What changed in this filing

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Item 1. Business

2021-03-08 compared with 2020-03-10 · 86 added, 43 removed, 272 unchanged (32% of the section changed)

We are a l eading 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 portfolio of software and hardware solutions combines industry-leading performance and scale with advanced intelligent automation, machine learning, data driven analytics, and threat intelligence to ensure security and availability of customer applications across their multi-cloud and mobile infrastructure networks, including on-premise, private and public clouds.

As the cyber threat landscape intensifies and network architectures evolve, we are committed to providing customers with greater connected intelligence to improve the security, visibility, automation, availability, flexibility, management and performance of their applications.

Our customers include leading cloud providers, web-scale businesses, service providers, government organizations, and enterprises.

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.

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.

Our customers include leading service providers (cloud, telecommunications, multiple system operators, cable), government organizations, and enterprises.

Industry Trends & Market Drivers

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To support data centers and different cloud types, solutions require a variety of form factors:

hardware, software (i.e.

virtual, bare metal and containers) and cloud-based offerings.

hardware, software (i.e., virtual, bare metal and containers) and cloud-based offerings.

• Clear Visibility and Sophisticated Analytics.

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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 scale will become imperative.

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.

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Our comprehensive and flexible application solutions portfolio, combined with our Harmony Controller, positions us to address the growing need for shifting workloads to a mix of private clouds and public clouds.

A10 Harmony Controller is built on microservices and container technologies and offers a multi-tenant, highly scalable controller architecture that incorporates real-time and predictive analytics at a per-app level and central management and orchestration of secure application services across hybrid environments - from physical data centers to public, private and hybrid clouds.

A10 Harmony Controller is built on microservices and container technologies and offers a multi-tenant, highly scalable controller architecture that incorporates real-time and predictive analytics at the application level and central management and orchestration of secure application services across hybrid environments - from physical data centers to public, private and hybrid clouds.

The following is an overview of our portfolio:

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• A high-performance Secure Web Gateway with integrated explicit proxy, URL filtering and SSL visibility, enabling security policy enforcement for outbound HTTP/HTTPS client traffic.

Our solution includes an Office 365 proxy to provide scalability, performance, and security to overcome deployment and operational challenges.

Our solution includes an Cloud Access Proxy to provide scalability, performance, and security to overcome deployment and operational challenges.

• A high-performance data center firewall with integrated network denial-of-service protection and server load balancing, and provides a Layer 4 stateful firewall and Layer 7 application-level gateway functionality for protecting data center applications from emerging network and DDoS threats.

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Our Harmony Controller simplifies operations.

Infrastructure and application operations teams can centrally manage and automate configuration and application policies for our Thunder and Lightning application and security services, such as load balancing, application delivery, web application firewall, SSL decryption, Gi/SGi firewall, Carrier Grade NAT and Office 365 solutions.

Configuration and control can also be automated via application program interface (“API”) and integrated with orchestration systems used within organizations.

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Our customers operate in a variety of industries, including telecommunications, technology, industrial, government, retail, financial, gaming, and education.

As of December 31, 2019 , we had sold our products to more than 6,020 end customers across 133 countries.

As of December 31, 2020, we had sold our products to more than 7,290 end-customers worldwide.

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.

During the years ended December 31, 2020, 2019 and 2018, purchases from our 10 largest end-customers accounted for approximately 41%, 36% and 37% of our total revenue, respectively.

In 2019 , two distribution channel partners, Arrow Electronics, Inc.

and ITOCHU Techno-Solutions Corporation, accounted for 14% and 12% of our total revenue, respectively.

In 2018 , two distribution channel partners, Adaptive Integration and ITOCHU Techno-Solutions Corporation, accounted for 14% and 10% of our total revenue, respectively.

In 2017 , no customer accounted for more than 10% of our total revenue.

In 2020, one distribution channel partner accounted for 10% of our total revenue.

In 2019, two distribution channel partners accounted for 14% and 12% of our total revenue.

In 2018, two distribution channel partners accounted for 14% and 10% of our total revenue.

In 2019, we changed the way we present revenue by customer vertical.

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We believe this new geographic and vertical view aligns with how we manage the business and maps our product portfolio to customer segments.

As security, 5G and multi-cloud trends continue to gain prominence, changes in application delivery needs, cyber security threats, and the technology landscape result in evolving customer requirements to address application scalability, performance, security and intelligent automation.

These evolving demands have expanded our addressable market into DDoS protection, 5G network security (Gi-LAN protection) and multiple areas of cloud and network security, where we compete with a number of companies not included among traditional ADC vendors.

The agility and flexibility of the ACOS platform enables us to rapidly innovate and deploy solutions into adjacent markets to ADC.

We have also enhanced our portfolio with the Harmony Controller, an intelligent management, automation, and predictive analytics platform for secure application delivery in multi-cloud environments and advanced protection of the 4G/5G mobile infrastructure services.

This container and microservices-based product complements our comprehensive set of hardware, software and cloud offerings.

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.

These evolving demands have expanded our addressable market into cybersecurity including DDoS protection, 5G /5G-readiness and hybrid networking, where we compete with a number of companies not included among our traditional competitors in the past.

The agility and flexibility of a common management platform enables us to offer multiple product categories that are easier to manage for our customers.

Our portfolio also includes container and microservices-based versions of certain of our comprehensive set of hardware, software and cloud offerings.

We do not consider any of these markets to include a single dominant company, nor do we consider the markets to be fragmented.

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.

(“HAProxy”) as well as many startups;

• 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 and Radware, Ltd;

• Companies that sell network security products, including Secure Web Gateways, SSL Insight/SSL Intercept, data center firewalls and Office 365 proxy solutions;

• Companies that sell Gi/SGi firewall and CGN products, which were originally designed for other networking purposes, such as edge routers and security appliances from vendors like Cisco Systems, Inc.

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(“Fortinet”);

Companies that sell traditional DDoS protection products, such as Arbor Networks, Inc., a subsidiary of NetScout Systems, (“Arbor Networks”) and Radware, Ltd.

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;

Companies that sell certain network security products, including Secure Web Gateways, SSL Insight/SSL Intercept, data center firewalls and Office 365 proxy solutions.

• Companies that sell products in the traditional application delivery market, such as F5 Networks, Inc.

(“F5 Networks”), Citrix Systems, Inc.

(“Citrix Systems”), Avi Networks Inc.

(“Avi Networks”) as well as many startups.

The key competitive factors in our markets include:

• Ability to innovate and respond to customer needs rapidly;

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;

Breadth and depth of product features and functionality;

Level of customer satisfaction;

Price, performance, and efficiency;

Ability for products to scale with high-speed network traffic;

Flexible and agile design of products;

• 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;

Strength of sales and marketing;

• Ability to attract and retain talented employees.

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For the years ended December 31, 2020, 2019 and 2018, our total revenue was $225.5 million, $212.6 million, and $232.2 million, respectively, and our gross margin was 77.8%, 77.0%, and 77.7%, respectively.

We had net losses of $17.8 million , $27.6 million and $10.8 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

We had net income of $17.8 million and net losses of $17.8 million and $27.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Intellectual Property

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Risk Factors included in this Annual Report on Form 10-K for additional information regarding the risks associated with protecting our intellectual property.

As of December 31, 2019 , we had 810 full-time employees, including 403 engaged in research and development and customer support, 318 in sales and marketing and 89 in general and administrative and other activities.

Human Capital

As of December 31, 2020, we had 740 full-time employees plus 9 full-time contractors, including 395 engaged in research and development and customer support, 279 in sales and marketing and 75 in general and administrative and other activities.

None of our employees is represented by a labor union or is a party to any collective bargaining arrangement in connection with his or her employment with us.

We have never experienced any work stoppages, and we consider our relations with our employees to be good.

Diversity, Inclusion & Equal Opportunity

We are committed to providing a work environment that is free of discrimination and harassment.

We are an equal-opportunity employer.

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.

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 believe that a cooperative work environment, based in 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.

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 Conduct, and compliance trainings.

These all provide guidance on how we expect to operate in order to foster diversity, equity and inclusion across our company.

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.

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.

We believe that we employ a fair and merit-based total compensation system for our employees.

Employees are generally eligible for medical, dental, vision and other comprehensive benefits, most of which become effective on their start date.

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;

• Employee assistance program

It is important that all employees have an opportunity to have an ownership interest in our company, and there are several programs that provide employees with the ability to own our stock.

Generally, more than 75% of our employees participates in at least one of our stock programs.

During their tenure with our company, most employees have an opportunity to receive an equity award, either upon hire and/or during an annual review process to recognize those with significant impact on achieving our goals.

Another program offered to most employees, whether part or full time, is the ability to participate in our Employee Stock Purchase Plan (“ESPP”).

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.

Most of our employees are working-from-home and personal protective equipment is provided to all employees coming into the office.

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 comply with applicable health, safety, and environmental laws as well as related company policies and procedures.

We have a zero-tolerance policy against aggressive behavior, violence, direct and indirect threats, harassment, intimidation, and possession of weapons on company property.

Moreover, we strive to conduct our everyday business activities in an environmentally sustainable way through wellness programs, and webinars through our health insurance providers.

Our Response to COVID-19

The health and well-being of our employees has always been and continues to be a top priority.

To ensure the health and well-being of all of our employees during the COVID-19 pandemic, we have taken the following measures:

• Implemented work-from-home and social distancing policies for our organization;

• Taken steps to ensure employee’s ability to remotely work-from-home when feasible;

• Placed restrictions on travel by our employees and in-person meetings;

• Prepared our San Jose, CA headquarters facility to be compliant with all local and statewide COVID-19 requirements for those essential workers that are unable to work-from-home.

Corporate Information

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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 http://investors.A10networks.com.

Our website is located at www.A10networks.com, and our investor relations website is located at https://investors.A10networks.com.

The following filings are available through our investor relations website after we file them with the SEC:

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Additionally, copies of materials filed by us with the SEC may be accessed at the SEC’s website at www.sec.gov.

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 ( www.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).

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).

The contents of our website and social media contents are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business