A10 Networks (ATEN) risk factors, FY2025 10-K

Risks Related to Our Business, Operations and Industry

1. 01If we do not successfully anticipate market needs and opportunities or if the market does not continue to adopt our application delivery solutions, our business, financial condition and results of operations could be significantly harmed
2. 02We have experienced net losses in the past and may not maintain profitability in future periods. If we cannot maintain profitability, our financial performance will be harmed and our business may suffer
3. 03Our operating results have varied and are likely to continue to vary significantly from period to period and may be unpredictable, which could cause the trading price of our common stock to decline
4. 04Reliance on shipments at the end of the quarter could cause our revenue for the applicable period to fall below expected levels
5. 05We face intense competition in our market, especially from larger, well-established companies, and we may lack sufficient financial or other resources to maintain or improve our competitive position
6. 06Cloud-based computing trends present competitive and execution risks
7. 07If we are not able to maintain and enhance our brand and reputation, our business and operating results may be harmed in tangible or intangible ways
8. 08A limited number of our end-customers, including service providers, make large and concentrated purchases that comprise a significant portion of our revenue. Any loss or delay of expected purchases by our largest end-customers could adversely affect our operating results30% rewritten
9. 092024 and 2023, service providers accounted for approximately 60%, 57% and 58%, of our total revenue, respectively, and enterprise customers accounted for approximately 40%, 43% and 42% of our total revenue, respectively
10. 10Our business could be adversely impacted by changes demanded by our customers in the deployment and payment models for our products
11. 11Some of our large end-customers demand favorable terms and conditions from their vendors and may request price or other concessions from us. As we seek to sell more products to these end-customers, we may agree to terms and conditions that may have an adverse effect on our business
12. 12Our gross margin may fluctuate from period to period based on the mix of products sold, the geographic location of our customers, price discounts offered, required inventory write downs and exchange rate fluctuations
13. 13We generate a significant amount of revenue from sales to distributors, resellers, and end-customers outside of the United States, and we are therefore subject to a number of risks that could adversely affect these international sources of our revenue
14. 14We have a significant presence in international markets and plan to continue to expand our international operations, which exposes us to a number of risks that could negatively affect our future business
15. 15Our success depends on our key personnel and our ability to hire, retain and motivate qualified product development, sales, marketing and finance personnel
16. 16There can be no assurance that our exploration of strategic alternatives will result in any transaction being consummated, and speculation and uncertainty regarding the outcome of our exploration of strategic alternatives may adversely impact our business
17. 17Adverse general economic conditions or reduced information technology spending may adversely impact our business
18. 18We are dependent on third-party manufacturers, and changes to those relationships, expected or unexpected, may result in delays or disruptions that could harm our business
19. 19Because some of the key components in our products come from limited sources of supply, we are susceptible to supply shortages or supply changes, which could disrupt or delay our scheduled product deliveries to our end-customers and may result in the loss of sales and end-customers
20. 20Real or perceived defects, errors, or vulnerabilities in our products or services or the failure of our products or services to block a threat or prevent a security breach could harm our reputation and adversely impact our results of operations33% rewritten
21. 21Our business is subject to the risks of warranty claims, product returns, product liability, and product defects
22. 22Undetected software or hardware errors may harm our business and results of operations
23. 23covering this type of liability, these policies may not provide sufficient protection should a claim be asserted. A material product liability claim may harm our business and results of operations
24. 24Our use of open source software and position regarding the potential use of generative AI in our products could negatively affect our ability to sell our products and subject us to possible litigation
25. 25We license technology from third parties, and our inability to maintain those licenses could harm our business
26. 26Failure to prevent excess inventories or inventory shortages could result in decreased revenue and gross margin and harm our business
27. 27Our ability to sell our products is highly dependent on the quality of our support and services offerings, and our failure to offer high-quality support could have a material adverse effect on our business, revenue and results of operations
28. 28We depend on growth in markets relating to network security, management and analysis, and lack of growth or contraction in one or more of these markets could have a material adverse effect on our results of operations and financial condition
29. 29Because we recognize subscription revenue from our customers over the term of their agreements, downturns or upturns in sales of our subscription-based offerings will not be immediately reflected in our operating results and may adversely affect our revenue in the future
30. 30increase our revenue through additional subscription sales in any one period, as revenue is generally recognized over a longer period
31. 31Our products must conform to industry standards in order to be accepted by end-customers in our markets
32. 32We are dependent on various information technology systems, and failures of or interruptions to those systems could harm our business
33. 33Future acquisitions we may undertake may not result in the financial and strategic goals that are contemplated at the time of the transaction
34. 34We are exposed to the credit risk of our distribution channels and end-customers, which could result in material losses and negatively impact our operating results
35. 35Our business is subject to the risks of earthquakes, fire, power outages, floods, and other catastrophic events, and to interruption by man-made problems such as acts of war and terrorism

Risks Related to Intellectual Property, Litigation, Laws and Regulations

1. 36Enhanced U.S. tariffs, import/export restrictions, Chinese regulations, countermeasures taken by affected countries or other trade barriers may have a negative effect on global economic conditions, financial markets and our business90% rewritten
2. 37We may not be able to adequately protect our intellectual property, and if we are unable to do so, our competitive position could be harmed, or we could be required to incur significant expenses to enforce our rights83% rewritten
3. 38Failure to protect and ensure the confidentiality and security of data, trade secrets and personally identifiable information (“PII”) could lead to legal liability, adversely affect our reputation and have a material adverse effect on our operating results, business and reputation
4. 39We have incurred, and expect to continue to incur, significant costs to protect against or remedy security breaches. We may incur significant additional costs in the future to address problems caused by any actual or perceived security breaches47% rewritten
5. 40Our failure to adequately protect personal data could have a material adverse effect on our business41% rewritten
6. 41Our sales to governmental organizations are subject to a number of challenges and risks
7. 42Failure to comply with governmental laws and regulations could harm our business
8. 43We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets
9. 44We are subject to various environmental laws and regulations that could impose substantial costs upon us
10. 45Our ability to use our net operating loss carryforwards may be subject to limitation and may result in increased future tax liability to us
11. 46Changes in tax laws or regulations or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our operating results and financial condition
12. 47Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States
13. 48If we are unable to maintain effective internal controls over financial reporting, investor confidence may be adversely affected, which in turn would negatively affect the value of our common stock
14. 49Our charter documents and Delaware law could discourage takeover attempts and lead to management entrenchment
15. 50In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time40% rewritten
16. 51Act, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunderNew
17. 52Increasing attention on sustainability, human capital, governance and other corporate responsibility matters may have a negative impact on our business, impose additional costs on us, and expose us to additional risks23% rewritten

Risks Related to Capitalization and Financial Markets

1. 53We are exposed to fluctuations in currency exchange rates, which could negatively affect our results of operations
2. 54We may need to or may elect to raise additional funds in future private or public offerings, and such funds may not be available on acceptable terms, if at all. If we do raise additional funds, existing stockholders will suffer dilution
3. 55The price of our common stock has been and may continue to be volatile, and the value of your investment could decline
4. 56If securities or industry analysts do not publish research or reports about our business, or publish inaccurate or unfavorable research reports about our business, our share price and trading volume could decline
5. 57A reduction in or suspension or elimination of our dividend payments could have a negative effect on our stock price
6. 58There is no assurance that the existence of a stock repurchase program will result in repurchases of our common stock or enhance long term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves70% rewritten

Risks Related to Our Convertible Indebtedness

1. 59The issuance of shares of our common stock could depress the trading price of our common stockNew
2. 60could place further downward pressure on the trading price of our common stock. In addition, our issuance of additional shares of common stock will dilute the ownership interests of our existing common stockholdersNew
3. 61Provisions in the 2030 Notes Indenture could delay or prevent an otherwise beneficial takeover of usNew
4. 62The conversion of 2030 Notes could impair our financial position and liquidityNew