What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-03-08 · 100 added, 134 removed, 852 unchanged (22% of the section changed)

32 unchanged sentences

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;

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

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.

7 unchanged sentences

The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.

Significant judgment is exercised by the Company in determining revenue recognition for these customer agreements, and includes the following:

Significant judgment is exercised by the Company in determining revenue recognition for these customer agreements, which includes the following:

• Determination of multiple performance obligations and the transaction price allocated to each distinct performance obligation based on the relative standalone selling price

11 unchanged sentences

◦ Assessed the terms in the customer agreement and evaluated the appropriateness of management’s application of their accounting policies, along with their use of estimates, in the determination of revenue recognition

Income Taxes — Refer to Note 1 and Note 9 to the Consolidated Financial Statements

Critical Audit Matter Description

The Company is subject to income taxes in the United States and multiple international tax jurisdictions.

The Company recorded a provision for income taxes of $5.8 million for the year ended December 31, 2022 and net deferred tax assets of $63.2 million and unrecognized tax benefits of $7.1 million as of December 31, 2022.

Significant judgment is exercised by the Company in determining the provision for income taxes and other tax positions, which includes the following:

• Application of complex tax laws and regulations, which are subject to legal and factual interpretation

• Projections and assumptions used to estimate the future utilization of tax credits

Given these factors, the related audit effort in evaluating management’s judgments in determining the provision for income taxes and other tax positions was extensive and required a high degree of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the Company’s income taxes included the following:

• We tested the design and operating effectiveness of controls relating to the income tax process

• We involved income tax professionals with specialized skills and knowledge, who assisted in:

◦ evaluating the Company’s interpretation of tax laws and assessing the technical merits of the Company’s tax positions

◦ analyzing the Company’s tax positions, including the assumptions and methodology of tax credits and unrecognized tax benefits

◦ testing the mathematical accuracy of the underlying data and calculations, including the effective tax rates and permanent and temporary differences

◦ evaluating the appropriateness of the related disclosures included in Note 9 to the consolidated financial statements related to these matters

/s/ Armanino LLP

San Jose, California

March 8, 2022

February 27, 2023

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

19 unchanged sentences

Accounts payable $ 6,725 $ 6,852

Accrued liabilities 36,101 36,930

Accrued and other liabilities 37,183 36,101

Deferred revenue, current 74,340 73,132

12 unchanged sentences

Dividends paid ( 19,802 ) ( 3,880 )

Accumulated other comprehensive income (loss) ( 229 ) 98

Accumulated other comprehensive loss ( 726 ) ( 229 )

Accumulated deficit ( 130,454 ) ( 177,362 )

21 unchanged sentences

Total operating expenses 170,427 163,149 157,646

Income (loss) from operations 33,388 17,733 ( 17,094 )

Income from operations 53,079 33,388 17,733

Non-operating income (expense):

Interest expense — ( 1 ) ( 237 )

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

Interest income 1,304 409 1,513

Interest and other income (expense), net ( 1,667 ) ( 2,155 ) ( 107 )

Total non-operating income (expense), net ( 363 ) ( 1,746 ) 1,406

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

Income before income taxes 52,716 31,642 19,139

Provision for (benefit from) income taxes 5,808 ( 63,245 ) 1,323

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

Net income (loss) per share:

Net income $ 46,908 $ 94,887 $ 17,816

Net income per share:

Basic $ 0.62 $ 1.23 $ 0.23

Diluted $ 0.60 $ 1.19 $ 0.22

Weighted-average shares used in computing net income (loss) per share:

Weighted-average shares used in computing net income per share:

Basic 75,528 77,046 77,776

6 unchanged sentences

2022 2021 2020

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

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) on marketable securities ( 327 ) ( 153 ) 395

Comprehensive income (loss) $ 94,560 $ 17,663 $ ( 17,424 )

Net income $ 46,908 $ 94,887 $ 17,816

Other comprehensive loss, net of tax:

Unrealized loss on marketable securities ( 497 ) ( 327 ) ( 153 )

Comprehensive income $ 46,411 $ 94,560 $ 17,663

See accompanying notes to consolidated financial statements.

7 unchanged sentences

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

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

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

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

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

Net Income — — — — — — 17,816 17,816

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

2 unchanged sentences

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

Payments for dividends — — — — ( 3,880 ) — — ( 3,880 )

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

4 unchanged sentences

Repurchase of common stock ( 6,090 ) — ( 79,257 ) — — — — ( 79,257 )

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

Payments for dividends — — — — ( 15,922 ) — — ( 15,922 )

Unrealized loss on marketable securities, net of tax — — — — — ( 497 ) — ( 497 )

8 unchanged sentences

Cash flows from operating activities:

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

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net income $ 46,908 $ 94,887 $ 17,816

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 7,381 8,907 11,303

10 unchanged sentences

Deferred revenue 5,361 12,932 7,535

Net cash provided by (used in) operating activities 50,097 55,286 ( 426 )

Net cash provided by operating activities 66,100 50,097 55,286

Cash flows from investing activities:

8 unchanged sentences

Payments for dividends ( 15,922 ) ( 3,880 ) —

Other — — ( 1 )

Net cash provided by (used in) financing activities ( 16,383 ) ( 22,949 ) 5,798

Net cash used in financing activities ( 88,141 ) ( 16,383 ) ( 22,949 )

Net increase (decrease) in cash and cash equivalents ( 10,954 ) ( 4,356 ) 37,539

49 unchanged sentences

Our cash equivalents are measured and recorded at fair value on a recurring basis.

Marketable securities are comprised of certificates of deposit, corporate securities, U.S.

Marketable securities are typically comprised of certificates of deposit, corporate securities, U.S.

Treasury and agency securities, commercial paper and asset-backed securities and are measured at fair value on a recurring basis.

50 unchanged sentences

We derive revenue from two sources:

(i) products revenue, which includes hardware, perpetual software license and subscription revenue;

(i) products revenue, which includes hardware, perpetual software license and subscription offerings, which include term-based license agreements and software-as-a-service;

and (ii) services revenue, which includes post contract support (“PCS”), professional services, and training.

Revenue for term-based license agreements is recognized at a point in time when the Company delivers the software license to the customer and the subscription term has commenced.

For our software-as-a-service offerings, our customers do not take possession of the Company’s software but rather we provide access to the service via a hosting arrangement.

Revenue in these arrangements is recognized ratably as the services are provided.

A substantial portion of our revenue is from sales of our products and services through distribution channel partners, such as resellers and distributors.

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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.

In December 2022, we released the software portion of our first capitalized project and impaired the remaining uncompleted hardware portion that we determined would not generate sufficient revenue to justify the cost of completing it.

When internal-use software that was previously capitalized is abandoned, the cost less the accumulated amortization, if any, is recorded as amortization expense within operating expenses.

During the years ended December 31, 2022, 2021 and 2020, capitalized labor costs, net of the software release and the one-time hardware impairment that occurred in December 2022, totaled $ 3.5 million, $ 3.1 million and $ 1.6 million, respectively, and are included in property and equipment in the consolidated balance sheets.

Stock-Based Compensation

15 unchanged sentences

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.

31 unchanged sentences

Customer C (a distribution channel partner) * * 10 %

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

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

Customer D (an end-customer) 11 % 11 % 12 %

* represents less than 10% of total revenue

As of December 31, 2021, two customers accounted for 14 % and 11 % of our total gross accounts receivable.

As of December 31, 2022, two customers accounted for 21 % each of our total gross accounts receivable.

As of December 31, 2021, two customers accounted for 14 % and 11 % of our total gross accounts receivable.

Recently Adopted Accounting Pronouncements

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.

2016-02, as amended, requires that a lessee recognize a liability to make lease payments (the lease liability) and a right-of-use asset (“ROU”) representing its right to use the underlying asset for the lease term on the balance sheet.

The Company adopted the standard effective January 1, 2019, using the modified retrospective method, which resulted in the recognition of right-of-use assets of approximately $ 6.0 million and lease liabilities for operating leases of approximately $ 6.8 million on the Company’s consolidated balance sheets, with no material impact to its consolidated statements of operations.

See Note 5 Leases, for further information regarding the impact of the adoption of ASU No.

2016-02 on the Company's consolidated financial statements.

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

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

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

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.

24 unchanged sentences

As of December 31, 2021, the current and non-current portions of deferred contract acquisition costs totaled $ 7.4 million and $ 4.5 million, respectively, and the related amortization was $ 7.4 million for the year ended December 31, 2021.

For the years ended December 31, 2021, 2020 and 2019, the Company had no impairment loss in relation to the costs capitalized and no asset impairment charges related to contract assets.

For the years ended December 31, 2022, 2021 and 2020, the Company had no impairment loss in relation to capitalized deferred contract acquisition costs and no asset impairment charges related to contract assets.

Remaining Performance Obligations

5 unchanged sentences

Total $ 126,992

Restructuring

In October 2019, the Company implemented a restructuring plan (the “2019 restructuring plan”) in its ongoing efforts to reduce operating costs and focus on advanced technologies.

Expense related to the 2019 restructuring plan was accrued for in 2019, which resulted in a reduction of approximately 5 % of the Company’s workforce and the closure and consolidation of certain U.S.

and international office facilities.

The Company recorded restructuring expenses of $ 2.5 million in the fourth quarter of 2019, which included the following (in thousands):

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

Employee severance and related payroll taxes $ 28 $ 1,355 $ 340 $ 194 $ 1,917

Facilities closure expenses 435 89 524

Legal fees 89 89

$ 28 $ 1,790 $ 429 $ 283 $ 2,530

The 2019 restructuring plan was completed prior to June 30, 2020 and as of December 31, 2020, the Company’s restructuring accrual was fully paid.

Marketable Securities and Fair Value Measurements

3 unchanged sentences

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Certificates of deposit $ — $ — $ — $ — $ 2,150 $ — $ — $ 2,150

Corporate securities $ 35,137 $ — $ ( 550 ) $ 34,587 $ 62,588 $ 1 $ ( 168 ) $ 62,421

20 unchanged sentences

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

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

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

Total $ 82,138 $ ( 231 ) $ — $ — $ 82,138 $ ( 231 )

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, 2022 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.

7 unchanged sentences

Cash equivalents 13,635 — — 13,635 16,904 — — 16,904

Certificates of deposit — — — — — 2,150 — 2,150

Corporate securities — 34,587 — 34,587 — 62,421 — 62,421

17 unchanged sentences

The aggregate future lease payments for the Company’s operating leases as of December 31, 2022 were as follows (in thousands):

Thereafter 2,414

Total lease payments 23,208

28 unchanged sentences

Allowance for doubtful accounts, beginning balance $ 543 $ 41

Increase in provision 616 78

Increase (decrease) in provision ( 202 ) 616

Write-offs ( 309 ) ( 114 )

32 unchanged sentences

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

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.

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

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

21 unchanged sentences

Total other non-current liabilities $ 17,193 $ 19,613

Credit Facility

In November 2016, the Company entered into a loan and security agreement (the “2016 Credit Facility”) with Silicon Valley Bank (“SVB”) as the lender.

The 2016 Credit Facility provided a three -year, $ 25.0 million revolving credit facility, which included a maximum of $ 25.0 million letter of credit sub-facility.

Loan advances under the revolving facility were available up to the full $ 25.0 million when the balance of the Company’s cash, cash equivalents and marketable securities minus outstanding revolving loans and letters of credit equaled or exceeded $ 50.0 million.

If this “net cash” fell below $ 50.0 million, loan advances were determined based on a borrowing base equal to a specified percentage of the value of the Company’s eligible accounts receivable.

Loans bore interest, at the Company’s option, at (i) the prime rate reported in The Wall Street Journal, minus 0.50 % or (ii) a LIBOR rate determined in accordance with the 2016 Credit Facility, plus 2.50 %.

Over the term of the 2016 Credit Facility, the Company paid customary closing fees, commitment fees and letter of credit fees related to the facility.

In September 2018, the Company entered into an amendment with SVB to reduce the unused revolving credit facility fee on the 2016 Credit Facility from 0.4 % to 0.3 %.

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

There were no outstanding loans or advances as of the maturity date.

The Company currently has no plans to enter into any new borrowing facilities.

Commitments and Contingencies

7 unchanged sentences

or (c) such estimate is immaterial.

On March 22, 2018, the Company, and certain of its current and former executive officers, were named as defendants in a putative class action lawsuit filed in the United States District Court for the Northern District of California, captioned Shah v.

A10 Networks, Inc.

et al., 3:18-cv-01772-VC (the “Securities Action”).

On August 31, 2018, the court appointed a lead plaintiff.

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

The Company and individual defendants filed motions to dismiss the amended complaint.

On February 21, 2019, the court granted the motions to dismiss with leave to amend within 21 days.

The lead plaintiff did not file an amended complaint by the Court-ordered deadline.

Instead, on March 21, 2019, the lead plaintiff filed a notice of appeal in the United States Court of Appeals for the Ninth Circuit.

On April 5, 2019, the clerk of court suspended briefing on the appeal and ordered that, by April 26, 2019, appellants shall either move for voluntary dismissal or show cause why the appeal should not be dismissed for lack of jurisdiction.

On April 25, 2019, appellants moved to voluntarily dismiss the appeal without prejudice, and that motion was granted on May 1, 2019.

The district court entered final judgment dismissing lead plaintiff’s claims on May 8, 2019.

The lead plaintiff subsequently filed a notice of appeal on June 6, 2019.

The parties filed a stipulated motion to voluntarily dismiss the appeal on October 7, 2019, with each side to bear its own costs.

The Court of Appeals granted the stipulated motion to dismiss on October 10, 2019.

On May 30, 2018, certain of our current and former directors and officers were named as defendants in a putative shareholder derivative lawsuit filed in the United States District Court for the Northern District of California, captioned Moulton v.

Chen et al., 3:18-cv-03223-VC (the “Derivative Action”).

We were also named as a nominal defendant.

The complaint in the Derivative Action alleged breaches of fiduciary duties and other related claims in connection with purported misrepresentations related to internal controls and revenues and alleged failures to ensure that financial statements were made in accordance with generally accepted accounting principles.

Plaintiff sought unspecified damages allegedly sustained by the Company, restitution, and other relief.

On July 11, 2018 the Derivative Action was stayed until a motion to dismiss in the Securities Action was granted with prejudice or denied in whole or in part.

Following dismissal of the Securities Action, the plaintiff voluntarily dismissed his claims on June 7, 2019.

Investigations

Securities and Exchange Commission (“SEC”) conducted a private investigation into possible violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), and 13(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13a-14, 13a-15, and 13b2-1 thereunder.

The Company cooperated with the SEC regarding this investigation.

The SEC staff informed the Company on September 6, 2019 that it had concluded its investigation and did not intend to recommend an enforcement action to the SEC.

In January 2023, the Company identified a cyber-security incident in its corporate IT infrastructure (not related to any of the Company’s products or solutions used by its customers) (the “Cyber Incident”).

Upon detecting the incident, the

Company launched an investigation and engaged the services of cyber-security experts and advisors, incident response professionals and external counsel to support the investigation.

While, to date, this incident has not had a material impact on our operations, it did result in additional expense incurred in connection with the investigation.

Lease Commitments

7 unchanged sentences

Years Ending December 31, Operating Leases and Other Contractual Obligation

Thereafter 2,414

Total $ 23,208

11 unchanged sentences

The shares authorized for the 2014 Plan increase annually by the least of (i) 8,000,000 shares, (ii) 5 % of the outstanding shares of common stock on the last day of our immediately preceding fiscal year, or (iii) such other amount as determined by our Board of Directors.

In November 2020, our Board of Directors determined the current shares authorized under the 2014 Plan were sufficient for the time being and decided not to increase the number of shares authorized in 2021.

To date, the Company has granted stock options, RSUs and PSUs under the 2014 Plan.

49 unchanged sentences

• Dividend Rate .

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.

In December 2021, the Company paid its first quarterly cash dividend in the amount of $ 0.05 per share of common stock outstanding and increased the amount to $ 0.06 per share in the three months ended December 31, 2022.

For the years ended December 31, 2022 and 2021, the expected dividend rate assumes cash dividends will total $ 0.24 and $ 0.20 per common share outstanding annually, respectively.

Stock Options

5 unchanged sentences

Exercised ( 592 ) 5.91

Canceled ( 6 ) 3.13

Outstanding as of December 31, 2022 279 $ 6.59 1.27 $ 2,804

2 unchanged sentences

No stock options were granted in years ended December 31, 2022, 2021 and 2020.

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

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

Years Ended December 31,

5 unchanged sentences

The Company’s PSUs have market performance-based vesting conditions as well as service-based vesting conditions.

As of December 31, 2021, there were 2,899,244 RSUs and 817,631 PSUs outstanding.

As of December 31, 2022, there were 2,917,838 RSUs outstanding that were unvested and 299,925 PSUs outstanding that had not yet achieved their market-performance vesting conditions.

The following table summarizes our stock award activities and related information:

16 unchanged sentences

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

On September 8, 2022, the Company entered into a Common Stock Repurchase Agreement with entities affiliated with Summit Partners whereby the Company purchased 3.5 million shares of common stock for $ 12.75 per share, or an aggregate purchase price of $ 44.6 million.

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

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.

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

These repurchase programs expired after twelve months.

On November 1, 2022, the Company announced its Board of Directors had authorized a new $ 50 million stock repurchase program of its common stock over a period of twelve months.

As of December 31, 2022, the Company had $ 50 million available to repurchase shares under the new program.

5 unchanged sentences

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

Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding for the period.

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 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):

During the year ended December 31, 2020, the Company repurchased 4.9 million shares for a total cost of $ 32.5 million.

Net Income Per Share

Basic net income per share is computed using the weighted average number of common shares outstanding for the period.

Diluted net income 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.

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

Years Ended December 31,

4 unchanged sentences

2022 2021 2020

Domestic income (loss) $ 29,088 $ 15,455 $ ( 20,345 )

Domestic income $ 52,231 $ 29,088 $ 15,455

Foreign income 485 2,554 3,684

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

Income before income taxes $ 52,716 $ 31,642 $ 19,139

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

23 unchanged sentences

Federal tax credits - net of uncertain tax positions ( 3,844 ) ( 7.3 ) ( 480 ) ( 1.5 ) ( 1,035 ) ( 5.4 )

Expenses for uncertain tax positions — — — — 166 ( 1.0 )

Amended return true-up ( 4,176 ) ( 7.9 ) — — — —

Other 1,157 2.2 ( 387 ) ( 1.2 ) ( 282 ) ( 1.5 )

9 unchanged sentences

Operating lease liability 4,459 5,400

Capitalized R&D expenses 12,075 —

Gross deferred tax assets 85,507 87,643

8 unchanged sentences

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 against the U.S.

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.

1 unchanged sentence

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.

For the years ended December 31, 2022 and 2021, the valuation allowance decreased by $ 1.8 million and decreased by $ 69.2 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.

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The state NOL carryforwards expire in various years ending between 2022 and 2042, if not utilized.

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

Additionally, as of December 31, 2022 and 2021, we had U.S.

federal research and development credit carryforwards of $ 20.4 million and $ 18.1 million, respectively, and state research and development credit carryforwards of $ 22.8 million and $ 20.3 million, respectively.

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.

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 IRC Sections 382 and 383 and similar state codes.

6 unchanged sentences

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

As of December 31, 2021 and 2020, the

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

As of December 31, 2022 and 2021, the undistributed earnings approximated $ 16.6 million and $ 15.8 million, respectively.

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

2 unchanged sentences

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.

Beginning in 2022 the Tax Act requires capitalization of research and development costs, which has been accounted for in the current year provision.

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

1 unchanged sentence

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

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

The Tax Cuts and Jobs Act of 2017 (“TCJA”) amended Section 174 to require research and experimental (“R&E”) expenses incurred in tax years beginning on or after January 1, 2022, to be capitalized and amortized over five years (fifteen years for expenditures attributable to R&E activity performed outside the United States) using a half-year convention.

Prior to the amendment, Section 174 expenses were allowed to be expensed in the year incurred.

In 2022, the Company is capitalizing $ 43.4 million of US R&E expenses (amortizable over 5 years) and $ 15.3 million of R&E expenses performed outside the US (amortizable over 15 years) which results in unfavorable book/tax differences as a temporary adjustment.

Since the Section 174 impact is a temporary difference, no material impact to tax expense is expected.

Geographic Information

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Americas $ 148,673 $ 121,169 $ 98,150

United States 129,397 99,484 83,083

Americas-other 19,276 21,685 15,067

APJ 89,702 90,374 96,810

APAC 32,986 28,674 29,760

Japan 56,716 61,700 67,050

Asia Pacific, excluding Japan 28,674 29,760 35,689

EMEA 41,963 38,499 30,567

Total $ 280,338 $ 250,042 $ 225,527

The APJ region comprises Japan and all other countries in APAC (excluding Japan).

The following table is a summary of our long-lived assets which include property and equipment, net and right-of-use assets based on the physical location of the assets (in thousands):

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Participants in the plan may elect to contribute up to $ 20,500 of their annual compensation to the plan for the 2022 calendar year and $ 22,500 for the 2023 calendar year.

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

Individuals who are 50 or older may contribute an additional $ 6,500 of their annual income in 2022 and an additional $ 7,500 of their income in 2023.

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.

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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 $ 0.00 $ 0.05 $ 0.08 $ 0.10

Net income (loss) per share - diluted $ 0.00 $ 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

Subsequent Event

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The dividend, in the amount of $ 0.06 per share of common stock outstanding, was paid on March 1, 2023 , to shareholders of record on February 17, 2023 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.

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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 8. Financial Statements and Supplementary Data