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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations (“MD&A”) should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this document. In addition to historical information, the MD&A contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include, but are not limited to, those matters discussed under the heading “Forward-looking Statements.” Our actual results could differ materially from those anticipated by these forward‐looking statements due to various factors, including, but not limited to, those set forth under Item 1A. Risk Factors of this Form 10-K and elsewhere in this document.

This section of the Form 10-K generally discusses fiscal 2024 and 2023 items and year-to-year comparisons between fiscal 2024 and 2023. Discussions of fiscal 2022 items and year-to-year comparisons between fiscal 2023 and2022 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 29, 2024.

Overview

We are a leading provider of secure application solutions and services that enable a new generation of intelligently connected companies with the ability to continuously improve cyber protection and digital responsiveness across dynamic Information Technology (“IT”) and network infrastructures. Our product portfolio seeks to address many of the cyber protection challenges and solution requirements. The portfolio consists of network infrastructure and security products. The infrastructure portfolio powers the delivery of internet services and applications while the security products protect applications, APIs, infrastructure and enterprises from cyber-attacks. Our security suite is known as A10 Defend. In addition, we have an intelligent management and automation tool known as A10 Control (formally Harmony Controller), which provides intelligent management, automation and analytics for secure application delivery in multi-cloud environments to help simplify operations.

Our secure infrastructure solutions include; Thunder Application Delivery Controller (“ADC”), Thunder Carrier Grade Networking (“CGN”), Thunder SSL Insight (“SSLi”) and Thunder Convergent Firewall (“CFW”). Our security products include; A10 Defend Threat Control, A10 Defend Orchestrator, A10 Defend Detector, A10 Defend Mitigator and A10 Defend ThreatX Protect. Our solutions are available in a variety of form factors, such as optimized hardware appliances, bare metal software, containerized software, virtual appliances and cloud-native software. Our customers include leading service providers (cloud, telecommunications, multiple system operators, cable), government organizations, and enterprises.

We derive revenue from two sources: (i) products revenue, which includes hardware, perpetual software license and subscription offerings, which include term-based license agreements; and (ii) services revenue, which includes post contract support (“PCS”), professional services, training and software-as-a-service offerings. Revenue for term-based license agreements is recognized at a point in time when the Company delivers the software license to the customer and over time once 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 over time 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. Our customers predominantly purchase PCS services in conjunction with purchases of our products other than our software-as-a-service offerings.

We sell our products globally to service providers and enterprises that depend on data center applications and networks to generate revenue and manage operations efficiently. We report two customer verticals: service providers, which accounted for 57% and 58% of our total revenue during 2024 and 2023, respectively, and enterprise, which accounted for 43% and 42% of our total revenue during 2024 and 2023, respectively. While we expect total demand to remain strong as the need for cybersecurity solutions continues to increase, we expect the demand shift trend from service provider to enterprise to continue in the near term. We report customer revenues in three broad geographic regions: the Americas, APJ and EMEA regions. The Americas region comprises the U.S. and all other countries in the Americas (excluding the U.S.). The APJ region comprises Asia Pacific region including Japan. The EMEA region comprises Europe, Middle East and Africa. We believe this vertical and geographic view aligns with how we manage the business and maps our product portfolio to customer verticals.

Our end-customers operate in a variety of industries, including telecommunications, technology, industrial, retail, financial, gaming, education and government. Since inception, our customer base has grown rapidly.

We sell substantially all of our solutions through our high-touch sales organization as well as distribution channels, including distributors, value-added resellers and system integrators, and fulfill nearly all orders globally through such resellers.

We believe this sales approach allows us to obtain the benefits of channel distribution, such as expanding our market coverage, while still maintaining face-to-face relationships with our end-customers. We outsource the manufacturing of our hardware products to original design manufacturers. We perform quality assurance and testing at our San Jose, Taiwan and Japan distribution centers, as well as at our manufacturers’ locations.

As a result of the nature of our target market and the current stage of our development, a substantial portion of our revenue comes from a limited number of large end-customers and service providers. Purchases from our ten largest end-customers accounted for 38%, 33% and 41% of our total revenue for 2024, 2023 and 2022, respectively. Sales to these large end-customers have typically been characterized by large but irregular purchases with long sales cycles. The timing of these purchases and the delivery of the purchased products are difficult to predict and rely upon customer growth and network enhancements. Consequently, any acceleration or delay in anticipated product purchases by or deliveries to our largest end-customers could materially impact our revenue and operating results in any quarterly period. This may cause our quarterly revenue and operating results to fluctuate from quarter to quarter and make them difficult to predict.

In February 2025, we acquired the assets and key personnel of ThreatX Protect, which expanded our cybersecurity portfolio with WAAP protection (web application and application programming interfaces).

We intend to continue to invest for long-term growth. We have invested and expect to continue to invest in our product development efforts to deliver new products and additional features in our current products to address customer needs. In addition, we may expand our global sales and marketing organizations, expand our distribution channel programs and increase awareness of our solutions on a global basis. Our investments in growth in these areas may affect our short-term profitability.

Results of Operations

A summary of our consolidated statements of operations for the years ended December 31, 2024 and 2023 are as follows (dollars in thousands):

Years Ended December 31,

Amount Percent of Total Revenue Amount Percent of Total Revenue Amount Percent

Revenue:

Cost of revenue:

Operating expenses:

Non-operating income (expense):

Revenue

Our products revenue primarily consists of revenue from sales of our hardware appliances upon which our software is installed. Such software includes our ACOS software platform plus one or more of our ADC, CGN, TPS, SSLi or CFW solutions. Purchase of a hardware appliance includes a perpetual license to the included software. Additionally, a small portion of our products revenue comes from subscription revenue. We offer several products by subscription, primarily through either term-based license agreements or as a service through our cloud-based platform. With respect to sales of our hardware appliances, we recognize products revenue upon transfer of control, generally at the time of shipment, provided that all other revenue recognition criteria have been met. Revenue for term-based license agreements is recognized at a point in time when we deliver 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 our 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. As a percentage of revenue, our

products revenue may vary from quarter to quarter based on, among other things, the timing of orders and delivery of products, cyclicality and seasonality, changes in currency exchange rates and the impact of significant transactions with unique terms and conditions.

We generate services revenue from sales of post contract support (“PCS”), which is bundled with sales of products and technical services. We offer tiered PCS services under renewable, fee-based PCS contracts, primarily including technical support, hardware repair and replacement parts, and software upgrades on a when-and-if-available basis. We recognize services revenue ratably over the term of the PCS contract, which is typically one year, but can be up to seven years.

A summary of our total revenue is as follows (dollars in thousands):

Years Ended December 31,

Amount Percent of Total Revenue Amount Percent of Total Revenue Amount Percent

Revenue:

Revenue by geographic region:

Total revenue increased by $10.0 million, or 4%, in 2024 compared to 2023. This increase was due to a $11.3 million increase in services revenue, partially offset by a decrease of $1.3 million in products revenue.

Products revenue decreased $1.3 million, or 1%, in 2024 compared to 2023 primarily driven by lower demand from our service provider and enterprise customers in the Americas, and EMEA regions, partially offset by higher demand from service provider customers in APJ.

Services revenue increased $11.3 million, or 10%, in 2024 compared to 2023. The increase was primarily attributable to the increase in PCS sales in connection with our increased installed customer base in the APJ region, and to a lesser extent in the Americas and EMEA regions.

During 2024, $134.4 million, or 51% of total revenue, was generated from the Americas region, which represents a 1% increase compared to 2023. The increase was primarily due to higher services revenue driven by an increase in demand from our enterprise customers.

During 2024, $87.2 million, or 33% of total revenue, was generated from APJ, which represents a 12% increase compared to 2023. The increase was primarily due to higher products and services revenue driven by an increase in demand from our service provider customers.

During 2024, $40.2 million, or 16% of total revenue, was generated from EMEA, which represented a 3% decrease compared to 2023. The decrease was primarily due to lower products revenue driven by a decrease in demand from our service provider customers.

Cost of Revenue, Gross Profit and Gross Margin

Cost of Revenue

Cost of products revenue is primarily comprised of cost of third-party manufacturing services and cost of inventory for the hardware component of our products. Our component suppliers change their selling prices frequently in response to market trends, including industry-wide increases in demand. Cost of products revenue also includes warehouse personnel costs, shipping costs, inventory write-downs, certain allocated facilities and information technology infrastructure costs, and expenses associated with logistics and quality control.

Cost of services revenue is primarily comprised of personnel costs for our technical support, training and professional service teams. Cost of services revenue also includes the costs of inventory used to provide hardware replacements to end- customers under PCS contracts and certain allocated facilities and information technology infrastructure costs.

A summary of our cost of revenue is as follows (dollars in thousands):

Years Ended December 31, Increase (Decrease)

Cost of revenue:

Gross Margin

Gross margin may vary and be unpredictable from period to period due to a variety of factors. These may include the mix of revenue from each of our regions, the mix of our products sold within a period, discounts provided to customers, cost of inventory for the hardware component of our products, inventory write-downs and foreign currency exchange rates.

Our sales are generally denominated in U.S. dollars, however, in Japan they are denominated in Japanese yen.

Any of the factors noted above can generate either a favorable or unfavorable impact on gross margin.

A summary of our gross profit and gross margin is as follows (dollars in thousands):

Years Ended December 31,

Amount Gross Margin Amount Gross Margin Amount Gross Margin

Gross profit:

Products gross margin percentage remained flat in 2024 compared to 2023.

Services gross margin percentage decreased by 1.7% in 2024 compared to 2023 primarily due to an increase in personnel-related support costs, especially variable compensation.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development, general and administrative, and restructuring expenses. The largest component of our operating expenses is personnel costs which consist of wages, benefits, bonuses, and, with respect to sales and marketing expenses, sales commissions. Personnel costs also include stock-based compensation.

A summary of our operating expenses is as follows (dollars in thousands):

Years Ended December 31, Increase (Decrease)

Operating expenses:

Sales and Marketing

Sales and marketing expenses are our largest functional category of operating expenses and primarily consist of personnel costs. Sales and marketing expenses also include the cost of marketing programs, trade shows, consulting services, promotional materials, demonstration equipment, depreciation and certain allocated facilities and information technology infrastructure costs.

The $2.7 million decrease in sales and marketing expenses in 2024 compared to 2023 was primarily due to decreases of $3.2 million in personnel costs as a result of a decrease in headcount, partially offset by an increase in marketing events of $0.6 million.

For 2025, we expect sales and marketing expenses to increase modestly from 2024 levels as we continue to apply a disciplined approach to focus our investments in areas that offer the greatest opportunities.

Research and Development

Research and development efforts are focused on new product development and on developing additional functionality for our existing products. These expenses primarily consist of personnel costs, and, to a lesser extent, prototype materials, depreciation and certain allocated facilities and information technology infrastructure costs. We expense research and development costs as incurred.

The $2.5 million increase in research and development expenses in 2024 compared to 2023 was primarily due to an increase of $1.5 million in personnel costs and a $1.3 million increase in equipment and software expense, partially offset by a decrease of $0.6 million in professional services.

For 2025, we expect research and development expenses to increase from 2024 levels reflecting strategic investments in our growth priorities, including cybersecurity technology and AI technologies.

General and Administrative

General and administrative expenses primarily consist of personnel costs, professional services and office expenses. General and administrative personnel costs include executive, finance, human resources, information technology, facility and legal related expenses. Professional services primarily consist of fees for outside accounting, tax, legal, recruiting and other administrative services.

The $1.4 million increase in general and administrative expenses in 2024 compared to 2023 was primarily due to an increase of $1.3 million in personnel costs as a result of an increase in variable compensation.

For 2025, we expect general and administrative expenses to increase modestly from 2024 levels as we continue to apply a disciplined approach to focus our investments in areas that offer the greatest opportunities.

Non-Operating Income (Expense) - Interest Income

Interest income consists primarily of interest income earned on our invested cash, cash equivalents and marketable securities.

Interest income was $6.7 million and $5.1 million in the years ended December 31, 2024 and 2023, respectively.

Non-Operating Income (Expense) - Interest and Other Income (Expense), Net

In the years ended December 31, 2024 and 2023, interest and other income (expense), net consisted primarily of gains on equity investments and foreign currency exchange gains and losses. The Company recorded $5.3 million of investment gains in the year ended December 31, 2024, compared to an immaterial loss in the year ended December 31, 2023. Foreign currency exchange gains and losses had a favorable change of $2.1 million in the year ended December 31, 2024 compared to a favorable change of $0.1 million in 2023.

Provision for Income Taxes

We recorded a provision for income tax of $8.0 million for the year ended December 31, 2024 and $3.8 million for the year ended December 31, 2023. Our deferred tax assets primarily consist of research and development credits, capitalized research and development expenses and accruals and reserves. The Company’s income tax provision for the year ended December 31, 2024 primarily consisted of U.S. federal and state taxes. The Company’s income tax provision for the year ended December 31, 2023 primarily consisted of U.S. federal, state and foreign income taxes.

See Note 10 Income Taxes, of the notes to consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further details regarding the Company’s taxes.

Liquidity and Capital Resources

As of December 31, 2024, we had cash and cash equivalents of $95.1 million, including $3.9 million held outside the U.S. in our foreign subsidiaries, and $100.4 million of marketable securities. We currently do not have any plans to repatriate our earnings from our foreign operations. As of December 31, 2024, we had working capital of $183.7 million, accumulated deficit of $40.3 million and total stockholders’ equity of $231.8 million.

We plan to continue to invest for long-term growth, and our investment may increase. We currently believe that our existing cash and cash equivalents and marketable securities will be sufficient to meet our anticipated cash needs for at least the next 12 months and beyond. Our future capital requirements will depend on many factors, including our growth rate, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the introduction of new and enhanced product and service offerings and the continuing market acceptance of our products. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition could be adversely affected. We may also elect to raise additional financing to help us pursue our business and strategic objectives.Any additional financing could be dilutive to our existing stockholders.

In September 2022, we entered into a Common Stock Repurchase Agreement (the “Repurchase Agreement”) with Summit Partners Growth Equity Fund VIII-A, L.P., Summit Partners Growth Equity Fund VIII-B L.P., Summit Investors I, LLC and Summit Investors I (UK), L.P. (collectively, “Summit”). Pursuant to the Repurchase Agreement, we repurchased 3.5 million shares of common stock from Summit for approximately $44.6 million.

In November 2024, we entered into a Common Stock Repurchase Agreement (the “Repurchase Agreement”) with Summit. Pursuant to the Repurchase Agreement, we repurchased 330 thousand shares of common stock from Summit for approximately $5.2 million. The common shares repurchased are held in treasury and accounted for under the cost method.

On November 1, 2022, the Company announced its Board of Directors authorized a stock repurchase program of up to $50 million of its common stock over a period of twelve months. On November 7, 2023, the Company announced its Board of Directors had authorized a stock repurchase program under which the Company may repurchase up to $50 million of its outstanding common stock over a period of twelve months. On November 7, 2024, the Company announced its Board of Directors had authorized a new, non-expiring stock repurchase program under which the Company may repurchase up to $50 million of its outstanding common stock. As of December 31, 2024, the Company had $44.2 million available to repurchase shares. Under these repurchase 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 the Company’s stock repurchase programs have occurred in the open market, in negotiated transactions and from withholding shares in connection with vesting equity awards held by certain employees. During the year

ended December 31, 2024, the Company repurchased 2.2 million shares for a total cost of $30.1 million. During the year ended December 31, 2023, the Company repurchased 1.3 million shares for a total cost of $16.0 million.

In October 2021, our Board approved the initiation of a regular quarterly cash dividend on our common stock. The first dividend, in the amount of $0.05 per share of common stock outstanding, was paid in December 2021 and was treated as a return of capital, and on November 1, 2022, the Board of Directors increased the dividend amount to $0.06 per share. We currently anticipate that we will continue to pay comparable quarterly cash dividends in the future. However, the payment, amount and timing of future dividends remain within the discretion of our Board and will depend on our results of operations, financial condition, cash requirements, and other factors.

In addition, as described in Note 7 Commitments and Contingencies, in the notes to consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, we may be currently, or may be from time to time, involved in ongoing litigation. Any adverse settlements or judgments in any litigation could have a material adverse impact on our results of operations, cash balances and cash flows in the period in which such events occur.

Statements of Cash Flows

The following table summarizes our cash flow related activities (in thousands):

Years Ended December 31,

Cash provided by (used in):

Net increase (decrease) in cash and cash equivalents $ (2,115) $ 29,273

Cash Flows from Operating Activities

Our cash provided by operating activities is driven primarily by sales of our products and management of working capital investments. Our primary uses of cash from operating activities have been for personnel-related expenditures, manufacturing costs, marketing and promotional expenses and costs related to our facilities. Our cash flows from operating activities will continue to be affected principally by the extent to which we increase spending on our business and our working capital requirements.

During the year ended December 31, 2024, cash provided by operating activities was $90.5 million, consisting of net income of $50.1 million, non-cash benefits totaling $28.0 million and a favorable net change in operating assets and liabilities of $12.4 million. Our non-cash benefits primarily consisted of non-cash charges of $17.0 million for stock-based compensation and $11.3 million of depreciation and amortization expense. The net change in our operating assets and liabilities primarily reflects cash inflows from changes in deferred revenue of $6.9 million, accrued and other liabilities of $6.6 million and accounts payable of $2.2 million, partially offset by cash outflows from changes in accounts receivable of $2.6 million, inventory of $0.8 million and prepaid expenses and other assets of $0.1 million. The favorable change in deferred revenues was attributable to the timing of service contract bookings. The favorable change in accrued liabilities was due to increases in accrued income taxes and variable compensation. The favorable change in accounts payable is due to the timing of payments to our vendors. The unfavorable change in accounts receivable was due to the timing of collections from our customers.

During the year ended December 31, 2023, cash provided by operating activities was $44.5 million, consisting of net income of $40.0 million and non-cash benefits totaling $22.8 million, partially offset by an unfavorable net change in operating assets and liabilities of $18.3 million. Our non-cash benefits primarily consisted of non-cash charges of $14.1 million for stock-based compensation and $9.3 million of depreciation and amortization expense. The net change in our operating assets and liabilities primarily reflects cash outflows from changes in accrued and other liabilities of $20.8 million, inventory of $6.3 million, accounts payable of $3.0 million and prepaid expenses and other assets of $1.9 million, partially offset by cash inflows from changes in deferred revenue of $14.3 million. The unfavorable change in accounts receivable was due to the timing of collections from our customers. The favorable change in deferred revenues was attributable to the timing of service contract bookings.

Cash Flows from Investing Activities

During the year ended December 31, 2024, cash used by investing activities was $48.4 million, consisting of purchases of marketable securities of $142.8 million and capital expenditures of $12.3 million, partially offset by proceeds from maturities of marketable securities of $81.1 million and proceeds from the sales of marketable securities of $25.5 million.

During the year ended December 31, 2023, cash provided in investing activities was $13.6 million, consisting of proceeds from maturities of marketable securities of $64.5 million and proceeds from the sales of marketable securities of $45.4 million, partially offset by purchases of marketable securities of $85.4 million and capital expenditures of $10.9 million.

Cash Flows from Financing Activities

During the year ended December 31, 2024, cash used in financing activities was $44.3 million consisting primarily of $30.1 million of cash used to repurchase our common stock in the open market, from privately negotiated transactions and from withholding shares in connection with vesting equity awards held by certain employees. Additionally, cash used for the payments of cash dividends was $17.8 million. Partially offsetting these cash outflows was $3.6 million of cash proceeds from common stock issuances under our equity incentive plans.

During the year ended December 31, 2023, cash used in financing activities was $28.8 million consisting primarily of $17.8 million of cash used for the payments of cash dividends and $16.0 million of cash used to repurchase our common stock in the open market, partially offset by $4.9 million of cash proceeds from common stock issuances under our equity incentive plans.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. Note 1, Description of Business and Summary of Significant Accounting Policies, in notes to consolidated financial statements in Item 8 of Part II of this Report, describes the significant accounting policies and methods used in the preparation of the consolidated financial statements.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements.

Revenue Recognition

We derive revenue from two sources: (i) products revenue, which includes hardware, perpetual software license and subscription offerings, which include term-based license agreements; and (ii) services revenue, which includes post contract support (“PCS”), professional services, training and software-as-a-service offerings. 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 channels, such as resellers and distributors. Our customers predominantly purchase PCS services in conjunction with purchases of our products.

Most of our contracts with customers, other than renewals of PCS, contain multiple performance obligations with a combination of products and PCS. Products and PCS generally qualify as distinct performance obligations. Our hardware includes embedded ACOS software, which together deliver the essential functionality of our products. For contracts which contain multiple performance obligations, we allocate revenue to each distinct performance obligation based on the standalone selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation. We use a range of amounts to estimate SSP for products and PCS sold together in a contract to determine whether there is a discount to be allocated based on the relative SSP of the various products and PCS.

If we do not have an observable SSP, such as when we do not sell a product or service separately, then SSP is estimated using judgment and considering all reasonably available information such as market conditions and information about the size and/or purchase volume of the customer. We generally use a range of amounts to estimate SSP for individual products and services based on multiple factors including, but not limited to the sales channel (reseller, distributor or end-customer), the geographies in which our products and services are sold, and the size of the end-customer.

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, the Asia Pacific region, including Japan. 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 $2.1 million and $0.1 million of net foreign exchange gains in the years ended December 31, 2024 and 2023, respectively. We recorded $0.5 million of net foreign exchange losses during the year ended December 31, 2022.

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 and equity securities of publicly traded companies. We do not enter into investments for trading or speculative purposes. At December 31, 2024, our investment portfolio included marketable securities with an aggregate fair market value and amortized cost basis of $100.4 million and $100.2 million, respectively. Due to the current nature of our investment portfolio, the effect of a hypothetical 10% increase or decrease in interest rates would not have had a material impact on the fair value of our investment portfolio. Therefore, we do not expect our operating results or cash flows to be materially affected by a sudden change in interest rates.

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, 2024 (in thousands):

Fair Value as of

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Page

Consolidated Balance Sheets as of December 31, 2024 and 2023 66

Notes to Consolidated Financial Statements 71

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

A10 Networks, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of A10 Networks, Inc. (a Delaware corporation) and subsidiaries(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Companyas of December 31, 2024 and 2023, and the results of itsoperations and itscash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 25, 2025 expressed an unqualified opinion.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the 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 audits 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. Our audits 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 audits 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 audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Determination of standalone selling price for performance obligations not sold separately

As described further in Note 1 to the consolidated financial statements, most of the Company’s revenue contracts, other than renewals of post contract support, contain multiple performance obligations with a combination of products and post contract support. Products and post contract support generally qualify as distinct performance obligations. For contracts that contain multiple performance obligations, the Company allocates revenue to each distinct performance obligation based on the standalone selling price. Judgment is required to determine the standalone selling price for each distinct performance obligation. The Company uses a range of amounts to estimate standalone selling price for products and post contract support sold together in a contract to determine whether there is a discount to be allocated based on the relative standalone selling price of the various products and post contract support. We identified estimates of standalone selling price as a critical audit matter.

The principal consideration for our determination that estimates of standalone selling price is a critical audit matter is that auditing the estimates involved subjective auditor judgment due to the absence of directly observable data which requires the Company to make subjective assumptions used to estimate the standalone selling price for each performance obligation. If the Company does not have an observable standalone selling price, such as when they do not sell a product or service separately,

then standalone selling price is estimated using judgment and considering all reasonably available information such as market conditions and information about the size and/or purchase volume of the customer. The Company generally uses a range of amounts to estimate standalone selling price for individual products and services based on multiple factors including, but not limited to the sales channel (reseller, distributor or end-customer), the geographies in which products and services are sold, and the size of the end-customer. Given these factors, the related audit effort in evaluating management’s judgments in determining revenue recognition for these customer contracts was extensive and required subjective auditor judgment.

We obtained an understanding, evaluated design and tested the operating effectiveness of internal controls related to the determination of the standalone selling price for performance obligations not sold separately.

To test management’s estimates of standalone selling price, we performed procedures to evaluate the methodology applied, including evaluating whether management maximized the use of observable inputs. We also inspected the sources of historical data used, evaluated pricing practices, and other observable inputs such as customer grouping, tested the mathematical accuracy of the underlying data and evaluated the accounting policies and practices related to the estimated standalone selling prices by management.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2023.

San Jose, California

February 25, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

A10 Networks, Inc.

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of A10 Networks, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2024, and our report dated February 25, 2025 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. 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; 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

San Jose, California

February 25, 2025

Report of Independent Registered Public Accounting Firm

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

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows of A10 Networks, Inc. and subsidiaries (the Company) for the year ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows for the Company for the year ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company's management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on the Company's consolidated 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 consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Armanino LLP

San Jose, California

February 27, 2023, except for the effect of the segment reporting discussed in Note 11 and stock award disclosures discussed in Note 8 as to which the date is February 25, 2025.

We served as the Company’s auditor since 2019. In 2023, we became the predecessor auditor.

A10 NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

ASSETS

Current assets:

Prepaid expenses and other current assets 13,038 14,695

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Commitments and contingencies (Note 7)

Stockholders' equity:

Accumulated other comprehensive income (loss) 194 (71)

Total liabilities and stockholders' equity $ 432,815 $ 389,809

See accompanying notes to consolidated financial statements.

A10 NETWORKS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Years Ended December 31,

Revenue:

Cost of revenue:

Operating expenses:

Non-operating income (expense):

Interest and other income (expense), net 7,384 69 (1,667)

Net income per share:

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

See accompanying notes to consolidated financial statements.

A10 NETWORKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Years Ended December 31,

Other comprehensive income (loss), net of tax:

Unrealized gain (loss) on marketable securities 214 911 (497)

Foreign currency translation adjustment 51 (256) —

See accompanying notes to consolidated financial statements.

A10 NETWORKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Shares Amount

Stock-based compensation expense — — — 13,852 — — — 13,852

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

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

Stock-based compensation expense — — — 15,088 — — — 15,088

Payments for dividends — — — — (17,817) — — (17,817)

Unrealized gain on marketable securities, net of tax — — — — — 911 — 911

Other comprehensive loss — — — — — (256) — (256)

Stock-based compensation expense — — — 17,805 — — — 17,805

Payments for dividends — — — — (17,798) — — (17,798)

Unrealized gain on marketable securities, net of tax — — — — — 214 — 214

Other comprehensive income — — — — — 51 — 51

See accompanying notes to consolidated financial statements.

A10 NETWORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended December 31,

Cash flows from operating activities:

Provision for (recovery from) credit losses and sales returns 59 (699) (36)

Changes in operating assets and liabilities:

Prepaid expenses and other assets (67) (1,862) 1,627

Cash flows from investing activities:

Cash flows from financing activities:

Net increase (decrease) in cash and cash equivalents (2,115) 29,273 (10,954)

Supplemental Disclosures:

Cash paid for income taxes, net of refunds $ 6,283 $ 2,409 $ 1,747

Cash paid for interest $ — $ — $ —

Non-cash investing and financing activities:

Transfers between inventory and property and equipment $ 2,277 $ 2,473 $ 733

Capital expenditures included in accounts payable $ 672 $ 3,298 $ 230

See accompanying notes to consolidated financial statements.

Notes to Consolidated Financial Statements

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

A10 Networks, Inc. (together with our subsidiaries, the “Company”, “we”, “our” or “us”) was incorporated in California in 2004 and reincorporated in Delaware in March 2014. We are headquartered in San Jose, California and have wholly-owned subsidiaries throughout the world including Asia and Europe.

Basis of Presentation

The accompanying consolidated financial statements include those of A10 Networks, Inc. and its subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Those estimates and assumptions affect revenue recognition and deferred revenue, the allowance for credit losses for potential uncollectible amounts, the sales return reserve, the valuation of inventory, the fair value of marketable securities, contingencies and litigation, accrued liabilities, deferred commissions and the determination of fair value of stock-based compensation. These estimates are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from management’s estimates.

Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents include bank deposits and short-term, highly liquid investments purchased with an original maturity of 90 days or less. Our cash equivalents consist of money market funds.

Marketable Securities

We classify our investments in debt securities as available-for-sale and record these investments at fair value. We may sell these investments at any time before their maturity dates. Accordingly, we classify our securities, including those with maturities exceeding twelve months, as current assets and include them in marketable securities in the consolidated balance sheets. Unrealized gains and losses are reported in accumulated other comprehensive income (loss), net of taxes, in the consolidated statements of stockholders’ equity. Realized gains and losses are determined based on the specific identification method. Realized gains and losses and credit allowances and impairments due to credit losses, if any, on marketable securities are reported in interest and other income, net as incurred in the consolidated statements of operations.

We regularly review our investment portfolio for impairment. If the estimated fair value of available-for-sale debt securities is less than its amortized cost basis, we determine if the difference, if any, is caused by expected credit losses and write-down the amortized cost basis of the securities if it is more likely than not we will be required or we intend to sell the securities before recovery of its amortized cost basis. Allowances for credit losses and write-downs are recognized in the non-operating income (expense) section of our consolidated statements of operations.

The Company also invests in equity securities with readily determinable fair values which consist of investments in publicly traded companies. These investments are measured at fair value with changes in fair value recognized in non-operating income (expense) in our consolidated statements of operations.

Fair Value Measurement

Our financial instruments consist of cash, cash equivalents, marketable securities, accounts receivable and accounts payable. Our cash equivalents are measured and recorded at fair value on a recurring basis. Marketable securities are typically comprised of certificates of deposit, corporate securities, U.S. Treasury and agency securities, commercial paper, asset-backed securities and publicly trader equity securities and are measured at fair value on a recurring basis. The Company determines whether a credit loss exists for available-for-sale debt securities in an unrealized loss position. When the fair value of a security is below its amortized cost, the amortized cost will be reduced to its fair value and the resulting loss will be recorded in our consolidated statements of operations, if it is more likely than not that we are required to sell the impaired security before recovery of its amortized cost basis, or we have the intention to sell the security. If neither of these conditions are met, the Company considers the extent to which the fair value is less than the amortized cost, any changes to the rating of the security by a rating agency, and review of the issuer's financial statements. If factors indicate a credit loss exists, an allowance for credit loss is recorded through other expense, net, limited by the amount that the fair value is less than the amortized cost basis.

For all available-for-sale debt securities, unrealized gains and the amount of unrealized loss relating to factors other than credit loss are reported as a separate component of accumulated other comprehensive loss in our consolidated balance sheets. Realized gains and losses are determined based on the specific identification method and are reported in our consolidated statements of operations.

Financial instruments recorded at fair value are measured and classified using the three-level valuation hierarchy as described below:

Level 1 —observable inputs for identical assets or liabilities, such as quoted prices in active markets.

Level 2 —inputs other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3 —unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions when pricing the financial instruments.

Accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are unsecured and are recorded at invoice amounts, net of allowances for credit losses for any potential uncollectible amounts. We evaluate the collectability of our accounts receivable based on known collection risks and historical experience. We mitigate credit risk in respect to accounts receivable by performing periodic credit evaluations based on a number of factors, including past transaction experience, evaluation of credit history and review of the invoicing terms of the contract. We generally do not require our customers to provide collateral to support accounts receivable. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us (for examples, bankruptcy filings or substantial downgrading of credit ratings), we record a specific allowance for credit losses against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we record allowances for credit losses based on the length of time the receivables are past due and our historical experience of collections and write-offs.

Inventory

Inventory is stated at the lower of cost or net realizable value. Inventory cost is determined using first-in, first-out method. We regularly evaluate inventory for excess and obsolete products. Most of our inventory provisions relate to excess quantities of certain products, based on our inventory levels and future product purchase commitments compared to assumptions based on management’s assessment of future demand and market conditions. Inventory write-downs, once established, are not reversed as they establish a new cost basis for the inventory. Inventory write downs are included as a component of cost of products revenue in the consolidated statements of operations.

Property and Equipment, Net

Property and equipment are stated at cost, less accumulated depreciation and amortization. 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. Remaining amortization terms on leasehold improvements as of December 31, 2024 ranged from approximately one to six years.

Leases

The Company determines if an arrangement is a lease at inception. For leases where the Company is the lessee, right-of-use (“ROU”) assets represent the Company’s right to use the underlying asset for the term of the lease and are included within other non-current assets in the consolidated balance sheets, and the lease liabilities represent an obligation to make lease payments arising from the lease and are recorded within accrued liabilities and other non-current liabilities in the consolidated balance sheets. Lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date of the underlying lease arrangement to determine the present value of lease payments. The ROU asset is determined based on the lease liability initially established and reduced for any prepaid lease payments and any lease incentives received. The lease term to calculate the ROU asset and related lease liability includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company’s lease agreements generally do not contain any material variable lease payments, residual value guarantees or restrictive covenants.

The Company elected the package of practical expedients permitted under the transition guidance, which allowed for the carry-forward of the Company’s historical lease classification and assessment on whether a contract is or contains a lease. The Company elected to not apply the new standard’s recognition requirements to leases with an initial term of 12 months or less and instead elected to recognize lease payments in the consolidated statements of operations on a straight-line basis over the lease term.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while expense for financing leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition. The Company accounts for lease components and non-lease components as a single lease component.

Goodwill

Goodwill represents the excess of purchase consideration over the fair values of assets acquired and liabilities assumed in a business combination. Goodwill is not amortized but is reviewed for possible impairment annually in the fourth quarter or more frequently if impairment indicators arise. We have identified a single reporting unit for the purpose of our goodwill impairment tests, and the fair value of our reporting unit has been determined by our enterprise value. We may elect to utilize a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying value. If, after assessing the qualitative factors, we determine that it is more likely than not that the fair value of our reporting unit is less than its carrying value, an impairment analysis will be performed. We compare the fair value of our reporting unit with its carrying amount and if the carrying value of the reporting unit exceeds its fair value, an impairment loss will be recognized for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill. We did not identify impairment of goodwill for any periods presented.

Impairment of Long-Lived Assets

We evaluate our property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of our long-lived assets may not be recoverable. Recoverability of an asset group is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset group is expected to generate. If it is determined that an asset group is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset group exceeds its fair value.

Revenue Recognition

We recognize revenue, net of applicable taxes, when we transfer control of promised goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services.

We derive revenue from two sources: (i) products revenue, which includes hardware, perpetual software license and subscription offerings, which include term-based license agreements; and (ii) services revenue, which includes post contract support (“PCS”), professional services, training and software-as-a-service offerings. Revenue for term-based license agreements is recognized at a point in time when the Company delivers the software license to the customer and over time once 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 over time 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. We apply the following five-step revenue recognition model:

•Identification of the contract, or contracts, with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, performance obligations are satisfied.

Our customers predominantly purchase PCS services in conjunction with purchases of our products. PCS revenue includes arrangements for software support and technical support for our products. PCS is offered under renewable, fee-based contracts, which include technical support, hardware repair and replacement parts, bug fixes, patches, and unspecified upgrades on a when-and-if available basis. We recognize services revenue ratably over the term of the PCS contract, which is typically one year, but can be up to seven years. Billed but unearned PCS revenue is included in deferred revenue.

Professional service revenue primarilyconsists of the fees we earn related to installation and consulting services. We recognize revenue from professional services upon delivery or completion of performance. Professional service arrangements are typically short term in nature and are largely completed within 30 to 90 days from the start of service. Revenue is recognized for training when the training course is delivered.

Contracts with Multiple Performance Obligations

We account for multiple contracts with a single customer as one arrangement if the contractual terms and/or substance of those agreements indicate that they may be so closely related that they are, in effect, parts of a single contract.

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 return rates applied against current-period shipments. Specific customer returns and allowances are considered when determining our sales return reserve estimate.

Consequently, we have chosen to apply the portfolio approach when possible, which we do not believe will happen frequently. Additionally, we will evaluate a portfolio of data, when possible, in various situations, rights of return and transactions with variable consideration.

We report revenue net of sales taxes. We include shipping charges billed to customers in revenue and the related shipping costs are included in cost of product revenue.

Deferred Contract Acquisition Costs

We capitalize certain contract acquisition costs consisting of incremental sales commissions incurred to obtain customer contracts. Deferred commissions related to product revenues are recognized upon transfer of control to customers. Deferred commissions related to services revenue are recognized as the related performance obligations are met. Deferred commissions that will be recognized during the succeeding 12-month period are recorded as prepaid expenses and other current assets in the Company’s consolidated balance sheets, and the remaining portion is recorded as other non-current assets. Amortization of deferred commissions is included in sales and marketing expense in the consolidated statements of operations.

Research and Development Costs

Research and development efforts are focused on new product development and on developing additional functionality for our existing products. These expenses consist of personnel costs, and to a lesser extent, prototype materials, depreciation and certain allocated facilities and information technology costs. We expense research and development costs as incurred.

Capitalization of Internal Use Software

The company capitalizes costs incurred during the application development stage associated with the development of internal-use software systems. We account for the capitalization of internal-use software under ASC Topic 350-40, Internal-Use Software. Capitalized costs are included in property and equipment, net on the Company’s consolidated balance sheet. Once a project is available for general release to customers, the accumulated capitalized costs associated with that project will begin to be amortized over the estimated useful life of the software.

Capitalization of Internally Developed Software to be Marketed and Sold

We capitalize 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 Accounting Standards Codification (“ASC”) Topic 985-20, Software to be Sold, Leased or Marketed. 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 and are recorded in cost of sales. In December 2022, we released the software portion of our first capitalized project and impaired the 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 an operating expense. In September 2023, we released our second capitalized project after we impaired a portion of it after we determined the full carrying value was not recoverable.

Stock-Based Compensation

Stock-based compensation expense is measured on the grant date based on the fair value of the award and recognized on a straight-line basis over the requisite service period, reduced for actual forfeitures. The fair values of restricted stock units (“RSUs”) are estimated using our stock price at the close of the market on the grant date. The fair value of employee stock purchase rights is estimated using the Black-Scholes model on the grant date. 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. Stock-based compensation expense related to shares not purchased due to terminations, or forfeitures, is reversed on the date of forfeiture. 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

Our appliance hardware and software generally carry a warranty period of 90 days. Estimates of future warranty costs are based on historical returns and the application of the historical return rates to our in-warranty installed base. Warranty costs to repair or replace items sold to customers have been insignificant for the years ended December 31, 2024, 2023 and 2022.

Foreign Currency

The functional currency of our foreign subsidiaries is the U.S. Dollar. Transactions denominated in non-functional currencies are remeasured to the functional currency at the average exchange rate for the period. Non-functional currency monetary assets and liabilities are remeasured to the functional currency using the exchange rate in effect at the balance sheet date, and 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.

Income Taxes

We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements or in our tax returns. 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. 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 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.

We account for uncertainty in income taxes recognized in our consolidated financial statements by regularly reviewing our tax positions and benefits to be realized. We recognize tax liabilities based upon our estimate of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. 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 (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

Advertising costs are expensed when incurred. Advertising costs were $0.1 million, $0.1 million and $0.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Segment Information

An operating segment is a component of an enterprise for which its discrete financial information is available and its operating results are regularly reviewed by our chief operating decision maker for resource allocation decisions and performance assessment. Our chief operating decision maker is our Chief Executive Officer.

Our Chief Executive Officer reviews financial information presented on a consolidated basis for purposes of allocating resources and assessing performance of the Company. Accordingly, we have one reportable segment and one operating segment. See Note 11 Segment and Geographic Information in the accompanying notes to the consolidated financial statements for further detail.

Vendor Business Concentration

We rely on third parties to manufacture our hardware appliances and we purchase raw materials from third-party vendors. We outsource substantially all of our manufacturing services to three independent manufacturers. In addition, we purchase certain strategic component inventory which is consigned to our third-party manufacturers. Other hardware components included in our products are sourced from various suppliers by our manufacturers and are principally industry standard parts and components that are available from multiple vendors.

Concentration of Credit Risk and Significant Customers

Financial instruments that potentially subject us to concentrations of credit risk consist of cash, cash equivalents, marketable securities and accounts receivable. Our cash, cash equivalents and marketable securities are held and invested in high-credit quality financial instruments by recognized financial institutions and are subject to minimum credit risk.

Our accounts receivable are unsecured and represent amounts due to us based on contractual obligations of our customers. We mitigate credit risk in respect to accounts receivable by performing periodic credit evaluations based on a number of factors, including past transaction experience, evaluation of credit history and review of the invoicing terms of the contract. We generally do not require our customers to provide collateral to support accounts receivable.

Significant customers, including distribution channel partners and direct customers (“end-customers”), are those which represent 10% or more of our total revenue for each period presented or our gross accounts receivable balance as of each respective balance sheet date.

A substantial portion of our revenue is from sales of our products and services through distribution channel partners, such as resellers and distributors. In 2024 and 2023, sales through a single distribution channel partner represented 20% and 19% of our total revenue, respectively. In 2022, sales through two distribution channel partners represented 15% and 13% of our total revenue.

Revenues from our significant end-customers as a percentage of our total revenue are as follows:

Years Ended December 31,

Customer B * * 13%

* represents less than 10% of total revenue

As of December 31, 2024, one distribution channel partner accounted for 34% of our total gross accounts receivable. As of December 31, 2023, one distribution channel partner accounted for 19% of our total gross accounts receivable.

Recent Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-09.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring public entities to disclose additional information about specific expense categories in the notes to the consolidated financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03.

Recently Adopted Accounting Standard

In November 2023, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280, on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-07 during the year ended December

31, 2024. See Note 11 Segment and Geographic Information in the accompanying notes to the consolidated financial statements for further detail.

There have been no other recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance during the year ended December 31, 2024 that are of significance or potential significance to us.

2. Revenue

Contract Balances

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

The Company receives payment from customers based upon billing cycles. Invoice payment terms typically range from 30 to 90 days.

Accounts receivable are recorded when the right to consideration becomes unconditional.

Contract assets include amounts related to the Company’s contractual right to consideration for performance obligations not yet billed, and are included in prepaid and other current assets in the Company’s consolidated balance sheets. The contract assets amount was immaterial as of December 31, 2024 and 2023.

Deferred revenue primarily consists of amounts that have been invoiced but not yet recognized as revenue and consists of performance obligations pertaining to support and subscription services. During the years ended December 31, 2024 and 2023, the Company recognized revenue of $80.7 million and $72.3 million, respectively, related to deferred revenue at the beginning of the period.

Deferred revenue consisted of the following (in thousands):

Deferred revenue:

Deferred Contract Acquisition Costs

As of December 31, 2024, the current and non-current portions of deferred contract acquisition costs totaled $6.2 million and $4.8 million, respectively, and the related amortization was $5.9 million for the year ended December 31, 2024. As of December 31, 2023, the current and non-current portions of deferred contract acquisition costs totaled $6.2 million and $4.4 million, respectively, and the related amortization was $5.5 million for the year ended December 31, 2023.

For the years ended December 31, 2024, 2023 and 2022, 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

Remaining performance obligations represent contracted revenues that are non-cancellable and have not yet been recognized due to unsatisfied or partially satisfied performance obligations, which include deferred revenues and amounts that will be invoiced and recognized as revenues in future periods.

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

3. Marketable Securities and Fair Value Measurements

Marketable Securities

Marketable securities, classified as available-for-sale, consisted of the following (in thousands):

Commercial paper — — — — 998 — — 998

Publicly held equity securities — 5,728

During the years ended December 31, 2024 and 2023, the Company did not reclassify any amount to earnings from accumulated other comprehensive income (loss) related to unrealized gains or losses. During the year ended December 31, 2023, the Company sold certain debt securities at a loss and realized a $0.3 million loss.

The Company anticipates that it will recover the entire amortized cost basis of its available-for-sale marketable securities and has determined that no allowance for credit losses was required to be recognized during the years ended December 31, 2024 and 2023.

The following table summarizes the cost and estimated fair value of debt securities based on stated effective maturities as of December 31, 2024 (in thousands):

Amortized Cost Fair Value

All available-for-sale securities are classified as current because they are available for use in current operations.

Marketable securities in an unrealized loss position consisted of the following (in thousands):

Less Than 12 Months 12 Months or More Total

Corporate securities $ 9,418 $ (2) $ — $ — $ 9,418 $ (2)

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, 2024 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. The Company has the ability to hold these investments until maturity, or for at least the foreseeable future. As such, the Company determined that as of December 31, 2024, there were no credit losses on any securities within its portfolio of marketable securities.

Fair Value Measurements

The following is a summary of the Company’s cash, cash equivalents and marketable securities. The Company records cash and cash equivalents at cost, which approximates fair value. Marketable securities are measured at fair value on a recurring basis (in thousands):

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Commercial paper — — — — — 998 — 998

Publicly held equity securities - Level 1 — 5,728

There were no transfers between Level 1 and Level 2 fair value measurement categories during the years ended December 31, 2024 and 2023.

4. Derivatives

Foreign Exchange Forward Contracts

The Company uses derivative financial instruments to manage exposures to foreign currency that may or may not be designated as hedging instruments. The Company’s objective for holding derivatives is to use the most effective methods to minimize the impact of these exposures. The Company does not enter into derivatives for speculative or trading purposes. The Company enters into foreign exchange forward contracts primarily to mitigate the effect of gains and losses generated by

foreign currency transactions related to certain operating expenses and remeasurement of certain assets and liabilities denominated in foreign currencies.

For foreign exchange forward contracts not designated as hedging instruments, the fair value of the derivatives in a net gain or net loss position are recorded in prepaid expenses and other current assets in the accompanying consolidated balance sheets. Changes in the fair value of derivatives are recorded in other income, net in the accompanying consolidated statements of operations. As of December 31, 2024 and 2023, foreign exchange forward currency contracts not designated as hedging instruments had the total notional amount of $7.6 million and $34.5 million, respectively. These contracts have maturities of approximately 30 days. For the years ended December 31, 2024 and 2023, the Company recorded unrealized net losses of $0.2 million and $0.1 million, respectively, in its consolidated statements of operations related to these contracts. For the years ended December 31, 2024 and 2023, the net realized gain recorded in the consolidated statements of operations from these contracts was $4.5 million and $2.1 million, respectively.

For foreign exchange forward contracts designated as hedging instruments, unrealized gains and losses arising from these contracts are recorded as a component of accumulated other comprehensive income (loss) on the consolidated balance sheets. These hedging contracts have 30 day maturities. The hedging gains and losses in accumulated other comprehensive income (loss) in the consolidated balance sheet are subsequently reclassified to expenses, as applicable, in the consolidated statements of operations in the same period in which the underlying transactions affect the Company’s earnings. As of December 31, 2024, there were no outstanding foreign exchange forward contracts designated as hedging instruments. As of December 31, 2023, foreign exchange forward currency contracts designated as hedging instruments had notional amounts of $10.8 million.

5. Leases

The Company leases various facilities in the U.S., Asia and Europe under non-cancellable operating lease arrangements that expire on various dates through July 2027. These arrangements require the Company to pay certain operating expenses, such as taxes, repairs and insurance, and contain renewal and escalation clauses.

The table below presents the Company’s right-of-use assets and lease liabilities as of December 31, 2024 (in thousands):

Operating leases

Right-of-use assets:

Other non-current assets $ 11,539

Total right-of-use assets $ 11,539

Lease liabilities:

Accrued liabilities $ 4,744

Other non-current liabilities 7,194

Total operating lease liabilities $ 11,938

The aggregate future lease payments for the Company’s operating leases as of December 31, 2024 were as follows (in thousands):

Total lease payments 12,332

Less: imputed interest (394)

Present value of lease liabilities $ 11,938

The components of lease costs were as follows (in thousands):

Operating lease costs $ 4,314

Short-term lease costs 536

Total lease costs $ 4,850

Average lease terms and discount rates for the Company’s operating leases were as follows (in thousands):

Weighted-average remaining term (in years) 2.5

Weighted-average discount rate 3.18 %

Supplemental cash flow information for the Company’s operating leases were as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 5,403

Right-of-use assets obtained in exchange for new lease liabilities $ —

Corporate Headquarters Lease

On May 2, 2019, the Company entered into a sublease agreement (the “Sublease”) with Marvell Semiconductor, Inc. (“Sublandlord”) for its corporate headquarters and research and development space located at 2300 Orchard Parkway, San Jose, California, 95131 (the “Premises”). The term of the Sublease is approximately eight years and began on December 1, 2019, the date the Company commenced business operations at the Premises. The Sublease provides for monthly base rent of approximately $262,000 per month for the first year with annual increases thereafter. The total base rent through the end of the term of the Sublease will total approximately $33.8 million. 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 has a right-of-use asset of $11.5 million recorded in other non-current assets and has lease liabilities of $4.7 million and $7.2 million, recorded in accrued liabilities and other non-current liabilities, respectively, in the consolidated balance sheets as of December 31, 2024. The Company had a right-of-use asset of $16.4 million recorded in other non-current assets and has lease liabilities of $5.0 million and $11.8 million, recorded in accrued liabilities and other non-current liabilities, respectively, in the consolidated balance sheets as of December 31, 2023.

6. Other Balance Sheet Accounts Details

Accounts Receivable Allowance for Credit Losses

The following table presents the changes in the Company’s accounts receivable allowance for credit losses (in thousands):

Allowance for credit losses, beginning balance $ 405 $ 32

Increase (decrease) in allowance 1,067 1,181

Allowance for credit losses, ending balance $ 465 $ 405

Inventory

Inventory consisted of the following (in thousands):

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

Deferred contract acquisition costs 6,201 6,177

Prepaid expenses and other current assets $ 13,038 $ 14,695

Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

(in years)

Leasehold improvements Lease term 3,439 3,207

Depreciation and amortization expense on property and equipment was $6.0 million, $4.6 million and $2.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Internally Developed Software to be Marketed and Sold

During the year ended December 31, 2024, no costs were capitalized associated with internally developed software to be marketed and sold. During the years ended December 31, 2023 and 2022, capitalized costs totaled $0.5 million and $2.1 million, respectively. During the years ended December 31, 2024 and 2023, amortization cost totaled $0.5 million and $0.3 million, respectively. During the years ended December 31, 2024, 2023 and 2022, impairment cost totaled $0.9 million, $3.0 million and $0.6 million, respectively. As of December 31, 2024, the unamortized capitalized balance was $1.7 million.

Other Non-Current Assets

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

Deferred contract acquisition costs 4,814 4,371

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

Accrued compensation and benefits $ 19,058 $ 7,633

Other Non-Current Liabilities

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

Total other non-current liabilities $ 7,489 $ 12,187

7. Commitments and Contingencies

Legal Proceedings

Litigation

From time to time, we may be party or subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. Some of these proceedings involve claims that are subject to substantial uncertainties and unascertainable damages. We make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Unless otherwise specifically disclosed in this note, we have determined that no provision for liability nor disclosure is required related to any claim against us because: (a) there is not a

reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.

Investigations

In January 2023, the Company identified a cybersecurity 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 cybersecurity experts and advisors, incident response professionals and external counsel to support the investigation. While this incident did not have a material impact on the Company, it did result in additional expense incurred in connection with the investigation.

Lease Commitments

The Company leases various operating spaces in the U.S., Asia and Europe under non-cancelable operating lease arrangements that expire on various dates through July 2027. These arrangements require us to pay certain operating expenses, such as taxes, repairs and insurance, and contain renewal and escalation clauses. The Company recognizes rent expense under these arrangements on a straight-line basis over the term of the lease.

The Company has open purchase commitments with third-party contract manufacturers with facilities in Taiwan to supply nearly all of our finished goods inventories, spare parts, and accessories. 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 $12.2 million as of December 31, 2024.

The following table summarizes our non-cancelable operating leases as of December 31, 2024 (in thousands):

Years Ending December 31, Operating Leases

Rent expense was $4.9 million, $4.9 million and $4.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Guarantees and Indemnifications

In the normal course of business, we provide indemnifications to customers against claims of intellectual property infringement made by third parties arising from the use of our products. Other guarantees or indemnification arrangements include guarantees of product and service performance, and standby letters of credit for lease facilities and corporate credit cards. We have not recorded a liability related to these indemnifications and guarantee provisions and our guarantees and indemnification arrangements have not had any significant impact on our consolidated financial statements to date.

8. Equity Incentive Plans, Stock-Based Compensation and Stock Repurchase Program

Equity Incentive Plans

2014 Equity Incentive Plan and 2023 Stock Incentive Plan

The 2014 Equity Incentive Plan (the “2014 Plan”) was in effect until it was replaced by the 2023 Stock Incentive Plan (the “2023 Plan”) on April 1, 2023. Both the 2014 Plan and 2023 Plan provide for the granting of stock options, restricted stock awards, restricted stock units (“RSUs”), market performance-based RSUs (“PSUs”), stock appreciation rights, performance units and performance shares to our employees, consultants and members of our Board of Directors. As of December 31, 2024, we had 3,553,759 shares available for future grant under the 2023 Plan.

Like the 2014 Plan, the shares authorized for the 2023 Plan increase annually on January 1 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. Our Board of Directors determined the current shares authorized under the 2023 Plan were sufficient for the time being and decided not to increase the number of shares authorized on January 1, 2024.

To date, the Company has granted stock options, RSUs and PSUs. Stock options expire no more than 10 years from the grant date and generally vest over four years. In the case of an incentive stock option granted to an employee, who at the time of grant, owns stock representing more than 10% of the total combined voting power of all classes of stock, the per share exercise price will be no less than 110% of the fair market value per share on the date of grant, and the incentive stock option will expire no later than five years from the date of grant. For incentive stock options granted to any other employees and nonstatutory stock options granted to employees, consultants, or members of our Board of Directors, the per share exercise price will be no less than 100% of the fair market value per share on the date of grant. RSUs and PSUs generally vest from one to four years.

2014 Employee Stock Purchase Plan

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. The Amended 2014 Purchase Plan permits eligible employees to purchase shares of our common stock through payroll deductions with up to 10% of their pre-tax eligible earnings subject to certain Internal Revenue Code (“IRC”) limitations. The purchase price of the shares is 85% of the lower of the fair market value of our common stock on the first day of a six-month offering period or the relevant purchase date. In addition, no participant may purchase more than 1,500 shares of common stock in each purchase period.

Employees purchased 281,107 shares at an average price of $11.69 per share and with an aggregate intrinsic value of $1.2 million during the year ended December 31, 2024. Employees purchased 274,937 shares at an average price of $12.88 per share and with an aggregate intrinsic value of $1.2 million during the year ended December 31, 2023. 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, 2022. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares. As of December 31, 2024, we had 531,170 shares available for future issuance under the Amended 2014 Purchase Plan.

Stock-Based Compensation

A summary of our stock-based compensation expense is as follows (in thousands):

Years Ended December 31,

Stock-based compensation by type of award:

Stock options $ — $ — $ —

Stock-based compensation by category of expense:

As of December 31, 2024, the Company had $32.7 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 2.5 years.

Fair Value Determination

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,

Expected term (in years) 0.5 0.5 0.5

Risk-free interest rate 5.0% 5.3% 0.9%

Expected volatility 32% 42% 58%

•Expected Term. We estimate the expected life of options based on an analysis of our historical experience of employee exercise and post-vesting termination behavior considered in relation to the contractual life of the option. The expected term for the employee stock purchase rights is based on the term of the purchase period.

•Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected terms of stock options and the employee stock purchase rights.

•Expected Volatility. For stock options, due to the limited trading history of our own common stock, we determined the share price volatility factor based on a combination of the historical volatility of our own common stock and the historical volatility of our peer group for the stock options. For employee stock purchase rights, we used the historical volatility of our own common stock.

•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 and increased the amount to $0.06 per share in the three months ended December 31, 2022. For the years ended December 31, 2024, 2023 and 2022, the expected dividend rate assumes cash dividends will total $0.24, $0.24 and $0.24 per common share outstanding annually, respectively.

Stock-based compensation expense related to shares not purchased due to terminations, or forfeitures, is reversed on the date of forfeiture.

Stock Options

The following tables summarize our stock option activities and related information:

Granted — —

Outstanding as of December 31, 2024 — $ — 0 $ —

Vested and exercisable as of December 31, 2024 — $ — 0 $ —

(1)The aggregate intrinsic value represents the excess of the closing price of our common stock of $18.40 as of December 31, 2024 over the exercise price of the outstanding in-the-money options.

No stock options were granted in years ended December 31, 2024, 2023 and 2022.

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

Years Ended December 31,

Intrinsic value of options exercised (1) $ 822 $ 1,440 $ 5,744

(1)Intrinsic value of options exercised is the difference between the closing price of our common stock at the time of exercise and the exercise price paid.

Stock Awards

The Company has granted Restricted Stock Units (“RSUs”) to its employees, consultants and members of its Board of Directors, and Performance Stock Units (“PSUs”) to certain executives and employees. RSUs have service-based vesting conditions and PSUs have market performance-based vesting conditions as well as service-based vesting conditions. As of December 31, 2024, there were 2,496,267 RSUs outstanding that were unvested and 746,422 PSUs outstanding that had not yet achieved their market-performance vesting conditions.

Our RSUs typically vest over a three or four year service term. We granted 1,424,261, 1,315,210 and 1,230,180 RSUs in 2024, 2023 and 2022, respectively. The fair value of RSUs is determined to be the fair value of our common stock on the grant date as quoted on the New York Stock Exchange.

Our PSUs typically have a four year term. Market performance-based conditions are satisfied upon the achievement of specified 100-day volume weighted average stock price targets for the Company’s common stock. We granted 363,445, 326,630 and 314,538 PSUs in 2024, 2023 and 2022, respectively. The fair value of our PSUs is determined using a Monte Carlo valuation model which incorporates various assumptions including expected stock price volatility, expected term, expected dividend yield and risk-free interest rates. We estimate the volatility of common stock on the date of grant based on historical volatility of our common stock price. We estimate the expected term based on various exercise scenarios. We estimate the expected dividend yield based on the current annual dividend payment per share divided by our grant date common stock price The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant.

The following table summarizes our restricted stock unit activities and related information:

The following table summarizes our market performance-based restricted stock unit activities and related information:

The fair values of market performance-based restricted stock units were estimated as of the grant date using a Monte Carlo valuation model with the following assumptions:

Years Ended December 31,

Expected term (in years) 4.0 4.0 4.0

Risk-free interest rate 4.0% 4.3% 1.4%

Following is additional information pertaining to our stock award activities for both RSUs and PSUs (in thousands, except per share data):

Years Ended December 31,

Repurchase Agreements

In September 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. In November 2024, the Company entered into a Common Stock Repurchase Agreement with entities affiliated with Summit Partners whereby the Company purchased 330 thousand shares of common stock for $15.73 per share, or an aggregate purchase price of $5.2 million. The Company’s common shares repurchased are held in treasury and accounted for under the cost method.

Stock Repurchase Programs

On November 1, 2022, the Company announced its Board of Directors authorized a stock repurchase program of up to $50 million of its common stock over a period of twelve months. On November 7, 2023, the Company announced its Board of Directors had authorized a stock repurchase program under which the Company may repurchase up to $50 million of its outstanding common stock over a period of twelve months. On November 7, 2024, the Company announced its Board of Directors had authorized a new, non-expiring stock repurchase program under which the Company may repurchase up to $50 million of its outstanding common stock. As of December 31, 2024, the Company had $44.2 million available to repurchase shares under this program. Under all of the Company’s stock repurchase programs, repurchased shares are held in treasury at cost. The Company’s stock repurchase programs do not obligate it to acquire any specific number of shares. Shares may be repurchased in privately negotiated and/or open market transactions and by withholding shares in connection with vesting equity awards held by certain employees, including under plans complying with Rule 10b5-1 under the Exchange Act.

To date, all repurchases under the Company’s stock repurchase programs have occurred in the open market, in negotiated transactions and from withholding shares in connection with vesting equity awards held by certain employees. During the year ended December 31, 2024, the Company repurchased 2.2 million shares for a total cost of $30.1 million. During the year ended December 31, 2023, the Company repurchased 1.3 million shares for a total cost of $16.0 million. During the year ended December 31, 2022, the Company repurchased 6.1 million shares for a total cost of $79.3 million.

9. 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,

Stock options, RSUs, PSUs and employee stock purchase rights 23 93 94

10. Income Taxes

The geographical breakdown of income before income taxes is as follows (in thousands):

Years Ended December 31,

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

Years Ended December 31,

Current provision for income taxes:

Deferred tax expense (benefit):

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

Years Ended December 31,

Amount Percentage Amount Percentage Amount Percentage

Changes in federal valuation allowance — — 210 0.5 — —

Other permanent items — — 5 — 73 0.1

Foreign-derived intangible income deduction (3,699) (6.4) (3,585) (8.2) — —

Deferred tax balances are comprised of the following (in thousands):

Deferred tax assets:

Net operating loss carryforwards $ 3,561 $ 3,799

Research and development credits, net of uncertain tax positions 29,217 36,592

Depreciation and amortization (1,293) (1,052)

Capitalized research and development expenses 30,985 23,497

Deferred tax liabilities:

Deferred contract acquisition costs (2,560) (2,429)

Operating lease right-of-use asset (2,610) (3,533)

Total deferred tax liabilities (5,391) (6,100)

Recognition of deferred tax assets is appropriate when realization of these assets is more likely than not. 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, 2024 and 2023, the valuation allowance increased by $1.0 million and $2.0 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, 2024 and 2023, we had no U.S. federal NOL carryforward balance. As of December 31, 2024 and 2023, we had state NOL carryforwards of $51.0 million and $54.9 million, respectively. The state NOL carryforwards expire in various years beginning in 2025, if not utilized.

Additionally, as of December 31, 2024 and 2023, we had U.S. federal research and development credit carryforwards of $14.8 million and $22.8 million, respectively, and state research and development credit carryforwards of $27.1 million and $25.3 million, respectively. The federal credit carryforwards will begin to expire at various dates beginning in 2031 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.

Additionally, as of December 31, 2024, we had no U.S. foreign tax credit carryforwards and, as of December 31, 2023, we had $0.4 million of U.S. foreign tax credit carryforwards.

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 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, 2024 and 2023, the

undistributed earnings approximated $18.6 million and $18.5 million, respectively. Our undistributed earnings through December 31, 2017, have been taxed under the one-time transition tax under the Tax Act.

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 U.S.) using a half-year convention. Prior to the amendment, Section 174 expenses were allowed to be expensed in the year incurred. In 2024, the Company is capitalizing $41.5 million of US R&E expenses (amortizable over 5 years) and $16.3 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.

Uncertain Tax Positions

As of December 31, 2024, 2023 and 2022, we had gross unrecognized tax benefits of $8.1 million, $7.6 million and $7.1 million, respectively. 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, 2024, 2023 and 2022. Our policy for classifying interest and penalties associated with unrecognized income tax benefits is to exclude such items in income tax expense.

The activity related to the unrecognized tax benefits is as follows (in thousands):

Years Ended December 31,

Gross unrecognized tax benefits—beginning balance $ 7,575 $ 7,077 $ 6,841

Increases (decreases) related to tax positions from prior years — 27 (226)

Increases related to tax positions taken during current year 576 580 462

Releases / statute lapses (76) (109) —

Gross unrecognized tax benefits—ending balance $ 8,075 $ 7,575 $ 7,077

These amounts are related to certain deferred tax assets with a corresponding valuation allowance. As of December 31, 2024, the total amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate is $3.7 million. We do not anticipate a material change to our unrecognized tax benefits over the next twelve months. Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinary course of business.

ATEN US Equity

ATEN · 10-K · period ended 2024-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

ATEN US Equity☆

ATEN · 10-K · period ended 2024-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

ATEN US Equity