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Dynamic quotes 
OFFON

A10 NETWORKS, INC.

(ATEN)
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A10 : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

07/30/2021 | 04:12pm EDT
The following discussion and analysis of our financial condition and results of
operations ("MD&A") should be read in conjunction with our condensed
consolidated financial statements and related notes included elsewhere in this
document. In addition to historical information, the MD&A contains
forward-looking statements that reflect our plans, estimates, and beliefs that
involve significant risks and uncertainties. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to those differences include those discussed below and
elsewhere in this Quarterly Report on Form 10-Q, particularly in "Risk Factors,"
and "Note Regarding Forward-Looking Statements."

Overview


  We are a leading provider of networking solutions that enable next-generation
networks focused on reliability, availability, scalability and cybersecurity.
Our portfolio supports customers operating in the cloud, on-premise or in hybrid
environments providing rapid return on their investment as well as investment
protection with best-in-class technical performance. As cyber-attacks increase
in volume and complexity, we integrate security as a key attribute in our
solutions that further enable our customers to continue to adapt to market
trends in cloud, internet of things and the ever increasing need for more data,
building upon our strong global footprint and leadership in application and
network infrastructure. Our customers include leading service providers (cloud,
telecommunications, multiple system operators, cable), government organizations,
and enterprises.

Our product portfolio seeks to address many of the cyber protection challenges and solution requirements. The portfolio consists of six secure application solutions; Thunder Application Delivery Controller ("ADC"), Lightning Application

                                       21
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Delivery Controller ("Lightning ADC"), Thunder Carrier Grade Networking ("CGN"),
Thunder Threat Protection System ("TPS"), Thunder SSL Insight ("SSLi") and
Thunder Convergent Firewall ("CFW") and intelligent management, and automation
tools; Harmony Controller and aGalaxy TPS. Our products are offered in a variety
of form factors and payment models, including physical appliances and perpetual
and subscription-based software licenses, as well as pay-as-you-go licensing
models and FlexPool, a flexible consumption-based software model.

  We derive revenue from sales of products and related support services.
Products revenue is generated primarily by sales of hardware appliances with
perpetual licenses to our embedded software solutions. We also derive revenue
from licenses to, or subscription services for, software-only versions of our
solutions. We generate services revenue primarily from sales of maintenance and
support contracts. Our customers predominantly purchase maintenance and support
in conjunction with purchases of our products. In addition, we also derive
revenue from the sale of professional services.

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 and
enterprises and we report customer revenues in four geographic regions: the
Americas, Japan, Asia Pacific (excluding Japan) and EMEA. 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. As of June 30, 2021, we had sold products to more than 7,500 customers worldwide.


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

During the three months ended June 30, 2021, 49% of our total revenue was
generated from the Americas region, 26% from Japan and 25% from other
geographical regions. During the three months ended June 30, 2020, 46% of our
total revenue was generated from the Americas region, 24% from Japan and 30%
from other geographical regions. One of our priorities is to strengthen our
sales efforts in North America. Our enterprise customers accounted for 39% and
42% of our total revenue during the three months ended June 30, 2021 and 2020,
respectively, and our service provider customers accounted for 61% and 58% of
our total revenue during the six months ended June 30, 2021 and 2020,
respectively.

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 customers, including service providers and enterprise customers, in any
period. Purchases by our ten largest end-customers accounted for 37% and 38% of
our total revenue for the three months ended June 30, 2021 and 2020,
respectively, and accounted for 36% and 45% of our total revenue for the six
months ended June 30, 2021 and 2020. 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. Consequently, any acceleration or delay in anticipated
product purchases by or deliveries to our largest 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.

As of June 30, 2021, we had $67.9 million of cash and cash equivalents and $98.9 million of marketable securities. Cash provided by operating activities was $19.4 million during the six months ended June 30, 2021, compared to $22.7 million of cash provided by operating activities in the same period last year.


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. Our investments in growth in these areas may affect our short-term
profitability.

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Results of Operations


A summary of our condensed consolidated statements of operations for the three
and six months ended June 30, 2021 and 2020 is as follows (dollars in
thousands):
                                                           Three Months Ended June 30,
                                                   2021                                      2020                             Increase (Decrease)
                                                            Percent of                             Percent of
                                        Amount            Total Revenue          Amount          Total Revenue            Amount               Percent
Revenue:
Products                           $      34,363                 58.1  %       $ 29,214                 55.6  %       $     5,149                  17.6  %
Services                                  24,805                 41.9            23,286                 44.4                1,519                   6.5
Total revenue                             59,168                100.0            52,500                100.0                6,668                  12.7
Cost of revenue:
Products                                   8,215                 14.0             6,544                 12.5                1,671                  25.5
Services                                   5,415                  9.2             4,878                  9.3                  537                  11.0
Total cost of revenue                     13,630                 23.0            11,422                 21.8                2,208                  19.3
Gross profit                              45,538                 77.0            41,078                 78.2                4,460                  10.9
Operating expenses:
Sales and marketing                       19,749                 33.4            18,476                 35.2                1,273                   6.9
Research and development                  13,491                 22.8            13,450                 25.6                   41                   0.3
General and administrative                 5,082                  8.6             5,237                 10.0                 (155)                 (3.0)
Total operating expenses                  38,322                 64.8            37,163                 70.8                1,159                   3.1
Income from operations                     7,216                 12.2             3,915                  7.5                3,301                  84.3

Non-operating income (expense):


Interest and other income
(expense), net                              (112)                (0.2)              227                  0.4                 (339)               

(149.3)

Total non-operating income
(expense), net                              (112)                (0.2)              227                  0.4                 (339)               

(149.3)

Income before provision for income
taxes                                      7,104                 12.0             4,142                  7.9                2,962                  71.5
Provision for income taxes                   488                  0.8               334                  0.6                  154                  46.1
Net income                         $       6,616                 11.2  %       $  3,808                  7.3  %       $     2,808                  73.7  %


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                                                            Six Months Ended June 30,
                                                   2021                                     2020                             Increase (Decrease)
                                                           Percent of                             Percent of
                                       Amount            Total Revenue          Amount          Total Revenue            Amount               Percent
Revenue:
Products                           $     64,903                 56.9  %       $ 59,950                 56.4  %       $     4,953                   8.3  %
Services                                 49,108                 43.1            46,314                 43.6                2,794                   6.0
Total revenue                           114,011                100.0           106,264                100.0                7,747                   7.3
Cost of revenue:
Products                                 15,301                 13.4            13,485                 12.7                1,816                  13.5
Services                                 10,828                  9.4            10,079                  9.5                  749                   7.4
Total cost of revenue                    26,129                 22.9            23,564                 22.2                2,565                  10.9
Gross profit                             87,882                 77.1            82,700                 77.8                5,182                   6.3
Operating expenses:
Sales and marketing                      38,841                 34.1            39,097                 36.8                 (256)                 (0.7)
Research and development                 27,472                 24.1            28,765                 27.1               (1,293)                 (4.5)
General and administrative               10,329                  9.1            11,132                 10.5                 (803)                 (7.2)
Total operating expenses                 76,642                 67.2            78,994                 74.3               (2,352)                 (3.0)
Income from operations                   11,240                  9.9             3,706                  3.5                7,534                 203.3

Non-operating income (expense):

Interest and other income
(expense), net                           (1,295)                (1.1)              458                  0.4               (1,753)               (382.8)
Total non-operating income
(expense), net                           (1,295)                (1.1)              458                  0.4               (1,753)               (382.8)
Income before income taxes                9,945                  8.7             4,164                  3.9                5,781                 138.8
Provision for income taxes                  672                  0.6               653                  0.6                   19                   2.9
Net income                         $      9,273                  8.1  %       $  3,511                  3.3  %       $     5,762                 164.1  %



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. We recognize products revenue upon transfer of control, generally at
the time of shipment, provided that all other revenue recognition criteria have
been met. 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 professional 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.

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


                                                             Three Months Ended June 30,
                                                     2021                                      2020                             Increase (Decrease)
                                                              Percent of                             Percent of
                                          Amount            Total Revenue          Amount          Total Revenue            Amount              Percent
Revenue:
Products                             $      34,363                   58  %       $ 29,214                   56  %       $     5,149                   18  %
Services                                    24,805                   42            23,286                   44                1,519                    7
Total revenue                        $      59,168                  100  %       $ 52,500                  100  %       $     6,668                   13  %
Revenue by geographic region:
Americas                             $      28,836                   49  %       $ 23,962                   46  %       $     4,874                   20  %
Japan                                       15,564                   26            12,854                   24                2,710                   21
Asia Pacific, excluding Japan                7,703                   13             8,005                   15                 (302)                  (4)
EMEA                                         7,065                   12             7,679                   15                 (614)                  (8)
Total revenue                        $      59,168                  100  %       $ 52,500                  100  %       $     6,668                   13  %



                                                                Six Months Ended June 30,
                                                       2021                                       2020                              Increase (Decrease)
                                                                 Percent of                              Percent of
                                           Amount              Total Revenue           Amount          Total Revenue            Amount              Percent
Revenue:
Products                             $     64,903                       57  %       $  59,950                   56  %       $     4,953                    8  %
Services                                   49,108                       43             46,314                   44                2,794                    6
Total revenue                        $    114,011                      100  %       $ 106,264                  100  %       $     7,747                    7  %
Revenue by geographic region:
Americas                             $     55,106                       48  %       $  49,400                   46  %       $     5,706                   12  %
Japan                                      29,183                       26             30,495                   29               (1,312)                  (4)
Asia Pacific, excluding Japan              14,038                       12             12,887                   12                1,151                    9
EMEA                                       15,684                       14             13,482                   13                2,202                   16
Total revenue                        $    114,011                      100  %       $ 106,264                  100  %       $     7,747                    7  %



Total revenue increased by $6.7 million, or 13%, during the three months ended
June 30, 2021 compared to the same period of 2020. This increase was due
primarily to a $4.9 million increase in the Americas region and a $2.7 million
increase in Japan, partially offset by a $0.6 million decrease in the EMEA
region and a $0.3 million decrease in the Asia region, excluding Japan. The
overall increase in revenue was attributable to a $5.7 million increase in
revenue from service provider customers, especially in the Americas region and
Japan. Revenue from enterprise customers increased $1.0 million during the three
months ended June 30, 2021 compared to the same period of 2020.

Total revenue increased by $7.7 million, or 7%, during the six months ended
June 30, 2021 compared to the same period of 2020. This increase was due
primarily to a $5.7 million increase in the Americas region, a $2.2 million
increase in the EMEA region and a $1.2 million increase in the Asia Pacific
region, excluding Japan, partially offset by a $1.3 million decrease in Japan.
The overall increase in revenue was attributable to a $4.6 million increase in
revenue from service provider customers, especially in the Americas and EMEA
regions. Revenue from enterprise customers increased $3.1 million during the six
months ended June 30, 2021 compared to the same period of 2020, due to increases
in the Americas and EMEA regions.
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Products revenue increased by $5.1 million, or 18%, during the three months
ended June 30, 2021 compared to the same period of 2020, primarily driven by
increased demand from our service provider customers in the Americas region and
Japan.

Products revenue increased by $5.0 million, or 8%, during the six months ended
June 30, 2021 compared to the same period of 2020, primarily driven by increased
demand from our enterprise and service provider customers in the Americas region
and increased demand from our service provider customers in the EMEA region.

Services revenue increased by $1.5 million, or 7%, during the three months ended
June 30, 2021 compared to the same period of 2020, and grew by $2.8 million, or
6%, during the six months ended June 30, 2021 compared to the same period of
2020, primarily attributable to an increase in PCS sales as a result of our
growing installed customer base.

During the three months ended June 30, 2021, $28.8 million, or 49% of total
revenue, was generated from the Americas region, which represents a 3% increase
compared to the same period of 2020. The increase was primarily due to higher
products revenue driven by higher demand from our service provider customers in
the Americas region.

During the six months ended June 30, 2021, $55.1 million, or 48% of total
revenue, was generated from the Americas region, which represents a 2% increase
compared to the same period of 2020. The increase was primarily due to higher
products revenue driven by higher demand from our service provider customers in
the Americas region.

During the three months ended June 30, 2021, $15.6 million, or 26% of total revenue, was generated from Japan, which represents a 2% increase compared to the same period of 2020. The increase was primarily due to higher products revenue driven by higher demand from our service provider customers in Japan.

During the six months ended June 30, 2021, $29.2 million, or 26% of total revenue, was generated from Japan, which represents a 3% decrease compared to the same period of 2020. The decrease was primarily due to lower products revenue driven by lower demand from our service provider customers.


During the three months ended June 30, 2021, $7.7 million, or 13% of total
revenue, was generated from the Asia Pacific region, excluding Japan, which
represents a 4% decrease compared to the same period of 2020. The decrease was
primarily due to lower products revenue driven by a decrease in demand from our
service provider customers in the Asia Pacific region, excluding Japan.

During the six months ended June 30, 2021, $14.0 million, or 12% of total
revenue, was generated from the Asia Pacific region, excluding Japan. Although
revenue from the Asia Pacific region, excluding Japan, increased $1.2 million
compared to the same period of 2020, the percentage of total revenue remained
flat at 12% in both periods. The increase of $1.2 million was primarily due to
higher products and services revenue driven by an increase in demand from
enterprise customers in the Asia Pacific region, excluding Japan.

During the three months ended June 30, 2021, $7.1 million, or 12% of total
revenue, was generated from the EMEA region, which represents a 3% decrease
compared to the same period of 2020. The decrease was primarily due to lower
products revenue driven by a decrease in demand from our enterprise customers in
the EMEA region.

During the six months ended June 30, 2021, $15.7 million, or 14% of total
revenue, was generated from the EMEA region, which represents a 1% increase
compared to the same period of 2020. The increase was primarily due to higher
products and services revenue driven by an increase in demand from our service
provider customers in the EMEA region.

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

                               Three Months Ended June 30,                  Increase (Decrease)
                                   2021                   2020              Amount            Percent
Cost of revenue:
Products                $        8,215                 $  6,544      $            1,671        25.5  %
Services                         5,415                    4,878                     537        11.0
Total cost of revenue   $       13,630                 $ 11,422      $            2,208        19.3  %



                              Six Months Ended June 30,                  Increase (Decrease)
                                  2021                 2020              Amount            Percent
Cost of revenue:
Products                $      15,301               $ 13,485      $            1,816        13.5  %
Services                       10,828                 10,079                     749         7.4
Total cost of revenue   $      26,129               $ 23,564      $            2,565        10.9  %




Products cost of revenue increased 25.5% during the three months ended June 30,
2021 compared to the same period of 2020, primarily driven by an increase in
products revenue of 18% and changes in product mix and geographic mix. The
increase in products revenue in the Americas region and Japan contributed to the
increase in products cost of revenue.

Products cost of revenue increased 13.5% during the six months ended June 30,
2021 compared to the same period of 2020, primarily driven by an increase in
products revenue of 8% and changes in product mix and geographic mix. The
increase in products revenue in the Americas region contributed to the increase
in products cost of revenue.

Services cost of revenue increased 11.0% during the three months ended June 30,
2021 compared to the same period of 2020, primarily driven by an increase in
services revenue of 7% and the mix of services delivered, which include
technical support, training and service costs.

Services cost of revenue increased 7.4% during the six months ended June 30,
2021 compared to the same period of 2020, primarily driven by an increase in
services revenue of 6% and the mix of services delivered, which include
technical support, training and service costs.

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, inventory write-downs and foreign currency exchange rates.

Our sales are generally denominated in U.S. dollars; however, in Japan, our sales 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):

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                                                          Three Months Ended June 30,
                                                  2021                                      2020                             Increase (Decrease)
                                       Amount             Gross Margin          Amount           Gross Margin            Amount            Gross Margin
Gross profit:
Products                          $      26,148                 76.1  %       $ 22,670                 77.6  %       $     3,478                 (1.5) %
Services                                 19,390                 78.2            18,408                 79.1                  982                 (0.9)
Total gross profit                $      45,538                 77.0  %       $ 41,078                 78.2  %       $     4,460                 (1.2) %



                                                           Six Months Ended June 30,
                                                  2021                                     2020                             Increase (Decrease)
                                      Amount             Gross Margin          Amount           Gross Margin            Amount            Gross Margin
Gross profit:
Products                          $     49,602                 76.4  %       $ 46,465                 77.5  %       $     3,137                 (1.1) %
Services                                38,280                 78.0            36,235                 78.2                2,045                 (0.2)
Total gross profit                $     87,882                 77.1  %       $ 82,700                 77.8  %       $     5,182                 (0.7) %




Products gross margin decreased 1.5% during the three months ended June 30, 2021
compared to the same period of 2020, primarily driven by changes in product mix
and geographic mix. The increase in products revenue in the Americas region and
Japan also contributed to the decrease in products gross margin.

Products gross margin decreased 1.1% during the six months ended June 30, 2021
compared to the same period of 2020, primarily driven by changes in product mix
and geographic mix. The increase in products revenue in the Americas region also
contributed to the decrease in products gross margin.

Services gross margin decreased 0.9% during the three months ended June 30, 2021
compared to the same period of 2020, primarily driven by the mix of services
delivered, which include technical support, training and service costs.

Services gross margin decreased 0.2% during the six months ended June 30, 2021
compared to the same period of 2020, primarily driven by the mix of services
delivered, which include technical support, training and service costs.


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Operating Expenses


Our operating expenses consist of sales and marketing, research and development
and general and administrative 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):

                                                      Three Months Ended June 30,                      Increase (Decrease)
                                                        2021                  2020                Amount                Percent
Operating expenses:
Sales and marketing                               $       19,749          $  18,476           $     1,273                     6.9  %
Research and development                                  13,491             13,450                    41                     0.3
General and administrative                                 5,082              5,237                  (155)                   (3.0)
Total operating expenses                          $       38,322          $  37,163           $     1,159                     3.1  %



                                                       Six Months Ended June 30,                      Increase (Decrease)
                                                        2021                 2020                Amount                Percent
Operating expenses:
Sales and marketing                               $      38,841          $  39,097           $      (256)                   (0.7) %
Research and development                                 27,472             28,765                (1,293)                   (4.5)
General and administrative                               10,329             11,132                  (803)                   (7.2)
Total operating expenses                          $      76,642          $  78,994           $    (2,352)                   (3.0) %



As a result of COVID-19, we implemented restrictions on travel in March 2020,
some of which are now being loosened, depending upon evolving circumstances. Our
travel restrictions, along with travel restrictions put in place by many of our
vendors, have directly and indirectly impacted activities such as marketing
events, trade shows and consulting services.

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 increase of $1.3 million, or 6.9%, in sales and marketing expense for the
three months ended June 30, 2021 compared to the same period of 2020, was
attributable to a $1.7 million increase in employee compensation and benefit
expense, partially offset by a decrease of $0.4 million in bad debt expense.
Employee compensation and benefits increased primarily due to an increase in
sales commissions.

The decrease of $0.3 million, or 0.7%, in sales and marketing expense for the
six months ended June 30, 2021 compared to the same period of 2020, was
attributable to a $0.8 million decrease in meeting and event expense and a $0.6
million decrease in travel and entertainment expense as a result of the
Company's COVID-19 safety measures and travel restrictions. These decreases were
partially offset by an increase in employee compensation and benefit expense,
which increased primarily due to an increase in sales commissions.

For the full year 2021, we expect sales and marketing expenses to remain near 2020 levels as we continue to actively control costs.

                                       29
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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 increase of $41 thousand, or 0.3%, in research and development expenses for
the three months ended June 30, 2021 compared to the same period of 2020, was
primarily attributable to a $1.3 million increase in consulting expenses,
partially offset by a decrease of $1.0 million in employee compensation and
benefit expense due to a decrease in employee headcount. The Company decreased
its employee headcount in the Asia Pacific region, excluding Japan, in the first
half of 2021 and engaged a third-party contracting firm to perform the same
distribution services that the terminated employees previously performed.
Additionally, depreciation and amortization decreased $0.2 million during the
three months ended June 30, 2021, compared to the same period of 2020.

The decrease of $1.3 million, or 4.5%, in research and development expenses for
the six months ended June 30, 2021 compared to the same period of 2020, was
primarily attributable to a $2.4 million decrease in employee compensation and
benefit expense due to a decrease in employee headcount. Additionally,
depreciation and amortization decreased $0.4 million and equipment and software
expenses decreased $0.2 million. Partially offsetting these decreases was an
increase in consulting expenses of $1.9 million related to our new third-party
contracting firm performing distribution services in Asia.

For the full year 2021, we expect research and development expenses to remain near 2020 levels as we continue to actively control costs.

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, external legal counsel (including litigation),
recruiting and other administrative services.

The decrease of $0.2 million, or 3.0%, in general and administrative expenses
for the three months ended June 30, 2021 compared to the same period of 2020,
was primarily due to a $0.2 million decrease in employee compensation and
benefit expense due to a decrease in employee headcount.

The decrease of $0.8 million, or 7.2%, in general and administrative expenses
for the six months ended June 30, 2021 compared to the same period of 2020, was
primarily due to a $0.5 million decrease in facility expense. We completed the
relocation of our headquarters facility in San Jose, California, in early 2020
and incurred certain non-recurring facility expenses in the six months ended
June 30, 2020. Additionally, employee compensation and benefit expense decreased
$0.4 million due to a decrease in employee headcount.

For the full year 2021, we expect general and administrative expenses to remain near 2020 levels as we continue to actively control costs.

Interest and Other Income (Expense), Net

Interest income consists primarily of interest income earned on our cash and cash equivalents and marketable securities. Other income (expense) consists primarily of foreign currency exchange gains and losses.


Interest and other income (expense), net, had an unfavorable change of $0.3
million for the three months ended June 30, 2021 compared to the same period of
2020, primarily driven by a decrease in interest income received from our
investments in liquid marketable securities. Interest income was $0.1 million in
the three months ended June 30, 2021 compared to $0.4 million in the three
months ended June 30, 2020 primarily as a result of fluctuations in prevailing
interest rates.
Interest and other income (expense), net, had an unfavorable change of $1.8
million for the six months ended June 30, 2021 compared to the same period of
2020, primarily driven by a $1.0 million unfavorable change in foreign exchange
gains and losses as we incurred $1.5 million of net foreign exchange losses in
the six months ended June 30, 2021 compared to $0.5
                                       30
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million of net foreign currency losses in the six months ended June 30, 2020
primarily as a result of the weakening of the Japanese Yen. Additionally,
interest income received from our investments in liquid marketable securities
decreased $0.7 million from $1.0 million in the six months ended June 30, 2020
compared to $0.3 million in the six months ended June 30, 2020 primarily as a
result of fluctuations in prevailing interest rates.

Provision for Income Taxes


We recorded income tax provisions of $0.5 million and $0.7 million for the three
and six months ended June 30, 2021, respectively, which primarily consisted of
foreign taxes. We recorded income tax provisions of $0.3 million and $0.7
million for the three and six months ended June 30, 2020, respectively, which
primarily consisted of foreign taxes.

We currently maintain a valuation allowance on federal and state deferred tax
assets. However, there is a reasonable possibility that within the next year, a
significant portion, or all, of the valuation allowance will no longer be
needed. We will continue to monitor both the quantitative and qualitative
evidence to determine if the valuation assertion would be revised.

Liquidity and Capital Resources


As of June 30, 2021, we had cash and cash equivalents of $67.9 million,
including $4.7 million held outside the United States at our foreign
subsidiaries, and $98.9 million of marketable securities. We currently do not
have any plans to repatriate our earnings from our foreign operations. As of
June 30, 2021, we had working capital of $147.3 million, accumulated deficit of
$263.0 million and total stockholders' equity of $124.5 million. Our marketable
securities are highly liquid and are classified as available for sale should the
Company decide to quickly raise cash at any time in the future.

We plan to continue to invest for long-term growth, and our investment may
increase. We 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. 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.

On May 17, 2020, we entered into a Common Stock Repurchase and Option Exchange
Agreement (the "Repurchase Agreement") with Lee Chen, the Company's founder and
its former Chairman, President and Chief Executive Officer. Pursuant to the
Repurchase Agreement, we repurchased 2.2 million shares of common stock from Mr.
Chen for approximately $13.3 million. The common shares repurchased are held in
treasury and accounted for under the cost method.

On September 17, 2020, we issued a press release announcing that our Board of
Directors had approved a stock repurchase program of up to $50 million of its
common stock over a period of twelve months. During the six months ended June
30, 2021, the Company repurchased 1.2 million shares of its common stock for a
total cost of $11.2 million. Since approving the program, the Company has
repurchased 3.9 million shares for a total cost of $30.4 million through June
30, 2021 and the Company had $19.6 million available to repurchase shares under
this program as of June 30, 2021. Our stock repurchase program does not obligate
us to acquire any specific number of shares. Shares may be repurchased in
privately negotiated and/or open market transactions. To date, all repurchases
under this program have occurred in the open market.

As described in Part II, Item 1. Legal Proceedings of this Quarterly Report on
Form 10-Q, from time to time we are 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.
                                       31

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