A10 Networks, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures about Market Risk Foreign Currency Risk Our consolidated results of operations, financial position and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Historically, the majority of our revenue contracts are denominated in U.S. Dollars, with the most significant exception being Japan where we invoice primarily in Japanese Yen. Our costs and expenses are generally denominated in the currencies where our operations are located, which is primarily in the Americas, EMEA and, to a lesser extent, Japan and the Asia Pacific region. We have a hedging program with respect to foreign currency risk. Revenue resulting from selling in local currencies and costs and expenses incurred in local currencies are exposed to foreign currency exchange rate fluctuations, which can affect our revenue and operating income. As exchange rates vary, operating income may differ from expectations. The functional currency of our foreign subsidiaries is the U.S. Dollar. At the end of each reporting period, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Gains and losses related to remeasurement are recorded in interest and other income, net in the consolidated statements of operations. A significant fluctuation in the exchange rates between our subsidiaries’ local currencies, especially the Japanese Yen, British Pound and Euro, and the U.S. Dollar could have an adverse impact on our consolidated financial position and results of operations. We recorded $0.5 million and $1.9 million of net foreign exchange losses during the years ended December 31, 2022 and 2021, respectively. During the year ended December 31, 2020, we recorded an immaterial foreign exchange gain. The effect of a hypothetical 10% change in our exchange rate would not have a significant impact on our consolidated results of operations. Interest Rate Sensitivity Our exposure to market risk for changes in interest rates relates primarily to our marketable securities. Our marketable securities are comprised of certificates of deposit, corporate securities, U.S. Treasury and agency securities, commercial paper and asset-backed securities. We do not enter into investments for trading or speculative purposes. At December 31, 2022, our investment portfolio included marketable securities with an aggregate fair market value and amortized cost basis of $83.0 million and $84.0 million, respectively. The effect of a hypothetical 10% change in interest rates would not have had any impact on our interest expense. The following table presents the hypothetical fair values of our marketable securities assuming immediate parallel shifts in the yield curve of 50 basis points (“BPS”), 100 BPS and 150 BPS as of December 31, 2022 (in thousands): Fair Value as of (150 BPS) (100 BPS) (50 BPS) 12/31/2022 50 BPS 100 BPS 150 BPS Marketable securities $ 83,529 $ 83,359 $ 83,188 $ 83,018 $ 82,847 $ 82,676 $ 82,506 61