
|
3%
|
Services
|
4,153
|
|
|
4,186
|
|
|
(33
|
)
|
|
(1)%
|
|||
Total cost of revenue
|
$
|
12,948
|
|
|
$
|
12,715
|
|
|
$
|
233
|
|
|
2%
|
|
Nine Months Ended September 30,
|
|
Increase (Decrease)
|
||||||||||
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||
Products
|
$
|
27,297
|
|
|
$
|
23,501
|
|
|
$
|
3,796
|
|
|
16%
|
Services
|
13,087
|
|
|
11,601
|
|
|
1,486
|
|
|
13%
|
|||
Total cost of revenue
|
$
|
40,384
|
|
|
$
|
35,102
|
|
|
$
|
5,282
|
|
|
15%
|
|
Three Months Ended September 30,
|
|
|
||||||||||||||
|
2016
|
|
2015
|
|
Increase (Decrease)
|
||||||||||||
|
Amount
|
|
Gross Margin
|
|
Amount
|
|
Gross Margin
|
|
Amount
|
|
Gross Margin
|
||||||
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Products
|
$
|
26,480
|
|
|
75.1%
|
|
$
|
26,461
|
|
|
75.6%
|
|
$
|
19
|
|
|
(0.5)%
|
Services
|
15,640
|
|
|
79.0%
|
|
11,602
|
|
|
73.5%
|
|
4,038
|
|
|
5.5%
|
|||
Total gross profit
|
$
|
42,120
|
|
|
76.5%
|
|
$
|
38,063
|
|
|
75.0%
|
|
$
|
4,057
|
|
|
1.5%
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||
|
2016
|
|
2015
|
|
Increase (Decrease)
|
||||||||||||
|
Amount
|
|
Gross Margin
|
|
Amount
|
|
Gross Margin
|
|
Amount
|
|
Gross Margin
|
||||||
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Products
|
$
|
83,149
|
|
|
75.3%
|
|
$
|
75,336
|
|
|
76.2%
|
|
$
|
7,813
|
|
|
(0.9)%
|
Services
|
42,469
|
|
|
76.4%
|
|
31,893
|
|
|
73.3%
|
|
10,576
|
|
|
3.1%
|
|||
Total gross profit
|
$
|
125,618
|
|
|
75.7%
|
|
$
|
107,229
|
|
|
75.3%
|
|
$
|
18,389
|
|
|
0.4%
|
|
Three Months Ended
September 30, |
|
Increase (Decrease)
|
||||||||||
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|||
Sales and marketing
|
$
|
24,331
|
|
|
$
|
25,774
|
|
|
$
|
(1,443
|
)
|
|
(6)%
|
Research and development
|
15,968
|
|
|
13,562
|
|
|
2,406
|
|
|
18%
|
|||
General and administrative
|
6,305
|
|
|
6,892
|
|
|
(587
|
)
|
|
(9)%
|
|||
Litigation and settlement expense
|
66
|
|
|
469
|
|
|
(403
|
)
|
|
(86)%
|
|||
Total operating expenses
|
$
|
46,670
|
|
|
$
|
46,697
|
|
|
$
|
(27
|
)
|
|
—%
|
|
Nine Months Ended
September 30, |
|
Increase
|
||||||||||
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|||
Sales and marketing
|
$
|
77,872
|
|
|
$
|
75,258
|
|
|
$
|
2,614
|
|
|
3%
|
Research and development
|
45,231
|
|
|
41,542
|
|
|
3,689
|
|
|
9%
|
|||
General and administrative
|
20,196
|
|
|
20,122
|
|
|
74
|
|
|
—%
|
|||
Litigation and settlement expense
|
2,059
|
|
|
1,939
|
|
|
120
|
|
|
6%
|
|||
Total operating expenses
|
$
|
145,358
|
|
|
$
|
138,861
|
|
|
$
|
6,497
|
|
|
5%
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
21,839
|
|
|
$
|
7,633
|
|
Investing activities
|
(95,617
|
)
|
|
(2,558
|
)
|
||
Financing activities
|
7,041
|
|
|
3,544
|
|
||
Net increase (decrease) in cash and cash equivalents
|
$
|
(66,737
|
)
|
|
$
|
8,619
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
•
|
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;
|
•
|
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 channel partners;
|
•
|
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;
|
•
|
the cost and potential outcomes of existing and future litigation;
|
•
|
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 market 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; and
|
•
|
our third-party manufacturers’ and component suppliers’ capacity to meet our product demand forecasts on a timely basis, or at all.
|
•
|
Companies that sell products in the traditional ADC market which includes companies that are well established in this market, such as F5 Networks, Inc., and Citrix Systems, Inc.
|
•
|
Companies that sell CGN products, products originally designed for other networking purposes, such as edge routers and security appliances from vendors such as Alcatel-Lucent USA Inc., Cisco Systems, Inc. and Juniper Networks, Inc.
|
•
|
Companies that sell traditional DDoS mitigation products. We are a relatively new entrant into the DDoS market and first publicly launched our DDoS protection detection, and mitigation solution, TPS, in January 2014. We believe our principal competitors in this market are Arbor Networks, Inc., a subsidiary of NetScout Systems, Inc., and Radware, Ltd.
|
•
|
Companies that sell certain network security products, including Secure Web Gateways, Secured Socket Layer (SSL) Insight/SSL Intercept, datacenter firewalls, and Gi/SGi firewalls. We are a new entrant into most of these network security markets and first publicly announced this network security solution, CFW, in our fourth quarter of 2015, which was available for shipping in the first quarter of 2016. We believe our principal competitors in these markets are Blue Coat Systems, Juniper Networks, F5 Networks, and Fortinet.
|
•
|
longer operating histories;
|
•
|
the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products and services at a greater range of prices;
|
•
|
the ability to incorporate functionality into existing products to gain business in a manner that discourages users from purchasing our products, including through selling at zero or negative margins, product bundling or closed technology platforms;
|
•
|
broader distribution and established relationships with distribution channel partners in a greater number of worldwide locations;
|
•
|
access to larger end-customer bases;
|
•
|
the ability to use their greater financial resources to attract our research and development engineers as well as other employees of ours;
|
•
|
larger intellectual property portfolios; and
|
•
|
the ability to bundle competitive offerings with other products and services.
|
•
|
greater difficulty in enforcing contracts and accounts receivable collection and 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 and the United Kingdom’s decision to exit the European Union (commonly referred to as “Brexit”);
|
•
|
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. Foreign Corrupt Practices Act, or 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.
|
•
|
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, 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;
|
•
|
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.
|
•
|
changes in the valuation of our deferred tax assets and liabilities;
|
•
|
expected timing and amount of the release of tax valuation allowances;
|
•
|
expiration of, or detrimental changes in, research and development tax credit laws;
|
•
|
tax effects of stock-based compensation;
|
•
|
costs related to intercompany restructurings;
|
•
|
changes in tax laws, regulations, accounting principles or interpretations thereof;
|
•
|
future earnings being lower than anticipated in countries where we have lower statutory tax rates and higher than anticipated earnings in countries where we have higher statutory tax rates; or
|
•
|
examinations by US federal, state or foreign jurisdictions that disagree with interpretations of tax rules and regulations in regards to positions taken on tax filings.
|
•
|
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;
|
•
|
sales of large blocks of our common stock; or
|
•
|
departures of key personnel.
|
•
|
a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;
|
•
|
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 secretary, 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 requirement for the affirmative vote of holders of at least 66-2/3% of the voting power of all of the then-outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our restated certificate of incorporation relating to the issuance of preferred stock and management of our business or our bylaws, which may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;
|
•
|
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 acquiror’s own slate of directors or otherwise attempting to obtain control of us.
|
|
A10 NETWORKS, INC.
|
|
By: /s/ Lee Chen
|
|
Lee Chen
|
|
Chief Executive Officer and President
(Principal Executive Officer)
|
|
By: /s/ Greg Straughn
|
|
Greg Straughn
|
|
Chief Financial Officer
(Principal Accounting and Financial Officer)
|
Exhibit
Number
|
|
Description
|
10.1
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1*
|
|
|
32.2*
|
|
|
101.INS
|
|
XBRL Instant Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Extension Calculation Linkbase Document
|
101.DEF
|
|
XBRL Extension Definition Linkbase Document
|
101.LAB
|
|
XBRL Extension Labels Linkbase Document
|
101.PRE
|
|
XBRL Extension Presentation Linkbase Document
|
|
*
|
The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10‑Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of A10 Networks, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10‑Q, irrespective of any general incorporation language contained in such filing.
|
TO:
|
SILICON VALLEY BANK
|
RE:
|
Loan and Security Agreement dated as of November 1, 2016 (as amended, modified, supplemented or restated from time to time, the “
Loan Agreement
”), by and between A10 Networks, Inc., a Delaware corporation
(“
Borrower
”), and Silicon Valley Bank, a California banking corporation (the “
Bank
”)
|
LIBOR Pricing Date
|
LIBOR
|
LIBOR Variance
|
Maturity Date
|
|
|
____%
|
|
TO:
|
SILICON VALLEY BANK
|
RE:
|
Loan and Security Agreement dated as of November 1, 2016 (as amended, modified, supplemented or restated from time to time, the “
Loan Agreement
”), by and between A10 Networks, Inc., a Delaware corporation
(“
Borrower
”), and Silicon Valley Bank, a California banking corporation (the “
Bank
”)
|
LIBOR Pricing Date
|
LIBOR
|
LIBOR Variance
|
Maturity Date
|
|
|
____%
|
|
ACCOUNTS RECEIVABLE
|
|
||
1. Accounts Receivable (invoiced) Book Value as of ____________________
|
$_______________
|
||
2. Additions (Please explain on next page)
|
$_______________
|
||
3. Less: Intercompany / Employee / Non-Trade Accounts
|
$_______________
|
||
4. NET TRADE ACCOUNTS RECEIVABLE
|
$_______________
|
||
|
|
||
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
|
|
||
5. 90 Days Past Invoice Date
|
$_______________
|
||
6. Credit Balances over 90 Days
|
$_______________
|
||
7. Balance of 25% over 90 Day Accounts (Cross-Age or Current Affected)
|
$_______________
|
||
8. Foreign Account Debtor Accounts
|
$_______________
|
||
9. Foreign Invoiced and/or Collected Accounts
|
$_______________
|
||
10. Contra / Customer Deposit Accounts
|
$_______________
|
||
11. U.S. Government Accounts
|
$_______________
|
||
12. Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts
|
$_______________
|
||
13. Accounts with Memo or Pre-Billings
|
$_______________
|
||
14. Contract Accounts; Accounts with Progress / Milestone Billings
|
$_______________
|
||
15. Accounts for Retainage Billings
|
$_______________
|
||
16. Trust / Bonded Accounts
|
$_______________
|
||
17. Bill and Hold Accounts
|
$_______________
|
||
18. Unbilled Accounts
|
$_______________
|
||
19. Non-Trade Accounts (If not already deducted above)
|
$_______________
|
||
20. Accounts with Extended Term Invoices (Net 90+)
|
$_______________
|
||
21. Chargebacks Accounts / Debit Memos
|
$_______________
|
||
22. Product Returns / Exchanges
|
$_______________
|
||
23. Disputed Accounts; Insolvent Account Debtor Accounts
|
$_______________
|
||
24. Deferred Revenue in excess of 25% of all Accounts/Other (Please explain on next page)
|
$_______________
|
||
25. Concentration Limits
|
$_______________
|
||
26. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
|
$_______________
|
||
|
|
||
27. Eligible Domestic Accounts (#4 minus #26)
|
$_______________
|
||
28. ELIGIBLE AMOUNT OF DOMESTIC ACCOUNTS (80% of #27)
|
$_______________
|
||
|
|
||
29. Eligible Foreign Accounts (#27 plus #8)
|
$_______________
|
||
30. ELIGIBLE AMOUNT OF FOREIGN ACCOUNTS (70% of #29)
|
$_______________
|
||
|
|
||
BALANCES
|
|
||
31. Maximum Loan Amount
|
|
$25,000,000.00
|
|
32. Total Funds Available (Lesser of (i) #31 and (ii) sum of #28 plus #30)
|
$_______________
|
||
33. Present balance owing on Line of Credit
|
$_______________
|
||
34. Outstanding under Sublimits
|
$_______________
|
||
35. RESERVE POSITION (#32 minus #33 and #34)
|
$_______________
|
COMMENTS:
By: ___________________________
Authorized Signer
Date:
|
BANK USE ONLY
Received by: _____________________
AUTHORIZED SIGNER
Date: __________________________
Verified: ________________________
AUTHORIZED SIGNER
Date: ___________________________
Compliance Status: Yes No
|
The following Intellectual Property was registered (or a registration application submitted) after the Effective Date (if no registrations, state “None”)
___________________________________________________________________________________________
___________________________________________________________________________________________
|
Financial Covenants
|
Required
|
Actual
|
Complies
|
|
|
|
|
Maintain at all times:
|
|
|
|
Minimum Adjusted Quick Ratio
|
1.50:1.00
|
_____:1.00
|
Yes No
|
Other
|
Threshold
|
Actual
|
Exceeds Threshold
|
|
|
|
|
Net Cash Trigger
|
$50,000,000
|
|
Yes No
|
A10 NETWORKS, INC.,
a Delaware corporation
By:
Name:
Title:
|
BANK USE ONLY
Received by: _____________________
AUTHORIZED SIGNER
Date: _________________________
Verified: ________________________
AUTHORIZED SIGNER
Date: _________________________
Compliance Status: Yes No
|
A.
|
Aggregate value of the unrestricted cash and cash equivalents of Borrower and its Subsidiaries
|
$
|
B.
|
Aggregate value of the net billed accounts receivable of Borrower and its Subsidiaries
|
$
|
C.
|
Quick Assets (the sum of lines A and B)
|
$
|
D.
|
Aggregate value of Obligations to Bank
|
$
|
E.
|
Aggregate value of liabilities that should, under GAAP, be classified as liabilities on Borrower’s consolidated balance sheet, including all Indebtedness, and not otherwise reflected in line D above that matures within one (1) year
|
$
|
F.
|
Current Liabilities (the sum of lines D and E)
|
$
|
G.
|
Aggregate value of all amounts received or invoiced by Borrower and its Subsidiaries in advance of performance under contracts and not yet recognized as revenue
|
$
|
|
|
|
H.
|
Line F minus Line G
|
$
|
|
|
|
I.
|
Adjusted Current Liabilities
|
$
|
|
|
|
J.
|
Quick Ratio (line C divided by line I)
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of A10 Networks, Inc. for the quarter ended
September 30, 2016
;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 3, 2016
|
By: /s/ Lee Chen
|
|
|
Lee Chen
|
||
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of A10 Networks, Inc. for the quarter ended
September 30, 2016
;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)
for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 3, 2016
|
By: /s/ Greg Straughn
|
|
|
Greg Straughn
|
||
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
November 3, 2016
|
By: /s/ Lee Chen
|
|
|
Lee Chen
|
||
|
President and Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
November 3, 2016
|
By: /s/ Greg Straughn
|
|
|
Greg Straughn
|
||
|
Chief Financial Officer
|