A10 Networks Inc

Previous wording

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 six secure application solutions; Thunder Application Delivery Controller (“ADC”), Lightning Application Delivery Controller (“Lightning ADC”), Thunder Carrier Grade Networking (“CGN”), Thunder Threat Protection System (“TPS”), Thunder SSL Insight (“SSLi”) and Thunder Convergent Firewall (“CFW”), and two intelligent management and automation tools; Harmony Controller and aGalaxy TPS. 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.

Current wording

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.

Previous wording

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 software-as-a-service; and (ii) services revenue, which includes post contract support (“PCS”), professional services, and training. 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.

Current wording

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.

Previous wording

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 58% and 66% of our total revenue during 2023 and 2022, respectively, and enterprise, which accounted for 42% and 34% of our total revenue during 2023 and 2022, respectively. During 2023, we experienced an increase in demand from our enterprise customers and a decrease in demand from our service provider customers related to lower service provider capital spending and longer sales cycles. 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 United States and all other countries in the Americas (excluding the United States). The APJ region comprises Japan and all other countries in APAC (excluding 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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 and service providers. Purchases from our ten largest end-customers accounted for 33%, 41% and 39% of our total revenue for 2023, 2022 and 2021, 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 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 was the case in 2023.

Current wording

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.

Previous wording

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 partner programs and increase awareness of our solutions on a global basis. Our investments in growth in these areas may affect our short-term profitability.

Current wording

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.

Previous wording

Products revenue decreased $32.1 million, or 19%, in 2023 compared to 2022 primarily driven by lower demand from our service provider customers in the Americas, APAC and EMEA regions, partially offset by higher demand from enterprise customers in Japan.

Current wording

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.

Previous wording

Services revenue increased $3.5 million, or 3%, in 2023 compared to 2022. The increase was primarily attributable to the increase in PCS sales in connection with our increased installed customer base in the Japan, Americas and EMEA regions.

Current wording

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.

Previous wording

During 2023, $132.7 million, or 53% of total revenue, was generated from the Americas region, which represents an 11% decrease compared to 2022. The decrease was primarily due to lower products revenue driven by a decrease in demand from our service provider customers.

Current wording

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.

Previous wording

During 2023, $77.6 million, or 31% of total revenue, was generated from APJ, which represents a 13% decrease compared to 2022. The decrease was mainly due to decreased revenue from both our enterprise and service provider customers.

Current wording

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.

Previous wording

During 2023, $41.3 million, or 16% of total revenue, was generated from EMEA, which represented a 1% decrease compared to 2022. The decrease was primarily due to lower products revenue driven by a decrease in demand from our service provider customers driven by decreased demand.

Current wording

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.

Previous wording

Services gross margin percentage increased by 0.7% in 2023 compared to 2022 primarily due to a decrease in personnel-related support costs.

Current wording

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.

Previous wording

The $2.5 million decrease in sales and marketing expenses in 2023 compared to 2022 was primarily due to decreases of $3.5 million in personnel costs as a result of a decrease in headcount and $0.4 million in marketing expenses, partially offset by increases of $0.9 million in credit loss expense and $0.5 million in travel-related expense.

Current wording

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.

Previous wording

In 2024, we expect sales and marketing expenses to increase from 2023 levels as we continue to apply a disciplined approach to focus our investments in areas that offer the greatest opportunities.

Current wording

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.

Previous wording

In 2024, we expect research and development expenses to increase from 2023 levels reflecting strategic investments in our growth priorities, including cybersecurity technology.

Current wording

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.

Previous wording

The $0.4 million increase in general and administrative expenses in 2023 compared to 2022 was primarily due to an increase of $1.3 million in professional services expense as a result of increases in accounting and tax fees. Additionally, facility expense increased $0.7 million primarily related to rent expense, equipment expense increased $0.4 million and depreciation expense increased $0.3 million. Partially offsetting these increases was a decrease of $1.6 million in office expenses as the Company paid catch-up tax fee in 2022 related to a property tax audit. Additionally, consulting expense decreased $0.7 million.

Current wording

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.

Previous wording

In 2024, we expect general and administrative expenses to increase from 2023 levels as we continue to apply a disciplined approach to focus our investments in areas that offer the greatest opportunities.

Current wording

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.

Previous wording

Interest income was $5.1 million and $1.3 million in the years ended December 31, 2023 and 2022, respectively.

Current wording

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

Previous wording

In the years ended December 31, 2023 and 2022, interest and other income (expense), net consisted primarily of foreign currency exchange gains and losses, which had a favorable change of $0.6 million in the year ended December 31, 2023 compared to 2022. Additionally, we recorded impairment expense of $1.0 million in the year ended December 31, 2022 related to an equity investment in a private company held by the Company.

Current wording

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.

Previous wording

We recorded income tax provisions of $3.8 million for the year ended December 31, 2023 and $5.8 million for the year ended December 31, 2022. 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 years ended December 31, 2023 and 2022 primarily consisted of state and foreign income taxes.

Current wording

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.

Previous wording

As of December 31, 2023, we had cash and cash equivalents of $97.2 million, including $3.4 million held outside the United States in our foreign subsidiaries, and $62.1 million of marketable securities. We currently do not have any plans to repatriate our earnings from our foreign operations. As of December 31, 2023, we had working capital of $160.8 million, accumulated deficit of $90.5 million and total stockholders’ equity of $207.9 million.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

On September 8, 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. The common shares repurchased are held in treasury and accounted for under the cost method.

Current wording

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.

Previous wording

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, at which point it expired. On November 7, 2023, the Company announced its Board of Directors had authorized a stock repurchase program of up to $50 million of its common stock over a period of twelve months. As of December 31, 2023, the Company had $49.7 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 these programs, other than the repurchase from Summit, have occurred in the open market. 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.

Current wording

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.

Previous wording

During the year ended December 31, 2022, cash provided by operating activities was $66.1 million, consisting of net income of $46.9 million, partially offset by a non-cash benefit of $21.5 million and an unfavorable net change in operating assets and liabilities of $2.3 million. Our non-cash benefit consisted primarily of non-cash charges of $13.3 million for stock-based compensation and $7.4 million of depreciation and amortization expense. The net change in our operating assets and liabilities primarily reflects cash outflows from changes in accounts receivable of $10.1 million and accrued and other liabilities of $1.3 million, partially offset by cash inflows from changes in deferred revenue of $5.4 million, inventory of $2.0 million and prepaid expenses and other assets of $1.6 million.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

During the year ended December 31, 2022, cash used in investing activities was $11.1 million, consisting of purchases of marketable securities of $55.4 million and capital expenditures of $10.8 million, partially offset by proceeds from maturities of marketable securities of $71.0 million and sales of marketable securities of $6.3 million.

Current wording

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.

Previous wording

During the year ended December 31, 2022, cash used in financing activities was $88.1 million consisting primarily of $79.3 million of cash used to repurchase our common stock in the open market and from Summit, and $15.9 million used for the payments of cash dividends, partially offset by $7.0 million of cash proceeds from common stock issuances under our equity incentive plans.

Current wording

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.

Previous wording

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. 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.

Current wording

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.

Previous wording

We derive revenue from two sources: (i) products revenue, which includes hardware, perpetual software license and subscription revenue; and (ii) services revenue, which includes post contract support (“PCS”), professional services, and training. 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.

Current wording

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.