What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-03-08 compared with 2021-03-08 · 74 added, 44 removed, 314 unchanged (27% of the section changed)

1 unchanged sentence

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.

As cyber-attacks increase in volume and complexity, we integrate security as a key attribute in essentially all our solutions that further enable our customers to continue to adapt to market trends in 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.

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The digitization of business has made applications a critical ingredient in virtually every aspect of operations.

How safely and efficiently applications perform determines how businesses perform, how they compete, grow, and stand out in the marketplace.

The safety and efficiency of applications can directly impact business and financial performance, and security shortfalls can impact brand value and customer retention.

The application networking and security industry is experiencing dynamic shifts in the way applications are developed, delivered, monetized and protected.

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Increased Network Complexity and New Infrastructure Paradigms.

Traditional IT vendors may need to shift from hardware-centric models to software-defined approaches to improve agility for critical applications, and subsequently, their business operations.

Traditional IT vendors may need to shift from hardware-centric models to software-defined approaches across several operating environments to improve agility for critical applications, and subsequently, their business operations.

Ensuring product portfolios adapt and diversify to include newer virtualized software, container-based software and cloud-based offerings are key factors determining future market leadership and competitive landscapes.

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A DDoS attack seeks to render a target network or website unavailable by orchestrating coordinated attacks from massive worldwide networks of compromised endpoints, called botnets.

Compromised endpoints can be computing

devices or “Internet of Things” driven devices like video cameras.

Compromised endpoints can be computing devices or “Internet of Things” driven devices like video cameras.

Any internet-connected device can be vulnerable to hackers and utilized as part of a botnet.

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Our software solutions are available to be delivered in a variety of form factors, such as embedded in optimized hardware appliances, as bare metal software, containerized software, virtual appliances and cloud-native software.

While our revenue to date has predominantly derived from delivery of our proprietary software on a perpetual license basis embedded in optimized hardware, this model has begun to evolve in various ways, including among others, term licenses, subscriptions, and software-only models.

While our revenue to date has predominantly derived from delivery of our proprietary software on a perpetual license basis embedded in

optimized hardware, this model has begun to evolve in various ways, including among others, term licenses, subscriptions, and software-only models.

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.

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In 2018, we enhanced our TPS detection capabilities with the One-DDoS solution, which enables Thunder ADC, CGN, and CFW solutions to act as in-line detectors to enhance application and infrastructure detection.

We also added TPS Dynamic Attack Pattern Recognition (DAPR) for

automatic attack learning, to identify and thwart zero-day attacks, and enhanced machine learning (ML) with always-on adaptive learning.

TPS is augmented by the A10 Threat Intelligence Service which can block known bad connections (i.e., IP addresses) from entering protected networks.

We also added TPS Dynamic Attack Pattern Recognition (DAPR) for automatic attack learning, to identify and thwart zero-day attacks, and enhanced machine learning (ML) with always-on adaptive learning.

TPS is augmented by the A10 Threat Intelligence Service which can block known

bad connections (i.e., IP addresses) from entering protected networks.

This service is based on software licensed from ThreatSTOP, Inc.

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Thunder CFW addresses multiple critical security capabilities in one package by consolidating multiple security and networking functions in a single appliance, helping customers significantly lower capital and operating expenses.

Its performance and scale delivers superior value to customers, all within a small form factor, and streamlines customer operations with a cloud-ready programmable platform.

Its performance and scale deliver superior value to customers, all within a small form factor, and streamlines customer operations with a cloud-ready programmable platform.

Thunder CFW includes:

• 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 Cloud Access Proxy to provide scalability, performance, and security to overcome deployment and operational challenges.

Our solution includes a 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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Product Form Factors

Our products are offered in a variety of form factors and payment models, including physical appliances and perpetual and subscription-based software licenses, as well as pay-as-you-go licensing models and FlexPool, a flexible consumption-

based software model.

FlexPool allows businesses to flexibly allocate and re-distribute capacity across applications, multiple clouds and data centers.

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Our Flexible Traffic Accelerator logic can be implemented either as software running within a standard x86 processor or a Field Programmable Gate Array (“FPGA”) semiconductor.

Our Flexible Traffic Accelerator (“FTA”) also performs certain hardware-based security checks for each packet and can discard suspicious traffic before it can impact system performance.

Our Flexible Traffic Accelerator (“FTA”) also performs certain hardware-based security checks for each packet and can isolate suspicious traffic before it can impact system performance.

Scalable and Efficient Memory Usage.

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Once data is processed and placed into a shared memory, a processor can begin to apply ACOS common services and function-specific logic.

To ensure that every processor is utilized to perform every function and thereby achieve greater system utilization, ACOS uses all processor cores symmetrically for all functions and services.

To ensure that every processor is utilized to perform every function and thereby achieve greater system utilization, ACOS uses all processor cores

symmetrically for all functions and services.

The ACOS common services perform a set of key operational functions, including configuration management, network I/O, aFleX scripting, Virtual Chassis System (“aVCS”), aXAPI for management integration, Application Delivery Partitions (“ADPs”), virtualization to enable multi-tenancy, and common resource management such as buffer, system memory, timer management and other internal system management tasks.

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One of our founding principles is to provide excellent customer support.

Our global support team is part of our engineering organization and is trained across all products and solutions, and takes complete ownership of customer issues from the beginning to the end to achieve rapid response and resolution.

Our global support team, with deep technical domain expertise, is part of our engineering organization and is trained across all products and solutions, and takes complete ownership of customer issues from the beginning to the end to achieve rapid response and resolution.

Our consistent, high-quality customer service and technical support is a key factor in attracting and retaining customers of all sizes, as well as support services that include installation, phone support, repair and replacement, software updates, online tools, consulting and training services.

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

As of December 31, 2021, we had sold our products to more than 7,700 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.

1 unchanged sentence

In 2021, one distribution channel partner accounted for 12% of our total revenue.

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

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

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

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

We now report two customer verticals:

service providers and enterprises, compared to service providers, enterprises and web giants in prior years.

Our previously reported revenue from web giants is primarily accounted for now in enterprise revenue.

The revenue by vertical percentages from prior years included in this report have been revised to conform with current year presentation.

Additionally, we changed the way we present customer revenue by geographic region.

We now report customer revenues in four geographic regions:

the Americas, Japan, Asia Pacific (excluding Japan) and EMEA.

Our previously reported customer revenues of our United States and Latin America regions are now included in the Americas geographic region.

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 cloud trends continue to gain prominence, changes in application delivery needs, cyber security threats, and the technology landscape result in evolving customer requirements.

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• 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;

in 2016), F5 Networks, Inc.

(“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;

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(“Fortinet”);

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

(“F5 Networks”), Citrix Systems, Inc.

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

(“Citrix Systems”), Avi Networks Inc.

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Our high-touch sales force engages customers directly and through distribution channels.

Our sales team is comprised of inside sales and field sales personnel who are organized by geography and maintain sales presence in 28 countries as of December 31, 2020, including in the following countries and regions:

United States, Western Europe, the Middle East, Japan, China, Taiwan, South Korea, Southeast Asia and Latin America.

Our sales team is comprised of inside sales and field sales personnel who are organized by geography and maintain sales presence in 27 countries as of

December 31, 2021, including in the following countries and regions:

United States, Western Europe, the Middle East, Japan, Taiwan, South Korea, Southeast Asia and Latin America.

Our sales organization includes sales engineers with deep technical domain expertise who are responsible for pre-sales technical support, solutions engineering, proof-of-concept work and technical training for our distribution channel partners.

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Our marketing drives global demand generation campaigns, as well as additional awareness and demand via joint marketing campaigns with channel partners and strategic alliance partners worldwide.

Our marketing also drives global awareness through industry analyst engagement, financial analyst engagement, media outreach, blogs, social media and events.

Our marketing also drives global awareness through industry analyst engagement, media outreach, blogs, social media and events.

Manufacturing

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For the years ended December 31, 2021, 2020 and 2019, our total revenue was $250.0 million, $225.5 million, and $212.6 million, respectively, and our gross margin was 78.6%, 77.8%, and 77.0%, 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.

We had net income of $94.9 million and $17.8 million and net loss of $17.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Intellectual Property

15 unchanged sentences

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.

As of December 31, 2021, we had 590 full-time employees, including 265 engaged in research and development and customer support, 262 in sales and marketing and 63 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.

Corporate Responsibility

A10 Networks’ mission is to enable business-critical networks that are secure, available and efficient.

In our rapidly expanding digital economy, this has never been more relevant and critical.

Our customers rely on us to help them drive better business outcomes now and into the future.

With our mission in mind, we are committed to maintaining the highest standards of ethics and corporate governance, and to fostering a diverse and inclusive workforce and customer and partner ecosystem.

We believe these practices will deliver the highest value for our employees, customers, partners and shareholders.

Our global footprint provides an additional level of sustainability for business performance, and we ensure that we are driving this responsibility across all our global locations.

We use as a guide the code of conduct policies set forth by the Responsible Business Alliance, the world’s largest industry coalition dedicated to corporate social responsibility in global supply chains, and we expect all of our suppliers to do so as well.

The alliance sets standards and practices for a social, environmentally sustainable, and ethical supply chains.

Our supply chain has sustained audits based on the Validated Assessment Program.

Further, we have established standards and practices to which our Board of Directors, executives and employees are obligated to adhere, as outlined on our website under Corporate Responsibility.

Environmental, Social and Governance (“ESG”)

Environmental

We are committed to business practices that preserve the environment upon which our society and economy depend.

We are committed to meeting or exceeding all legal and compliance guidelines for our people, products and operations.

In addition, we strive to deliver products and services that minimize the impact to the environment throughout our value chain.

Our environmental initiatives are aligned with the 1.5°C ambition as outlined in the Paris Agreement, and we have corporate goals to support the initiative.

We work with our contract manufacturers and suppliers to maintain compliance with, for example, RoHS, REACH and WEEE in the EU and elsewhere across the globe for other such environmental requirements.

The Company’s Conflict Minerals Supply Chain Policy outlines our practices and procedures with respect to human rights to ensure participants in our supply chain do not knowingly contribute to local conflict or human rights abuses.

We expect our suppliers to comply with our policy on responsible sourcing of minerals from conflict-affected and high-risk areas and to cooperate with our diligence

inquiries and requests for information and certification as may be required by us to comply with reporting and disclosure obligations to which we are subject from time to time.

Our corporate headquarters in San Jose, California, is compliant with the California Building Energy Efficiency Standards - Title 24 to reduce wasteful and unnecessary energy consumption.

The Company has planned for greater use of renewable energy in partnership with the local utility, PG&E.

At our headquarters, we offer EV charging stations to our employees and visitors, and where applicable according to local requirements, we offer recycling and we properly dispose of e-waste.

Diversity, Inclusion & Equal Opportunity

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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 believe that a cooperative work environment, based on trust and mutual respect, is essential to our success.

We embrace the diversity of our workforce and celebrate the creative value added by individuals with differing backgrounds.

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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.

We believe that we employ a fair and merit-based total compensation system for our employees and offer a variable bonus plan for eligible employees.

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

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• 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.

Employees have an opportunity for financial inclusion at A10 Networks with an ownership interest in our company.

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”).

Most employees, whether part or full time, also have 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.

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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.

At the outset of the pandemic, we immediately followed all local shelter-in-place orders in each of the locations where we do business.

As stated below, we permit remote working as conditions of the pandemic continue to fluctuate around the world.

We are aligned with the guidance from the Centers for Disease Control in the U.S.

and all other local requirements where we do business across the globe.

We use a multi-faceted approach to ensure the health and safety of our employees, from our Code of Conduct to our policies governing the way we act within and outside of our company.

9 unchanged sentences

• 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.

We will continue to monitor progress in managing the pandemic and will revise our measures in accordance with national and local public health guidance.

Our Board of Directors believes that our board should be a diverse body, and our Nominating and Corporate Governance Committee considers a broad range of backgrounds and experiences when selecting nominees for our board.

Sixty percent of our directors currently self-identify as being from one or multiple diverse groups, including gender.

We continuously review and improve our corporate governance guidelines in response to changing requirements and feedback from employees, customers, partners, vendors and shareholders.

The Nominating and Corporate Governance Committees of the Board of Directors, consisting entirely of independent directors, evaluates the appropriate governance practices as defined by law and industry best practice and takes those recommendations to the Board of Directors.

Currently, four of five Board members are independent and three of five have less than five years of tenure.

A10 engages with an independent audit firm to ensure the company complies with relevant requirements such as the 2002 Sarbanes-Oxley Act.

The company’s governance and code of conduct policies are outlined in the Code of Business Conduct and Ethics, Corporate Governance Guidelines, Whistleblower Policy and the Employee Handbook.

Employees many submit concerns to generalcounsel@a10networks.com or via the company’s third-party hotline as noted the Employee Handbook.

Corporate Information

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

Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, as well as any amendments to such reports and all other filings pursuant to Section 13(a) or 15(d) of the Securities Act.

Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, as well as any

amendments to such reports and all other filings pursuant to Section 13(a) or 15(d) of the Securities Act.

These filings are also available for download free of charge on our investor relations website.

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

investors.A10networks.com ), press releases, filings with the Securities and Exchange Commission, public conference calls, and social media, including our corporate Twitter account ( @A10Networks) and our corporate Facebook page (https://www.facebook.com/a10networks).

We announce material information to the public about A10, our products and services and other matters through a variety of means, including our website ( www.A10networks.com ), the investor relations section of our website (https:// investors.A10networks.com ), press releases, filings with the Securities and Exchange Commission, public conference calls, and social media, including our corporate Twitter account ( @A10Networks) and our corporate Facebook page (https://www.facebook.com/a10networks).

Information provided includes press releases and other information about financial performance, information on environmental, social and governance and details related to the Company’s annual meeting of shareholders.

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