A10 Networks (NYSE:ATEN) announced today that the Audit
Committee of its Board of Directors has completed the internal
investigation previously disclosed on January 30, 2018. The
Committee conducted the investigation with the assistance of
outside counsel, as well as independent counsel. Counsel retained
forensic accountants to assist with their work.
Results of Audit Committee Internal Investigation
As a result of the investigation, errors in the company’s
financial statements were identified relating to the recognition of
revenue in a limited number of sale transactions between the
company and its resellers. The errors do not have an impact on the
aggregate amount of revenue recognized by the company. The company
does, however, expect to shift the timing of recognition of revenue
among certain quarterly periods.
The Audit Committee believes that the errors identified during
the investigation relate to the application of accounting
principles that require interpretation and judgment. The principal
factors that contributed to the company prematurely recognizing
revenue on these transactions were incorrect assessment of
resellers’ ability or intent to pay the company before they
received a purchase order or payment from their end customers, and
some of the facts and circumstances of certain transactions not
being fully communicated to accounting personnel at the time of the
transaction.
The company is also evaluating the impact of these errors on its
internal control over financial reporting and disclosure controls
and procedures, and expects to report one or more material
weaknesses in internal control over financial reporting related to
this matter and that its disclosure controls and procedures were
not effective. The company is evaluating, has begun to implement
and will continue to implement remedial measures identified by the
investigation.
The company’s Board of Directors continues to have the utmost
confidence in the company’s current officers, none of whom were
implicated in any misconduct or caused any of the errors identified
in the investigation. The Audit Committee notes management’s
assistance and helpful cooperation with all aspects of the
investigation.
Restatement of Financial Statements
As a result of the errors identified during the investigation,
the Audit Committee, in consultation with the company’s management,
has concluded that the company’s previously issued consolidated
financial statements and other financial information, and the
related report of its independent registered public accounting
firm, each as contained in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2016, and its condensed consolidated
financial statements contained in its Quarterly Reports on Form
10-Q for the quarters ended September 30, 2016 and March 31, 2017
should no longer be relied upon and should be restated.
The company’s Total Revenue was overstated by approximately $1
million for the three months ended September 30, 2016, overstated
by approximately $3 million for the year ended December 31, 2016,
and understated by approximately $4 million for the three months
ended March 31, 2017. The company’s Net Loss was understated by
approximately $1 million for the three months ended September 30,
2016, understated by approximately $2 million for the year ended
December 31, 2016, and overstated by approximately $3 million for
the three months ended March 31, 2017.
As part of the restatement process, the company is continuing to
assess the adjustments identified above and will assess any other
potential items for correction as needed.
Further Information
The company is proceeding to complete its quantification and
evaluation of the impact of the identified errors on its previously
issued financial statements. The company will provide additional
information regarding the foregoing errors and the consequent
adjustments to its financial statements and expects to file
restated consolidated financial statements as soon as practicable.
Due to the procedures required before such process can be
completed, the company is not able to predict at this time the
exact dates for such filings, but currently expects to be able to
make such filings in the third quarter of 2018. The company also
expects to provide during the third quarter an update on its
business and financial performance in the first half of 2018.
Forward Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. You can identify these
statements by our use of such words as "will," "expects," "plans,"
"intends," "believes," and similar expressions that do not relate
to historical matters. Forward-looking statements in this press
release include, but are not limited to, statements, inferences,
beliefs or expectations regarding: consequences and effects of the
Audit Committee investigation, including on previously announced
company financial results and the anticipated adjustments thereto
discussed above; timing of the announcement of the company's
financial results for the fourth quarter and full year of 2017 and
for the first half of 2018; and the company's plans, objectives and
intentions that are not historical facts generally.
The above forward-looking statements reflect the current intent,
beliefs and expectations of the company's management. They involve
known and unknown risks, uncertainties and other factors that may
cause future events, including the company's performance and
results to differ materially from those expressed or implied by the
forward-looking statements. Factors that may cause actual future
events to differ from those in the forward-looking statements
include the outcome of the company’s completion of the
quantification and evaluation of the specific impact of the errors
in the company’s revenue recognition practices on the company’s
financial results and previously issued financial statements,
including the possibility of material adjustments thereto; the
discovery of additional and unanticipated information during the
procedures required to be completed before the company is able to
file its required reports; review by, and the conclusions of, our
independent registered public accounting firm regarding our revenue
recognition and related accounting practices; the application of
accounting or tax principles in an unanticipated manner; and any
unanticipated delay in the preparation and filing of our required
reports with the SEC. See also the factors described under the
heading "Item 1A -- Risk Factors" in the company’s Annual Report on
Form 10-K for the year ended December 31, 2016, and in the
company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2017, or as otherwise described in the company’s
other public filings. The company's results may also be affected by
factors of which the company is not currently aware. The company
may not update these forward-looking statements, even though its
situation may change in the future, unless it has obligations under
the federal securities laws to update and disclose material
developments related to previously disclosed information.
About A10 Networks
A10 Networks (NYSE: ATEN) is a provider of intelligent and
automated cybersecurity solutions, providing a portfolio of
high-performance, secure application solutions that enable
intelligent automation with machine learning to ensure
business-critical applications are secure and always available.
Founded in 2004, A10 Networks is based in San Jose, California, and
serves customers in more than 80 countries with offices worldwide.
For more information, visit: www.a10networks.com and
@A10Networks.
The A10 logo, A10 Networks, A10 Thunder, Reliable Security
Always and Secure Application Services are trademarks or registered
trademarks of A10 Networks, Inc. in the United States and other
countries. All other trademarks are the property of their
respective owners.
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version on businesswire.com: https://www.businesswire.com/news/home/20180702005900/en/
Investor Contact:The Blueshirt GroupMaria Riley &
Chelsea Lish, 415-217-7722investors@a10networks.comorMedia and
Analyst Contact:A10 NetworksBen
Strickerbstricker@a10networks.com
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