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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549 
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to              
Commission File Number: 001-37771
 
Acacia Communications, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware
 
27-0291921
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
Three Mill and Main Place, Suite 400
Maynard, Massachusetts 01754
(Address of principal executive offices)
(978) 938-4896
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.0001 par value per share
 
ACIA
 
The Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
  
Accelerated filer
 
 
 
 
 
 
 
Non-accelerated filer
 
 
  
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.             
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No   
As of August 2, 2019, the registrant had 41,052,804 shares of common stock outstanding.
 



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ACACIA COMMUNICATIONS, INC.
Table of Contents
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EX-31.1
 
(CERTIFICATION OF THE CEO PURSUANT TO SECTION 302)
 
 
EX-31.2
 
(CERTIFICATION OF THE CFO PURSUANT TO SECTION 302)
 
 
EX-32.1
 
(CERTIFICATION OF THE CEO PURSUANT TO SECTION 906)
 
 
EX-32.2
 
(CERTIFICATION OF THE CFO PURSUANT TO SECTION 906)
 
 


i

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “will” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” under Part II, Item 1A below and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as indicative of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:
the occurrence of any event, change or other circumstances that could give rise to the termination of the Agreement and Plan of Merger we have entered into with Cisco Systems, Inc. and Amarone Acquisition Corp. and any inability to complete the proposed merger due to the failure to obtain stockholder approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the proposed merger;
our ability to sustain or increase revenue from our larger customers, generate revenues from new customers, or offset the discontinuation of concentrated purchases by our larger customers with purchases by new or existing customers;
our ability to anticipate the timing and scale of demand for our products, including from our largest customers;
our expectations regarding our expenses and revenue, our ability to maintain and expand gross profit, the sufficiency of our cash resources and needs for additional financing;
our ability to produce products free of problems, defects, errors and vulnerabilities;
our anticipated growth strategies;
our expectations regarding competition;
the anticipated trends and challenges in our business and the markets in which we operate;
our expectations regarding, and the capacity and stability of, our supply chain and manufacturing;
the size and growth of the potential markets for our products and the ability to serve those markets;
the scope, progress, expansion, and costs of developing and commercializing our products;
the timing, rate and degree of introducing any of our products into the market and the market acceptance of any of our products;
our ability to establish and maintain development partnerships;
our ability to attract or retain key personnel;
our expectations regarding federal, state and foreign regulatory requirements, including export controls, tax law changes and interpretations, economic sanctions and anti-corruption regulations;
regulatory or legislative developments in the United States and foreign countries, including trade policy and tariffs and export control laws or regulations that could impede our ability to sell our products to our customer ZTE Kangxun Telecom Co. Ltd. or any of its affiliates, or that could impede our ability to sell our

1

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products to other customers in certain foreign jurisdictions, particularly in China, or that could impede sales by such customers in the United States; and
our ability to obtain and maintain intellectual property protection for our products.
Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.


2

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PART I—FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements (Unaudited).
ACACIA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(Unaudited)

 
June 30, 2019
 
December 31, 2018
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
46,175

 
$
60,444

Marketable securities - short-term
271,962

 
264,660

Accounts receivable
89,496

 
90,831

Inventory
38,551

 
25,511

Prepaid expenses and other current assets
7,030

 
12,598

Total current assets
453,214

 
454,044

Marketable securities - long-term
116,390

 
74,764

Property and equipment, net
27,559

 
26,643

Operating lease right-of-use assets
27,345

 

Deferred tax asset
43,223

 
38,717

Other assets
1,049

 
7,691

Total assets
$
668,780

 
$
601,859

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
47,682

 
$
46,650

Accrued liabilities
55,888

 
31,848

Deferred revenue
4,977

 
5,101

Total current liabilities
108,547

 
83,599

Income taxes payable
7,117

 
8,791

Non-current operating lease liabilities
17,455

 

Other long-term liabilities
6,111

 
6,742

Total liabilities
139,230

 
99,132

 
 
 
 
Commitments and contingencies (Note 12)


 


 
 
 
 
Stockholders’ equity:
 

 
 

Preferred stock, $0.0001 par value; 5,000 shares authorized; none issued and outstanding at June 30, 2019 and December 31, 2018

 

Common stock, $0.0001 par value; 150,000 shares authorized; 41,955 and 41,024 shares issued at June 30, 2019 and December 31, 2018, respectively
4

 
4

Treasury stock, at cost; 974 shares at June 30, 2019 and December 31, 2018
(39,712
)
 
(39,712
)
Additional paid-in capital
381,105

 
360,267

Accumulated other comprehensive income (loss)
661

 
(372
)
Retained earnings
187,492

 
182,540

Total stockholders’ equity
529,550

 
502,727

Total liabilities and stockholders’ equity
$
668,780

 
$
601,859

 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

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ACACIA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
111,183

 
$
65,003

 
$
216,399

 
$
137,944

Cost of revenue
60,096

 
39,798

 
115,470

 
88,668

Gross profit
51,087

 
25,205

 
100,929

 
49,276

Operating expenses:
 
 
 
 
 

 
 

Research and development
28,976

 
24,340

 
59,929

 
48,785

Sales, general and administrative
29,899

 
12,984

 
45,686

 
27,272

Total operating expenses
58,875

 
37,324

 
105,615

 
76,057

Loss from operations
(7,788
)
 
(12,119
)
 
(4,686
)
 
(26,781
)
Other income, net:
 
 
 
 
 

 
 

Interest income, net
2,902

 
1,491

 
5,348

 
2,845

Other expense, net
(55
)
 
(191
)
 
(107
)
 
(262
)
Total other income, net
2,847

 
1,300

 
5,241

 
2,583

(Loss) income before benefit for income taxes
(4,941
)
 
(10,819
)
 
555

 
(24,198
)
Benefit for income taxes
(2,916
)
 
(7,574
)
 
(4,397
)
 
(11,875
)
Net (loss) income
$
(2,025
)
 
$
(3,245
)
 
$
4,952

 
$
(12,323
)
(Loss) earnings per share:
 
 
 
 
 

 
 

Basic
$
(0.05
)
 
$
(0.08
)
 
$
0.12

 
$
(0.31
)
Diluted
$
(0.05
)
 
$
(0.08
)
 
$
0.12

 
$
(0.31
)
Weighted-average shares used to compute (loss) earnings per share:
 
 
 
 
 

 
 

Basic
40,777

 
40,307

 
40,532

 
40,074

Diluted
40,777

 
40,307

 
42,154

 
40,074


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

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ACACIA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net (loss) income
$
(2,025
)
 
$
(3,245
)
 
$
4,952

 
$
(12,323
)
Other comprehensive income (loss):
 
 
 
 
 

 
 

Changes in unrealized income (loss) on marketable securities, net of income taxes of $(72), $(160), $(54) and $33 for the three and six months ended June 30, 2019 and 2018, respectively
478

 
252

 
1,033

 
(150
)
Comprehensive (loss) income
$
(1,547
)
 
$
(2,993
)
 
$
5,985

 
$
(12,473
)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

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ACACIA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive (Loss) Income
 
 
 
 
 
 
Common Stock
 
Treasury Stock
 
 
 
Retained Earnings
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Total
Balance at December 31, 2017
 
39,606

 
$
4

 

 
$

 
$
324,944

 
$
(320
)
 
$
177,422

 
$
502,050

Adoption of ASU 2014-09, net of tax of $51
 
 
 
 
 
 
 
 
 
 
 
 
 
157

 
157

Vesting of restricted common stock
 
21

 
 

 
 
 
 
 
 

 
 

 
 

 

Exercise of common stock options
 
220

 

 
 
 
 
 
968

 
 

 
 

 
968

Vesting of restricted stock units
 
214

 

 
 
 
 
 

 
 
 
 
 

Stock-based compensation expense
 
 

 
 

 
 
 
 
 
6,514

 
 

 
 

 
6,514

Unrealized losses on marketable securities, net of tax of $88
 
 
 
 
 
 
 
 
 
 
 
(402
)
 
 
 
(402
)
Net loss
 
 

 
 

 
 
 
 
 
 

 
 

 
(9,078
)
 
(9,078
)
Balance at March 31, 2018
 
40,061

 
4

 

 

 
332,426

 
(722
)
 
168,501

 
500,209

Adoption of ASU 2018-02
 
 
 
 
 
 
 
 
 
 
 
(45
)
 
45

 

Treasury stock acquired
 
 
 
 
 
24

 
(771
)
 
 
 
 
 
 
 
(771
)
Exercise of common stock options
 
128

 

 
 
 
 
 
552

 
 
 
 
 
552

Vesting of restricted stock units
 
271

 

 
 
 
 
 

 
 
 
 
 

Common stock issued under employee stock purchase plan
 
57

 

 
 
 
 
 
1,367

 
 
 
 
 
1,367

Stock-based compensation expense
 
 
 
 
 
 
 
 
 
7,563

 
 
 
 
 
7,563

Unrealized gains on marketable securities, net of tax of $(54)
 
 
 
 
 
 
 
 
 
 
 
252

 
 
 
252

Net loss
 
 
 
 
 
 
 
 
 
 
 
 
 
(3,245
)
 
(3,245
)
Balance at June 30, 2018
 
40,517

 
$
4

 
24

 
$
(771
)
 
$
341,908

 
$
(515
)
 
$
165,301

 
$
505,927

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
 
41,024

 
$
4

 
974

 
$
(39,712
)
 
$
360,267

 
$
(372
)
 
$
182,540

 
$
502,727

Exercise of common stock options
 
190

 

 
 
 
 
 
1,400

 
 

 
 

 
1,400

Vesting of restricted stock units
 
316

 

 
 
 
 
 

 
 

 
 

 

Stock-based compensation expense
 
 

 
 

 
 
 
 
 
7,967

 
 

 
 

 
7,967

Unrealized gains on marketable securities, net of tax of $(88)
 
 

 
 

 
 
 
 
 
 

 
555

 
 

 
555

Net income
 
 

 
 

 
 
 
 
 
 

 
 

 
6,977

 
6,977

Balance at March 31, 2019
 
41,530


4


974


(39,712
)

369,634


183


189,517


519,626

Exercise of common stock options
 
72

 

 
 
 
 
 
413

 
 
 
 
 
413

Vesting of restricted stock units
 
297

 

 
 
 
 
 
 
 
 
 
 
 

Common stock issued under employee stock purchase plan
 
56

 

 
 
 
 
 
2,131

 
 
 
 
 
2,131

Stock-based compensation expense
 
 
 
 
 
 
 
 
 
8,927

 
 
 
 
 
8,927

Unrealized gains on marketable securities, net of tax of $(72)
 
 
 
 
 
 
 
 
 
 
 
478

 
 
 
478

Net loss
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,025
)
 
(2,025
)
Balance at June 30, 2019
 
41,955


$
4


974


$
(39,712
)

$
381,105


$
661


$
187,492


$
529,550


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

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ACACIA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited) 
 
Six Months Ended June 30,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 

Net income (loss)
$
4,952

 
$
(12,323
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation
6,330

 
6,634

Stock-based compensation
17,007

 
14,126

Deferred income taxes
(4,506
)
 
(9,823
)
Non-cash lease expense
2,406

 

Other non-cash benefits
(1,439
)
 
(47
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
1,335

 
30,203

Inventory
(13,040
)
 
11,582

Prepaid expenses and other current assets
5,568

 
(2,236
)
Other assets
(247
)
 
613

Accounts payable
(390
)
 
(17,439
)
Accrued liabilities
20,216

 
(4,053
)
Deferred revenue
(920
)
 
2,826

Income taxes payable
(1,674
)
 
(1,829
)
Lease liabilities
(1,697
)
 

Other long-term liabilities
165

 
(420
)
Net cash provided by operating activities
34,066

 
17,814

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Purchases of property and equipment
(6,072
)
 
(9,683
)
Purchases of marketable securities
(229,695
)
 
(142,614
)
Sales and maturities of marketable securities
183,488

 
165,508

Deposits

 
20

Net cash (used in) provided by investing activities
(52,279
)
 
13,231

 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Treasury stock acquired

 
(771
)
Proceeds from the issuance of common stock under stock-based compensation plans
3,944

 
2,887

Net cash provided by financing activities
3,944

 
2,116

 
 
 
 
Net (decrease) increase in cash and cash equivalents
(14,269
)
 
33,161

Cash and cash equivalents—Beginning of period
60,444

 
67,495

Cash and cash equivalents—End of period
$
46,175

 
$
100,656

 
 
 
 
Supplemental cash flow disclosures:
 

 
 

(Refunds received) cash paid for income taxes, net
$
(996
)
 
$
659

 
 
 
 
Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Right of use assets acquired under operating leases
$
7,084

 
$

Capital expenditures incurred but not yet paid
$
1,618

 
$
1,025


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

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Acacia Communications, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 
1. NATURE OF THE BUSINESS AND OPERATIONS
 Acacia Communications, Inc. was incorporated on June 2, 2009, as a Delaware corporation. Acacia Communications, Inc. and its wholly-owned subsidiaries (the “Subsidiaries”) are collectively referred to as the Company. The Company’s mission is to deliver high-speed coherent optical interconnect products that transform communications networks, relied upon by cloud infrastructure operators and content and communication service providers, through improvements in performance and capacity and reductions in associated costs. By implementing optical interconnect technology in a silicon-based platform, a process the Company refers to as the siliconization of optical interconnect, the Company believes it is leading a disruption that is analogous to the computing industry’s integration of multiple functions into a microprocessor. The Company’s products fall into three product groups: embedded modules, pluggable modules and semiconductors. The Company’s embedded module and pluggable module product groups consist of optical interconnect modules with transmission speeds ranging from 100 to 1,200 gigabits per second (“Gbps”), for use in long-haul, metro and inter-data center markets. The Company’s semiconductor product group consists of its low-power coherent digital signal processor application-specific integrated circuits (“DSP ASICs”) and its silicon photonic integrated circuits (“silicon PICs”) which are either integrated into the Company’s embedded and pluggable modules or sold to customers on a standalone basis for integration into internally developed or other merchant modules. The Company is also developing a 400ZR module that will expand its pluggable module product group, and enable inter-data center transmission capacity of 400 Gbps in the same compact pluggable form factors used for 400G client optics, including QSFP-DD and OSFP. The Company’s modules perform a majority of the digital signal processing and optical functions in optical interconnects and offer low power consumption, high density and high speeds at attractive price points. Through the use of standard interfaces, the Company’s modules can be easily integrated with customers’ network equipment. The advanced software in the Company’s modules enables increased configurability and automation, provides insight into network and connection point characteristics and helps identify network performance problems, all of which increase flexibility and reduce operating costs.
The Company is headquartered in Maynard, Massachusetts, and has wholly-owned subsidiaries in North America, Europe and Asia.
On July 8, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cisco Systems, Inc., a California corporation (the “Parent”), and Amarone Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Parent (the “Merger Sub”). See Note 17, Subsequent Events, and the description of the Merger Agreement included under the heading “Overview” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements include the accounts of Acacia Communications, Inc. and its Subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. For further information, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on February 21, 2019. There have been no significant changes in the Company’s accounting policies from those disclosed in the Annual Report on Form 10-K that have had a material impact on the Company’s condensed consolidated financial statements, except for changes as a result of the adoption of Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842) (“ASC 842”) as discussed below.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2018, and in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s condensed consolidated balance sheet as of June 30, 2019, its condensed consolidated statements of operations for the three and six months ended June 30, 2019 and 2018, its condensed consolidated statements of comprehensive (loss) income for the three and six months ended June 30, 2019 and 2018, its condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2019 and 2018, and its condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018. All intercompany balances and transactions have been eliminated in consolidation. The financial data and the other financial information disclosed in the notes to these condensed consolidated financial statements related to the

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three and six months ended June 30, 2019 and 2018 are also unaudited. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full fiscal year or any other period.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASC 842 which requires lessees to recognize a right-of-use (“ROU”) asset and lease liability on the balance sheet for virtually all leases. From a lessee perspective, ASC 842 retains a dual model requiring leases to be classified as either operating or financing leases for the income statement. Operating leases will result in straight-line expense, and financing leases will have a front-loaded expense pattern with an interest expense component. On January 1, 2019, the Company adopted ASC 842 and all related amendments using the modified retrospective approach and the effective date as the date of initial application. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. Adoption of the new standard resulted in the recording of lease ROU assets and lease liabilities of approximately $21.5 million and $16.0 million, respectively, as of January 1, 2019. The difference between the ROU assets and lease liabilities relates to deferred and prepaid rent balances which are now included as part of the ROU assets. The standard did not materially impact the Company’s condensed consolidated income statements. In accordance with ASC 842, the Company determines if an arrangement is a lease at inception based on whether there is an identified asset, whether the Company has the right to obtain substantially all of the economic benefits from use of the asset and whether the Company has the right to direct the use of the asset. Currently, the Company only has operating leases and does not have any financing leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. See Note 8, Leases, for further disclosures and detail regarding our operating leases.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 is intended to provide more decision-useful information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The main provisions include presenting financial assets measured at amortized cost at the amount expected to be collected, which is net of an allowance for credit losses, and recording credit losses related to available-for-sale securities through an allowance for credit losses. The amendments in ASU 2016-13 are effective for fiscal years beginning after December 15, 2019, and must be applied using a modified retrospective approach with earlier adoption permitted for fiscal years beginning after December 15, 2018. The Company does not expect the adoption of this amendment to have a material impact on its condensed consolidated financial statements.
3. REVENUE
The opening and closing balances of the Company’s deferred revenue and accounts receivable for the six months ended June 30, 2019 are as follows (in thousands):
 
Balance at Beginning of Period
 
Decrease
 
Balance at End of Period
Six Months Ended June 30, 2019
 
 
 
 
 
Accounts receivable
$
90,831

 
(1,335
)
 
$
89,496

Deferred revenue (current)
$
5,101

 
(124
)
 
$
4,977

Deferred revenue (non-current)
$
3,707

 
(796
)
 
$
2,911


The amounts of revenue recognized in the period that were included in the opening deferred revenue balances were immaterial for the six months ended June 30, 2019. Generally, increases in current and non-current deferred revenue are related to billings to, or advance payments from, customers for which the Company has not yet fulfilled its performance obligations, and decreases are related to revenue recognized. Deferred revenue not expected to be recognized within the Company’s

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operating cycle of one year is presented as a component of “Other long-term liabilities” on the condensed consolidated balance sheets.
At times, the Company receives orders for products that may be delivered over multiple dates that may extend across reporting periods. The Company invoices for each delivery upon shipment and recognizes revenues for each distinct product delivered, assuming transfer of control has occurred. Generally, scheduled delivery dates are within one year, and the Company has elected to use the optional exemption whereby revenues allocated to partially completed contracts with an expected duration of one year or less are not disclosed. As of June 30, 2019, the Company had no contracts with unsatisfied performance obligations with a duration of more than one year.
Disaggregation of Revenue
The following table provides information about disaggregated revenue based on product group (in thousands). Further disaggregation of revenue by geographic country can be found in Note 14.
 
Three Months Ended June 30, 2019
 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2019
 
Six Months Ended June 30, 2018
 
Revenue ($)
 
Revenue (%)
 
Revenue ($)
 
Revenue (%)
 
Revenue ($)
 
Revenue (%)
 
Revenue ($)
 
Revenue (%)
Embedded modules
$
21,844

 
20
%
 
$
9,482

 
14
%
 
$
39,270

 
18
%
 
$
32,512

 
23
%
Pluggable modules
54,905

 
49
%
 
42,013

 
65
%
 
110,422

 
51
%
 
73,993

 
54
%
Semiconductors
34,434

 
31
%
 
13,508

 
21
%
 
66,707

 
31
%
 
31,439

 
23
%
Total revenue
$
111,183

 
100
%
 
$
65,003

 
100
%
 
$
216,399

 
100
%
 
$
137,944

 
100
%

4. FINANCIAL INSTRUMENTS
The following tables set forth the Company’s cash, cash equivalents and short- and long-term marketable securities as of June 30, 2019 and December 31, 2018 (in thousands):
 
As of June 30, 2019
 
 
 
Gross Unrealized
 
 
 
 
 
 
 
 
 
 
 
Losses
 
 
 
 
 
 
 
Amortized Cost
 
Gains
 
Less than One Year
 
Greater than One Year
 
Estimated Fair Value
 
Cash and Cash Equivalents
 
Marketable Securities
Cash
$
36,384

 
$

 
$

 
$

 
$
36,384

 
$
36,384

 
$

Money market funds
4,793

 

 

 

 
4,793

 
4,793

 

U.S. treasury bonds
65,666

 
108

 

 

 
65,774

 

 
65,774

Commercial paper
45,843

 
9

 
(1
)
 

 
45,851

 
2,998

 
42,853

Certificates of deposit
27,695

 
37

 

 

 
27,732

 

 
27,732

Asset-backed securities
77,625

 
164

 
(2
)
 
(2
)
 
77,785

 
2,000

 
75,785

Corporate debt securities
175,766

 
453

 
(3
)
 
(8
)
 
176,208

 

 
176,208

Total
$
433,772

 
$
771

 
$
(6
)
 
$
(10
)
 
$
434,527

 
$
46,175

 
$
388,352


 
As of December 31, 2018
 
 
 
Gross Unrealized
 
 
 
 
 
 
 
Amortized Cost
 
 
 
Losses
 
Estimated Fair Value
 
Cash and Cash Equivalents
 
Marketable Securities
 
 
Gains
 
Less than One Year
 
Greater than One Year
 
 
 
Cash
$
49,650

 
$

 
$

 
$

 
$
49,650

 
$
49,650

 
$

Money market funds
1,563

 

 

 

 
1,563

 
1,563

 

U.S. treasury bonds
40,367

 

 
(9
)
 
(3
)
 
40,355

 

 
40,355

Commercial paper
60,435

 

 
(13
)
 

 
60,422

 
6,668

 
53,754

Certificates of deposit
36,839

 
13

 
(12
)
 

 
36,840

 

 
36,840

Asset-backed securities
47,798

 
1

 
(63
)
 
(22
)
 
47,714

 

 
47,714

Corporate debt securities
163,654

 
9

 
(239
)
 
(100
)
 
163,324

 
2,563

 
160,761

Total
$
400,306

 
$
23

 
$
(336
)
 
$
(125
)
 
$
399,868

 
$
60,444

 
$
339,424



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The proceeds from the sales and maturities of marketable securities, which were primarily reinvested and resulted in realized gains and losses, were as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Proceeds from the sales and maturities of marketable securities
$
93,198

 
$
77,678

 
$
183,488

 
$
165,508

Realized gains
$
3

 
$
1

 
$
6

 
$
5

Realized losses
$

 
$
(30
)
 
$
(2
)
 
$
(32
)

 The contractual maturities of short-term and long-term marketable securities held at June 30, 2019 and December 31, 2018 are as follows (in thousands):
 
As of June 30, 2019
 
As of December 31, 2018
 
Amortized Cost Basis
 
Aggregate Fair Value
 
Amortized Cost Basis
 
Aggregate Fair Value
Due within one year
$
271,569

 
$
271,962

 
$
264,959

 
$
264,660

Due after one year through four years
116,027

 
116,390

 
74,902

 
74,764

Total
$
387,596

 
$
388,352

 
$
339,861

 
$
339,424



As of June 30, 2019, the Company believed that any unrealized losses on its available-for-sale investments were temporary. The investments with unrealized losses consisted primarily of corporate debt securities. In making the determination that the decline in fair value of these securities was temporary, the Company considered various factors, including, but not limited to: the length of time each security was in an unrealized loss position; the extent to which fair value was less than cost; the financial condition and near-term prospects of the issuers; and the Company’s intent not to sell these securities and the assessment that it is more likely than not that the Company would not be required to sell these securities before the recovery of their amortized cost basis.
5. INVENTORY
Inventory consisted of the following as of June 30, 2019 and December 31, 2018 (in thousands):
 
June 30, 2019
 
December 31, 2018
Raw materials
$
18,407

 
$
18,420

Work-in-process
635

 
218

Finished goods
19,509

 
6,873

Inventory
$
38,551

 
$
25,511


6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of June 30, 2019 and December 31, 2018 (in thousands):
 
June 30, 2019
 
December 31, 2018
Engineering laboratory equipment
$
54,402

 
$
50,590

Computer software
3,584

 
3,132

Computer equipment
6,984

 
6,018

Furniture and fixtures
3,602

 
3,227

Leasehold improvements
3,695

 
3,581

Construction in progress
2,498

 
1,279

Total property and equipment
74,765

 
67,827

Less: Accumulated depreciation
(47,206