What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-08 compared with 2021-03-08 · 120 added, 182 removed, 866 unchanged (26% of the section changed)

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm - Armanino LLP

Report of Independent Registered Public Accounting Firm - Deloitte & Touche LLP

Report of Independent Registered Public Accounting Firm - Armanino LLP (PCAOB ID:

Consolidated Balance Sheets as of December 31, 202 1 and 20 20

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of A10 Networks, Inc.

and subsidiaries (the Company) as of December 31, 2020 and 2019 and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the two years ended December 31, 2020, and the related notes (collectively referred to as the consolidated financial statements).

We have audited the accompanying consolidated balance sheets of A10 Networks, Inc.

and subsidiaries (the Company) as of December 31, 2021 and 2020 and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the three years ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the two years ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the three years ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842).

Basis for Opinions

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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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We have served as the Company’s auditor since 2019.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of A10 Networks, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows of A10 Networks, Inc.

and subsidiaries (the “Company”) for the year ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for revenue from contracts with customers in 2018 due to the adoption of Accounting Standards Update No.

2014-09 Revenue from Contracts with Customers (Topic 606) using the modified retrospective approach.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/S/ DELOITTE & TOUCHE LLP

San Jose, California

March 15, 2019 (date of initial issuance)

We have served as the Company’s auditor since 2011.

In 2019, we became the predecessor auditor.

A10 NETWORKS, INC.

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Intangible assets — 862

Deferred tax assets, net 65,773 944

Other non-current assets 31,294 37,507

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500,000 shares authorized;

76,346 and 77,580 shares issued and outstanding, respectively 1 1

84,717 and 81,924 shares issued and 77,423 and 76,346 shares outstanding, respectively 1 1

Treasury stock, at cost:

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Additional paid-in-capital 446,035 425,534

Accumulated other comprehensive income 98 251

Dividends paid ( 3,880 ) —

Accumulated other comprehensive income (loss) ( 229 ) 98

Accumulated deficit ( 177,362 ) ( 272,249 )

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Interest and other income, net ( 1,746 ) 1,407 919

Total non-operating income, net 1,406 682 1,144

Total non-operating income (expense), net ( 1,746 ) 1,406 682

Income (loss) before income taxes 31,642 19,139 ( 16,412 )

Provision for income taxes 1,323 1,407 1,082

Provision for (benefit from) income taxes ( 63,245 ) 1,323 1,407

Net income (loss) $ 94,887 $ 17,816 $ ( 17,819 )

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(in thousands)

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

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

Shares Amount

Balance at December 31, 2018 74,301 1 ( 4,870 ) 381,142 — ( 144 ) ( 272,246 ) 103,883

Cumulative effect adjustment from adoption of ASU 2014-09 — — — — — 12,396 12,396

Stock-based compensation expense — — — 16,529 — — — 16,529

Common stock issued under employee equity incentive plans 3,279 — — 5,799 — — — 5,799

Unrealized loss on marketable securities, net of tax — — — — ( 21 ) — ( 21 )

Unrealized gain on marketable securities, net of tax — — — — — 395 — 395

Net loss — — — — — — ( 17,819 ) ( 17,819 )

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Common stock issued under employee equity incentive plans 3,666 — — 9,591 — — — 9,591

Repurchase of common stock ( 4,900 ) — ( 32,540 ) — — — — ( 32,540 )

Unrealized loss on marketable securities, net of tax — — — — — ( 153 ) — ( 153 )

Net loss — — — — — ( 17,819 ) ( 17,819 )

Net Income — — — — — — 17,816 17,816

Balance at December 31, 2020 76,346 1 ( 37,410 ) 425,534 — 98 ( 272,249 ) 115,974

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Repurchase of common stock ( 1,717 ) — ( 18,267 ) — — — — ( 18,267 )

Unrealized gain on marketable securities, net of tax — — — — ( 153 ) — ( 153 )

Dividends declared — — — — ( 3,880 ) — — ( 3,880 )

Unrealized loss on marketable securities, net of tax — — — — — ( 327 ) — ( 327 )

Net Income — — — — — — 94,887 94,887

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Provision for doubtful accounts and sales returns ( 616 ) ( 78 ) ( 190 )

Release of deferred tax asset valuation allowance and other adjustments ( 64,186 ) — —

Other non-cash items 1,688 1,144 ( 153 )

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Purchases of marketable securities ( 128,554 ) ( 57,992 ) ( 71,636 )

Purchase of investment — — ( 1,000 )

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

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Repurchases of common stock ( 18,267 ) ( 32,540 ) —

Payments for dividends ( 3,880 ) — —

Other — — ( 1 )

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Non-cash investing and financing activities:

Inventory transfers to property and equipment $ 1,112 $ 1,193 $ 1,176

Transfers between inventory and property and equipment $ 94 $ 1,112 $ 1,193

Purchases of property and equipment included in accounts payable $ 6 $ 58 $ 10

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All intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation in the consolidated revenues by geographic region in Note 12 Geographic Information, in the notes to consolidated financial statements.

We have combined in the “Americas” region, revenues from the United States with revenues from Latin America.

A portion of the prior period balance for Additional paid-in capital on the Company’s consolidated balance sheet as of December 31, 2019 has been reclassified to Treasury stock, at cost, to conform to the current period presentation.

This reclassification did not have a material impact on the previously reported financial statements.

Use of Estimates

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Property and equipment are stated at cost, less accumulated depreciation and amortization.

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets.

Depreciation on property and equipment, excluding leasehold improvements, ranges from one to three years .

Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets.

Depreciation and amortization on property and equipment, excluding leasehold improvements, ranges from one to seven years .

Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the remaining lease term.

Amortization on leasehold improvements ranges from one to seven years .

Remaining amortization terms on leasehold improvements as of December 31, 2021 ranged from approximately one to six years .

The Company determines if an arrangement is a lease at inception.

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We may occasionally accept returns to address customer satisfaction issues even though there is generally no contractual provision for such returns.

We estimate returns for sales to customers based on historical returns rates applied against current-period shipments.

We estimate returns for sales to customers based on historical return rates applied against current-period shipments.

Specific customer returns and allowances are considered when determining our sales return reserve estimate.

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In the first quarter of 2020, we began capitalizing software engineering labor costs related to certain long-term projects that are expected to take more than a year to complete.

We account for the capitalization of labor costs under ASC Topic 985-20, Software to be Sold, Leased or Marketed .

During the year ended December 31, 2020, capitalized labor costs totaled $ 1.6 million and is included in property and equipment in the consolidated balance sheets.

We account for the capitalization of labor costs under Accounting Standards Codification (“ASC”) Topic 985-20, Software to be Sold, Leased or Marketed .

During the years ended December 31, 2021 and 2020, capitalized labor costs totaled $ 3.1 million and $ 1.6 million, respectively, and are included in property and equipment in the consolidated balance sheets.

Once a long-term project is available for general release to customers, the accumulated capitalized labor costs associated with that project will begin to be amortized over the expected revenue-generating life of that project.

We expect to have our first capitalized project available for general release to customers sometime in the second half of 2022.

Stock-Based Compensation

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The Black-Scholes model determines the fair value of share-based payment awards based on assumptions including expected term, stock price volatility, and risk-free interest rate.

The fair value of market performance-based restricted stock units (“PSUs”) is valued using the Monte Carlo simulation model, which uses the stock price, expected volatility and risk-free interest rate to determine the fair value.

The fair values of market performance-based restricted stock units (“PSUs”) are estimated using the Monte Carlo simulation model, which uses the stock price, expected volatility and risk-free interest rate to determine the fair value.

Warranty Costs

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Estimates and judgments occur in the calculation of certain tax liabilities and in the determination of the recoverability of certain deferred income tax assets, which arise from temporary differences and carryforwards.

Deferred income tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled.

Deferred income tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable

income in effect for the years in which those tax assets are expected to be realized or settled.

We regularly assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through an adjustment to income tax expense.

The factors used to assess the likelihood of realization of our deferred tax assets include our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.

The factors used to assess the likelihood of realization of our deferred tax assets include our historical operating performance, our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.

Assumptions represent our best estimates and involve inherent uncertainties and the application of our judgment.

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An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained upon examination by taxing authorities.

The provision for income taxes excludes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

The provision for (benefit from) income taxes excludes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Advertising Costs

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Customer D (a distribution channel partner) * * 14 %

Customer E (an end-customer) 11 % 12 % *

* represents less than 10% of total revenue

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Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606), as subsequently amended, which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition .

This ASU requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

This ASU also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the capitalization of incremental customer acquisition costs and amortization of these costs over the contract period or estimated customer life which resulted in the recognition of a deferred commission asset on our consolidated balance sheet.

The Company adopted ASU No.

2014-09 and its related amendments (collectively “ASC 606”) on January 1, 2018 using the modified retrospective method.

See Note 2 Revenue, for disclosure on the impact of adopting this standard.

In February 2016, the FASB issued ASU No.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, Leases (Topic 842), and subsequent amendments to the initial guidance, in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under prior generally accepted accounting principles.

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In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).

ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”).

As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

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However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including any interim impairment tests within those annual periods, with early application permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

In January 2020, the Company adopted ASU 2017-04, and the adoption did not have a material impact on the Company’s consolidated financial statements.

In March 2018, the FASB issued ASU No.

2018-05, Income Taxes (Topic 740) :

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (“SAB”) No.

These amendments add SEC guidance to the FASB Accounting Standards Codification regarding the Tax Cuts and Jobs Act pursuant to the issuance of SAB 118.

The amendments are effective upon addition to the FASB Codification and did not have a material impact on the Company’s consolidated financial statements.

In January 2020, the Company adopted ASU 2017-04, and the adoption did not have a significant impact on the Company’s consolidated financial statements.

Effective January 1, 2020, the Company adopted ASU No.

2018-13, Fair Value Measurement (Topic 820 - Changes to the Disclosure Requirements for the Fair Value Measurement) (“ASU 2018-13”).

Under ASU 2018-13, entities will no longer

be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

The guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years.

Under ASU 2018-13, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

The adoption of ASU 2018-13 did not have a significant impact on the Company’s consolidated financial statements.

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There is also new guidance related to consolidated group reporting and tax impacts resulting from business combinations.

The guidance is effective for public entities for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years.

The Company adopted this guidance effective January 1, 2021 and does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements.

The Company adopted this guidance effective January 1, 2021 and the adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements.

In October 2020, the FASB issued ASU No.

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The amendments in this ASU improve the consistency of the codification and reorganize the guidance into appropriate sections providing less opportunities for disclosures to be missed.

The amendments in this update do not change GAAP and are not expected to result in a significant change in practice.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2020.

Early adoption is permitted.

The Company adopted this guidance on January 1, 2021 and does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements.

ASC 606 Adoption Impact

On January 1, 2018, the Company adopted ASC 606 applying the modified retrospective method.

The Company recognized the cumulative effect of initially applying the new guidance as an adjustment to the opening balance of accumulated deficit as of the adoption date.

The Company applied ASC 606 to all contracts that were not completed at the date of initial application.

Comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods.

In connection with the adoption of ASC 606, the Company also adopted ASC No.

340-40, Other Assets and Deferred Costs - Contracts with Customers , which requires the deferral of incremental costs of obtaining a contract with a customer.

Collectively, ASC No.

606 and ASC No.

340-40 are referred to as the “new standard.”

Adoption of the new standard resulted in changes to the Company’s accounting policies for revenue recognition, commissions expense and deferred commissions as discussed below.

The Company recorded a reduction to opening accumulated deficit of $ 12.4 million as of January 1, 2018 due to the cumulative impact of adopting the new standard as follows:

• A decrease in total deferred revenue of $ 4.0 million primarily due to the removal of the limitation on contingent revenue that would have accelerated revenue recognition for certain of our historical revenue contracts;

• Recognition of a deferred commissions asset of $ 8.4 million on our consolidated balance sheet due to the requirement under the new standard to recognize incremental customer acquisition costs in our consolidated statement of operations as the related performance obligations are met as compared to the previous recognition to expense as incurred.

Impact on the Consolidated Financial Statements

The following table summarize the impact of ASC 606 on the Company’s Consolidated Statement of Operations for the year ended December 31, 2018:

Selected Consolidated Statement of Operations Line Items

Year Ended December 31, 2018

(in thousands, except per share amounts) As Reported Adjustments

Increase (Decrease)

Balance Without Adopting the New Standard

Revenue - products $ 144,682 $ ( 2,594 ) $ 142,088

Revenue - services 87,541 — 87,541

Total revenue 232,223 ( 2,594 ) 229,629

Gross profit 180,327 ( 2,594 ) 177,733

Sales and marketing 103,214 1,345 104,559

Total operating expenses 208,006 1,345 209,351

Loss from operations ( 27,679 ) ( 3,939 ) ( 31,618 )

Net loss ( 27,617 ) ( 3,939 ) ( 31,556 )

Basic and diluted net loss per share $ ( 0.38 ) $ ( 0.43 )

The amendments in this update do not change U.S.

GAAP and are not expected to result in a significant change in practice.

The Company adopted this guidance on January 1, 2021 and the adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements.

Contract Balances

The following table reflects contract balances with customers (in thousands):

Balance Sheet Line Reference December 31, 2020 December 31, 2019

Balance Sheet Line Reference December 31,

2021 December 31,

Accounts receivables, net $ 61,795 $ 51,051

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The Company expects to recognize revenue on the remaining performance obligations as follows (in thousands):

December 31, 2020

Within 1 year $ 73,132

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As of December 31, 2021 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses

Certificates of deposit $ — $ — $ — $ — $ — $ —

Corporate securities $ 62,012 $ ( 168 ) $ — $ — $ 62,012 $ ( 168 )

Treasury and agency securities 13,845 ( 59 ) — — 13,845 ( 59 )

Commercial paper — — — — — —

Asset-backed securities 6,281 ( 4 ) — — 6,281 ( 4 )

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As of December 31, 2020 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses

Certificates of deposit $ — $ — $ — $ — $ — $ —

Corporate securities $ 20,355 $ ( 8 ) $ — $ — $ 20,355 $ ( 8 )

Treasury and agency securities — — — — — —

Commercial paper — — — — — —

Asset-backed securities — — — — — —

Total $ 2,996 $ ( 1 ) $ — $ — $ 2,996 $ ( 1 )

Based on evaluation of securities that have been in a continuous loss position, the Company determined all gross unrealized losses on its marketable securities as of December 31, 2021 were temporary in nature and related primarily to interest rate shifts rather than changes in the underlying credit quality of the securities in a loss position.

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In addition to base rent, the Company will also be responsible for operating and other facility expenses.

The Company has accounted for the lease under ASC 842 and recorded a right-of-use asset of $ 30.0 million included in other non-current assets and recorded lease liabilities of $ 3.3 million and $ 26.7 million, included in accrued liabilities and other non-current liabilities, respectively, in the consolidated balance sheets as of December 31, 2019.

The Company has accounted for the lease under ASC 842 and has a right-of-use asset of $ 23.0 million recorded in other non-current assets and has lease liabilities of $ 3.7 million and $ 19.3 million, recorded in accrued liabilities and other non-current liabilities, respectively, in the consolidated balance sheets as of December 31, 2021.

Other Balance Sheet Accounts Details

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Allowance for doubtful accounts, beginning balance $ 41 $ 52

Increase (decrease) of provision 78 ( 72 )

Increase in provision 616 78

Write-offs ( 114 ) ( 89 )

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Furniture and fixtures 1 - 7 545 652

Leasehold improvements 1-7 3,616 5,440

Leasehold improvements Lease term 3,231 3,616

Construction in progress 4,823 1,677

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Property and equipment, net $ 10,692 $ 7,888

Depreciation expense on property and equipment was $ 4.2 million, $ 5.0 million and $ 6.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Depreciation and amortization expense on property and equipment was $ 2.6 million, $ 4.2 million and $ 5.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Intangible Assets

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Total $ 7,986 $ ( 7,986 ) $ — $ 7,986 $ ( 7,124 ) $ 862

Amortization expense related to purchased intangible assets was $ 1.4 million for each of the years ended December 31, 2020, 2019 and 2018.

Purchased intangible assets will be amortized over a remaining weighted average useful life of 0.6 years.

Future amortization expense for purchased intangible assets as of December 31, 2020 is as follows (in thousands):

Amortization expense related to purchased intangible assets was $ 0.9 million for the year ended December 31, 2021, and was $ 1.4 million for each of the years ended December 31, 2020 and 2019.

Purchased intangible assets were fully amortized as of December 31, 2021.

Other non-current assets

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Deposits 2,036 2,746

Net deferred tax assets 944 1,171

Other 1,933 2,807

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Other non-current liabilities consisted of the following (in thousands):

December 31, 2020 December 31, 2019

2021 December 31,

Lease liabilities $ 19,316 $ 23,498

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The Company’s obligations under the 2016 Credit Facility were secured by substantially all of the Company’s assets, excluding intellectual property.

The 2016 Credit Facility required the Company to maintain compliance with customary affirmative and negative covenants, including compliance with an adjusted quick ratio of not less than 1.50 :1.00, and restricted the Company’s ability to pay cash dividends or make other distributions on our common stock.

The 2016 Credit Facility required the Company to maintain compliance with customary

affirmative and negative covenants, including compliance with an adjusted quick ratio of not less than 1.50 :1.00, and restricted the Company’s ability to pay cash dividends or make other distributions on our common stock.

The Company elected to allow the 2016 Credit Facility to expire without renewal on the maturity date of November 1, 2019.

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On October 5, 2018, the lead plaintiff filed an amended complaint.

The amended complaint named the same

defendants as the initial complaint, in addition to one of the Company’s former executive vice presidents.

The amended complaint named the same defendants as the initial complaint, in addition to one of the Company’s former executive vice presidents.

The amended complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

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These purchase orders are expected to be paid within one year of the issuance date.

The Company had open purchase commitments with manufactures in Taiwan totaling $ 31.2 million as of December 31, 2021.

The following table summarizes our non-cancelable operating leases as of December 31, 2021 (in thousands):

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2014 Employee Stock Purchase Plan

The 2014 Employee Stock Purchase Plan (the “2014 Purchase Plan”) was suspended effective March 16, 2018 due to the delay of the Form 10-K filing for the year ended December 31, 2017.

In October 2018, the Board of Directors approved amending the 2014 Purchase Plan (the “Amended 2014 Purchase Plan”) in order to, among other things, reduce the maximum contribution participants can make under the plan from 15 % to 10 % of eligible compensation.

In October 2018, the Board of Directors approved amending the 2014 Employee Stock Purchase Plan (the “Amended 2014 Purchase Plan”) in order to, among other things, reduce the maximum contribution participants can make under the plan from 15 % to 10 % of eligible compensation.

The Amended 2014 Purchased Plan also reflects revised offering periods, which were changed from 24 months to six months in duration and that begin on or about December 1 and June 1 each year, starting in December 2018.

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In addition, no participant may purchase more than 1,500 shares of common stock in each purchase period.

Employees purchased 581,634 shares at an average price of $ 5.67 and with an aggregate intrinsic value of $ 1.0 million during the year ended December 31, 2020, and purchased 662,362 shares at an average price of $ 5.14 and with an intrinsic value of $ 0.8 million during the year ended December 31, 2019.

During 2018, there were no stock purchases by employees under the Amended 2014 Purchase Plan or the 2014 Purchase Plan.

Employees purchased 434,547 shares at an average price of $7.46 per share and with an aggregate intrinsic value of $2.1 million during the year ended December 31, 2021.

Employees purchased 581,634 shares at an average price of $ 5.67 per share and with an aggregate intrinsic value of $ 1.0 million during the year ended December 31, 2020.

Employees purchased 662,362 shares at an average price of $ 5.14 per share and with an aggregate intrinsic value of $ 0.8 million during the year ended December 31, 2019.

The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.

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Total $ 14,422 $ 12,310 $ 16,529

(1) Amount for the year ended December 31, 2018 includes $ 4.1 million of accelerated stock-based compensation expense.

In March 2018, as a result of a suspension of the 2014 Purchase Plan due to our non-timely filing status, all unrecognized stock-based compensation expense related to ESPP under the 2014 Purchase Plan was accelerated and recognized within the consolidated statement of operations.

As of December 31, 2021, the Company had $ 23.9 million of unrecognized stock-based compensation expense related to unvested stock-based awards, including ESPP under our Amended 2014 Purchase Plan, which will be recognized over a weighted-average period of 1.8 years.

Fair Value Determination

The fair values of stock options and employee stock purchase rights were estimated as of the grant date using the Black-Scholes option-pricing model with the following assumptions:

Stock Options (1)

Employee Stock Purchase Rights

Year Ended December 31, Years Ended December 31,

The fair values of employee stock purchase rights were estimated as of the grant date using the Black-Scholes option-pricing model with the following assumptions:

Years Ended December 31,

2021 2020 2019

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Dividend rate 0.60 % — % — %

(1) The Company did not grant stock options in the years ended December 31, 2020 and 2019.

• Expected Term .

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• Dividend Rate .

The expected dividend was assumed to be zero as we have never paid dividends and do not anticipate paying any dividends in the foreseeable future.

In December 2021, the Company paid its first quarterly cash dividend in the amount of $0.05 per share of common stock outstanding.

For the year ended December 31, 2021, the expected dividend rate assumes cash dividends will total $0.20 per common share outstanding annually.

Stock Options

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(1) The aggregate intrinsic value represents the excess of the closing price of our common stock of $ 16.58 as of December 31, 2021 over the exercise price of the outstanding in-the-money options.

Following is additional information pertaining to our stock option activities (in thousands, except per share data):

No stock options were granted in years ended December 31, 2021, 2020 and 2019.

The intrinsic value of options exercised is a follows (in thousands):

Years Ended December 31,

2021 2020 2019

Weighted-average grant date fair value of options granted (per share) $ — $ — $ 2.19

Intrinsic value of options exercised (1)

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The common shares repurchased are held in treasury and accounted for under the cost method.

Stock Repurchase Program

On September 17, 2020, the Company’s Board of Directors approved a stock repurchase program of up to $ 50 million of its common stock over a period of twelve months.

During the year ended December 31, 2020, the Company repurchased a total of 2.7 million shares for a total cost of $ 19.2 million and as of December 31, 2020, the Company had $ 30.8 million available to repurchase shares under this program.

Under the program, repurchased shares are held in treasury at cost.

The Company’s stock repurchase program does not obligate us to acquire any specific number of shares.

Stock Repurchase Programs

On September 17, 2020, the Company’s Board of Directors authorized a stock repurchase program of up to $ 50 million of its common stock over a period of twelve months.

This repurchase program was active for twelve months and expired in the second half of 2021.

On October 28, 2021, the Company announced its Board of Directors authorized a new stock repurchase program of up to $ 100 million of its common stock over a period of twelve months.

As of December 31, 2021, the Company had $ 92.9 million available to repurchase shares under the new program.

Under both programs, repurchased shares are held in treasury at cost.

The Company’s stock repurchase programs do not obligate us to acquire any specific number of shares.

Shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.

To date, all repurchases under this program have occurred in the open market.

To date, all repurchases under these programs have occurred in the open market.

During the year ended December 31, 2021, the Company repurchased 1.7 million shares for a total cost of $ 18.3 million.

During the year ended December 31, 2020, the Company repurchased 2.7 million shares for a total cost of $ 19.2 million.

Net Income (Loss) Per Share

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Diluted net income (loss) per share is computed using the weighted average number of common shares outstanding for the period plus potential dilutive common shares, including stock options, RSUs, PSUs and employee stock purchase rights, unless the potential common shares are anti-dilutive.

Since we had net losses in the years ended December 31, 2019 and 2018, none of the potential dilutive common shares were included in the computation of diluted shares for these periods, as inclusion of such shares would have been anti-dilutive.

Since we had a net loss in the year ended December 31, 2019, none of the potential dilutive common shares were included in the computation of diluted shares for that period, as inclusion of such shares would have been anti-dilutive.

The following table presents common shares related to potentially dilutive shares excluded from the calculation of diluted net income (loss) per share as their effect would have been anti-dilutive (in thousands):

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Income (loss) before income taxes $ 31,642 $ 19,139 $ ( 16,412 )

The provision for income taxes consisted of the following (in thousands):

The provision for (benefit from) income taxes consisted of the following (in thousands):

Years Ended December 31,

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Federal ( 58,103 ) 2 3

State ( 6,880 ) — —

Foreign 155 224 ( 361 )

Total deferred ( 64,828 ) 226 ( 358 )

Provision for income taxes $ 1,323 $ 1,407 $ 1,082

The reconciliation of the statutory federal income taxes and the provision for income tax is as follows (in thousands, except percentages):

Provision for (benefit from) income taxes $ ( 63,245 ) $ 1,323 $ 1,407

The reconciliation of the statutory federal income taxes and the provision for (benefit from) income taxes is as follows (in thousands, except percentages):

Years Ended December 31,

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Changes in federal valuation allowance ( 63,153 ) ( 199.6 ) ( 3,281 ) ( 17.1 ) 4,695 ( 28.6 )

Change in federal tax rate due to Tax Cuts and Jobs Act — — — — — —

Stock-based compensation ( 908 ) ( 2.9 ) 781 4.1 578 ( 3.5 )

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Recognition of deferred tax assets is appropriate when realization of these assets is more likely than not.

Based upon the weight of available evidence, which includes our historical operating performance and the recorded cumulative net losses in prior fiscal periods, we recorded a full valuation allowance of $ 82.9 million and $ 85.7 million against the U.S.

net deferred tax assets as of December 31, 2020 and 2019, respectively.

net deferred tax assets as of December 31, 2020.

Primarily based upon a strong earnings history, expectation of future taxable income, with the exception of certain state tax attributes, we believe that a significant amount of the deferred tax assets would be realized on a more likely than not basis.

Therefore we released the valuation allowance on our U.S.

deferred tax assets except for state credits in 2021.

For the years ended December 31, 2021 and 2020, the valuation allowance decreased by $ 69.2 million and increased by $ 2.8 million, respectively.

Companies subject to the Global Intangible Low-Taxed Income provision (“GILTI”) have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for outside basis temporary differences expected to reverse as GILTI.

We have elected to account for GILTI as a period cost.

As of December 31, 2021 and 2020, we had U.S.

federal net operating loss (“NOL”) carryforwards of $ 177.0 million and $ 193.8 million, respectively, and state NOL carryforwards of $ 78.0 million and $ 84.6 million, respectively.

federal NOL carryforwards of $ 146.6 million and $ 177.0 million, respectively, and state NOL carryforwards of $ 70.4 million and $ 78.0 million, respectively.

The federal NOL carryforwards will expire at various dates beginning in the year ending December 31, 2033, if not utilized.

The state NOL carryforwards expire in various years ending between 2023 and 2041, if not utilized.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”), as modified by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, among other things, includes changes to the rules governing NOLs.

NOLs arising in tax years beginning after December 31, 2017 are subject to an 80% of taxable income limitation (as calculated before taking the NOLs into account) for tax years beginning after December 31, 2020.

In addition, NOLs arising in tax years 2018, 2019, and 2020 are subject to a five year carryback and indefinite carryforward, while NOLs arising in tax years beginning after December 31, 2020 also are subject to indefinite carryforward but cannot be carried back.

Approximately $ 36.9 million of federal NOLs generated after December 31, 2017 can be carried forward indefinitely.

Additionally, as of December 31, 2021 and 2020, we had U.S.

federal research and development credit carryforwards of $ 18.1 million and $ 16.4 million, respectively, and state research and development credit carryforwards of $ 20.3 million and $ 18.2 million, respectively.

The federal credit carryforwards will begin to expire at various dates beginning in 2025 while the state credit carryforwards can be carried over indefinitely.

Utilization of the NOL and credit carryforwards may be subject to an annual limitation provided for in the IRC Section 382 and similar state codes.

The federal credit carryforwards will begin to expire at various dates beginning in 2025 through 2041, while the state credit carryforwards can be carried over indefinitely.

Utilization of the NOL and credit carryforwards may be subject to an annual limitation provided for in IRC Sections 382 and 383 and similar state codes.

Any annual limitation could result in the expiration of NOL and credit carryforwards before utilization.

The Company believes NOL’s will not expire unused as a result of any Section 382 annual limitations.

With respect to our undistributed foreign subsidiaries’ earnings, we consider those earnings to be indefinitely reinvested and, accordingly, no related provision for U.S.

federal and state income taxes has been provided.

Our intention has not changed subsequent to the one-time transition tax under the Tax Act.

Our intention has not changed subsequent to the one-time transition tax under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).

Upon distribution of those earnings in the form of dividends or otherwise, we may be subject to both U.S.

income taxes subject to an adjustment for foreign tax credits and withholding taxes in the various countries.

As of December 31, 2020 and 2019, the undistributed earnings approximated $ 16.0 million and $ 13.6 million, respectively.

As of December 31, 2021 and 2020, the

undistributed earnings approximated $ 15.8 million and $ 16.0 million, respectively.

Our undistributed earnings through December 31, 2017, have been taxed under the one-time transition tax under the Tax Act.

On December 22, 2017, the Tax Act was signed into law.

The Tax Act significantly revised the U.S.

tax code generally effective January 1, 2018.

Beginning in 2022 the Tax Act requires capitalization of research and development costs.

While we continue to evaluate the impact of the delayed effective date, we currently believe that this provision will not materially impact our income tax provision.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law.

The CARES Act includes provisions relating to refundable payroll tax credits, NOL carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property.

The CARES Act has an immaterial impact on the Company’s income taxes.

On June 29, 2020, the California Governor signed Assembly Bill 85 (“A.B.

85”), which includes several tax measures, provides for a three-year suspension of the use of NOLs for medium and large businesses and a three-year limit on the use of business incentive tax credits to offset no more than $5 million of tax per year.

The three-year term was subsequently revised to a two-year term and has been accounted for in our deferred tax assets.

Uncertain Tax Positions

As of December 31, 2021, 2020 and 2019, we had gross unrecognized tax benefits of $ 6.8 million, $ 4.6 million and $ 4.4 million, respectively.

Accrued interest expense related to unrecognized tax benefits is not recognized as part of our income tax provision in our consolidated statements of operations and is immaterial for the years ended December 31, 2020 and 2019.

Accrued interest expense related to unrecognized tax benefits is recognized as part of our income tax provision in our consolidated statements of operations and was immaterial for the years ended December 31, 2021, 2020 and 2019.

Our policy for classifying interest and penalties associated with unrecognized income tax benefits is to exclude such items in income tax expense.

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The CARES Act includes provisions relating to refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property.

The CARES Act has an immaterial impact on the Company’s income taxes.

The CARES Act has had an immaterial impact on the Company’s income taxes.

Geographic Information

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Employee Benefit Plan

The Company has a profit sharing plan that qualifies under Section 401(k) of the IRC which is offered to all of its United States employees.

Participants in the plan may elect to contribute up to $ 19,500 of their annual compensation to the plan for the 2020 calendar year.

The Company has a profit sharing plan that qualifies under IRC Section 401(k), which is offered to all of its United States employees.

Participants in the plan may elect to contribute up to $ 19,500 of their annual compensation to the plan for the 2021 calendar year and $ 20,500 for the 2022 calendar year.

Individuals who are 50 or older may contribute an additional $ 6,500 of their annual income.

The Company typically matches 50 % of the first 6 % of the employee’s eligible compensation for a maximum employer contribution of $ 2,500 per participant per year.

The Company temporarily suspended its employer matching contribution in June 2020 due to cost savings measures, although the Company re-instated its employer matching contributions effective March 1, 2021.

The Company’s matching contributions totaled $ 0.5 million, $ 0.4 million and $ 0.7 million during the years ended December 31, 2021, 2020 and 2019, respectively.

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Gross profit 42,344 45,538 52,166 56,489

Net income (loss) $ ( 297 ) $ 3,808 $ 6,464 $ 7,841

Net income (loss) per share - basic $ — $ 0.05 $ 0.08 $ 0.10

Net income (loss) per share - diluted $ — $ 0.05 $ 0.08 $ 0.10

Net income 2,657 6,616 74,886 10,728

Net income per share - basic $ 0.03 $ 0.09 $ 0.97 $ 0.14

Net income per share - diluted $ 0.03 $ 0.08 $ 0.94 $ 0.13

Quarter Ended

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Net income (loss) per share - diluted $ 0.00 $ 0.05 $ 0.08 $ 0.10

Subsequent Event

On February 1, 2022 , the Company announced its Board of Directors declared a quarterly dividend.

The dividend, in the amount of $ 0.05 per share of common stock outstanding, was paid on March 1, 2022 , to shareholders of record on February 15, 2022 as a return of capital.

The total amount of the dividend paid out by the Company was $ 3.9 million.

Future dividends will be subject to further review and approval by the Board in accordance with applicable law.

The Board reserves the right to adjust or withdraw the quarterly dividend in future periods as it reviews the Company’s capital allocation strategy from time-to-time.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data