Company Maintains Solid Profitability
A10 Networks, Inc. (NYSE: ATEN), a leading provider of
cybersecurity and infrastructure solutions, today announced
financial results for its second quarter ended June 30, 2024.
Second Quarter 2024 Financial
Summary
- Revenue of $60.1 million, compared to $65.8 million in the
second quarter of 2023. Revenue for the first six months of 2024
was $120.8 million, compared to $123.5 million for the first half
of 2023.
- GAAP gross margin of 80.0%; non-GAAP gross margin of 80.9% as a
result of continued focus on operational execution of business
model goals in spite of near-term volatility in the market.
- GAAP net income of $9.5 million (15.8% of revenue), or $0.13
per diluted share, compared to net income of $11.6 million (17.7%
of revenue) or $0.15 per diluted share in the second quarter of
2023.
- Non-GAAP net income of $13.2 million (22.0% of revenue), or
$0.18 per diluted share (non-GAAP EPS) compared to non-GAAP net
income of $14.5 million (22.1% of revenue) or $0.19 per diluted
share in the second quarter of 2023.
- The Company returned $16.3 million to investors, having
repurchased 844 thousand shares at an average price of $14.02 per
share for a total of $11.8 million and having paid $4.5 million in
cash dividends in the quarter.
- The Board of Directors approved a quarterly cash dividend of
$0.06 per share, payable September 3, 2024, to stockholders of
record at the close of business on August 15, 2024.
A reconciliation between GAAP and non-GAAP information is
contained in the financial statements below.
“Consistent with our prior comments and expectations, the North
American service provider market remains volatile, impacting our
quarter-to-quarter visibility,” commented Dhrupad Trivedi, A10
Network’s President and Chief Executive Officer. “While elongated
sales cycles have slowed service provider revenue, we continue to
believe that we have not lost those customer opportunities to
competitors or cancellations, and demand for our security-led
solutions remains robust. The Enterprise segment continues to grow
in line with our stated strategy. During the second quarter,
Enterprise revenue increased 25% and year-to-date, Enterprise
revenue was up 7%. We continue to increase our research and
development investments, focused on enterprise-targeted solutions
and capitalizing on AI-driven market potential, to better position
A10 to capture growth opportunities in the future.”
“Despite the macro challenges, we continued to deliver
bottom-line results in-line with expectations while returning
significant capital to shareholders,” added Trivedi. “We believe
our business model enables solid and consistent profitability, and
our revenue diversification positions A10 to navigate challenging
market conditions.”
Conference Call
Management will host a call at 1:30 p.m. Pacific time (4:30 p.m.
Eastern time) today, Tuesday, July 30, 2024, to discuss these
results. Interested parties may access the conference call by
dialing (833) 470-1428 (toll-free) or (404) 975-4839 and
referencing access code: 707454.
A live audio webcast of the conference call will be accessible
from the “Investor Relations” section of A10 Network’s website at
investors.a10networks.com. The webcast will be archived for at
least 90 days. A telephonic replay of the conference call will be
available two hours after the conclusion of the live call and will
run for seven days and may be accessed by dialing (866) 813-9403
(toll-free) or (929) 458-6194 and entering the passcode 793093.
Forward-Looking
Statements
This press release contains “forward-looking statements,”
including statements regarding our quarterly dividend payments and
stock repurchase program, strategy, growth, customer opportunities,
demand, positioning, profitability, revenue and expectations for
2024, market trends, investments and return of capital.
Forward-looking statements are subject to known and unknown risks
and uncertainties and are based on assumptions that may prove to be
incorrect, which could cause actual results to differ materially
from those expected or implied by the forward-looking statements.
Factors that may cause actual results to differ include any
unforeseen need for capital which may require us to divert funds we
may have otherwise used for the dividend program or stock
repurchase program, which may in turn negatively impact our ability
to administer the quarterly dividends or the repurchase of our
common stock; a significant decline in global macroeconomic or
political conditions that have an adverse impact on our business
and financial results; business interruptions related to our supply
chain; our ability to manage our business and expenses if customers
cancel or delay orders; execution risks related to closing key
deals and improving our execution; the continued market adoption of
our products; our ability to successfully anticipate market needs
and opportunities; our timely development of new products and
features; our ability to achieve or maintain profitability; any
loss or delay of expected purchases by our largest end-customers;
our ability to maintain or improve our competitive position;
competitive and execution risks related to cloud-based computing
trends; our ability to attract and retain new end-customers and our
largest end-consumers; our ability to maintain and enhance our
brand and reputation; changes demanded by our customers in the
deployment and payment model for our products; continued growth in
markets relating to network security; the success of any future
acquisitions or investments in complementary companies, products,
services or technologies; the ability of our sales team to execute
well; our ability to shorten our close cycles; the ability of our
channel partners to sell our products; variations in product mix or
geographic locations of our sales; risks associated with our
presence in international markets; weaknesses or deficiencies in
our internal control over financial reporting; our ability to
timely file periodic reports required to be filed under the
Securities Exchange Act of 1934; and other risks that are described
in “Risk Factors” in our periodic filings with the Securities and
Exchange Commission, including our Form 10-K filed with the
Securities and Exchange Commission on February 29, 2024. We do not
intend to update or alter our forward-looking statements, whether
as a result of new information, future events or otherwise, except
as required by applicable law.
Non-GAAP Financial
Measures
In addition to disclosing financial measures prepared in
accordance with U.S. generally accepted accounting principles
(GAAP), we refer to certain non-GAAP financial measures, including
non-GAAP net income, non-GAAP net income per basic and diluted
share (or non-GAAP EPS), non-GAAP gross profit and gross margin,
non-GAAP operating income and operating margin, non-GAAP operating
expenses, Adjusted EBITDA and Adjusted EBITDA margin. Non-GAAP
financial measures do not have any standardized meaning and are
therefore unlikely to be comparable to similarly titled measures
presented by other companies.
A10 Networks considers these non-GAAP financial measures to be
important because they provide useful measures of the operating
performance of the company, exclusive of unusual events or factors
that do not directly affect what we consider to be our core
operating performance and are used by the company's management for
that purpose.
Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP.
We define non-GAAP net income as our GAAP net income excluding:
(i) stock-based compensation and related payroll tax, (ii)
restructuring expense, (iii) cyber incident remediation expense,
(iv) one-time tax planning expense, (v) one-time legal expense and
(vi) income tax effect of non-GAAP items (i) to (v) listed above.
We define non-GAAP net income per basic and diluted share as our
non-GAAP net income divided by our basic and diluted
weighted-average shares outstanding. We define non-GAAP gross
profit as our GAAP gross profit excluding (i) stock-based
compensation and related payroll tax, (ii) restructuring expense
and (iii) cyber incident remediation expense. We define non-GAAP
gross margin as our non-GAAP gross profit divided by our GAAP
revenue. We define non-GAAP operating expenses as our GAAP
operating expenses excluding (i) stock-based compensation and
related payroll tax, (ii) restructuring expense, (iii) cyber
incident remediation expense, (iv) one-time tax planning expense
and (v) one-time legal expense. We define non-GAAP operating income
as our GAAP income from operations excluding (i) stock-based
compensation and related payroll tax, (ii) restructuring expense,
(iii) cyber incident remediation expense, (iv) one-time tax
planning expense and (v) one-time legal expense. We define non-GAAP
operating margin as our non-GAAP operating income divided by our
GAAP revenue. We define Adjusted EBITDA as our GAAP net income
excluding (i) interest and other (income) expense, net, (ii)
depreciation and amortization expense, (iii) provision for income
taxes, (iv) stock-based compensation and related payroll tax, (v)
restructuring expense, (vi) cyber incident remediation expense,
(vii) one-time tax planning expense and (viii) one-time legal
expense. We define Adjusted EBITDA margin as our Adjusted EBITDA
divided by our GAAP revenue.
Non-GAAP financial measures are presented for supplemental
informational purposes only for understanding the company's
operating results.
About A10 Networks
A10 Networks (NYSE: ATEN) provides security and infrastructure
solutions for on-premises, hybrid cloud, and edge-cloud
environments. Our 7000+ customers span global large enterprises and
communications, cloud and web service providers who must ensure
business-critical applications and networks are secure, available,
and efficient. Founded in 2004, A10 Networks is based in San Jose,
Calif. and serves customers globally. For more information, visit
A10networks.com and follow us at A10Networks.
The A10 logo and A10 Networks 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.
Source: A10 Networks, Inc.
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited, in thousands,
except per share amounts, on a GAAP Basis)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Net revenue:
Products
$
29,533
$
39,090
$
59,602
$
70,272
Services
30,563
26,727
61,169
53,236
Total net revenue
60,096
65,817
120,771
123,508
Cost of net revenue:
Products
6,813
9,436
13,612
15,519
Services
5,225
4,027
9,870
8,160
Total cost of net revenue
12,038
13,463
23,482
23,679
Gross profit
48,058
52,354
97,289
99,829
Operating expenses:
Sales and marketing
19,453
20,868
40,667
43,202
Research and development
14,737
13,965
28,800
25,630
General and administrative
5,952
5,255
12,693
12,564
Total operating expenses
40,142
40,088
82,160
81,396
Income from operations
7,916
12,266
15,129
18,433
Non-operating income, net:
Interest income
1,761
662
3,442
1,635
Other income (expense), net
1,306
1,884
3,632
(334
)
Non-operating income, net
3,067
2,546
7,074
1,301
Income before provision for income
taxes
10,983
14,812
22,203
19,734
Provision for income taxes
1,507
3,186
3,001
4,150
Net income
$
9,476
$
11,626
$
19,202
$
15,584
Net income per share:
Basic
$
0.13
$
0.16
$
0.26
$
0.21
Diluted
$
0.13
$
0.15
$
0.25
$
0.21
Weighted-average shares used in computing
net income per share:
Basic
74,366
74,017
74,401
74,009
Diluted
75,497
75,428
75,432
75,512
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET
INCOME TO NON-GAAP NET INCOME
(unaudited, in thousands,
except per share amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP net income
$
9,476
$
11,626
$
19,202
$
15,584
Non-GAAP items:
Stock-based compensation and related
payroll tax
4,309
3,527
8,298
7,497
Restructuring expense
—
—
—
1,861
Cyber incident remediation expense
(recovery)
—
(621
)
—
732
One-time tax planning expense
400
—
400
—
One-time legal expense
71
—
71
—
Income tax-effect of non-GAAP items
(1,046
)
(3
)
(2,017
)
(1,218
)
Total non-GAAP items
3,734
2,903
6,752
8,872
Non-GAAP net income
$
13,210
$
14,529
$
25,954
$
24,456
GAAP net income per share:
Basic
$
0.13
$
0.16
$
0.26
$
0.21
Diluted
$
0.13
$
0.15
$
0.25
$
0.21
Non-GAAP items:
Stock-based compensation and related
payroll tax
0.05
0.05
0.11
0.10
Restructuring expense
—
0.01
—
0.02
Cyber incident remediation expense
(recovery)
—
(0.01
)
—
0.01
One-time tax planning expense
0.01
—
0.01
—
One-time legal expense
—
—
—
—
Income tax-effect of non-GAAP items
(0.01
)
—
(0.03
)
(0.02
)
Total non-GAAP items
0.05
0.04
0.09
0.12
Non-GAAP net income per share:
Basic
$
0.18
$
0.20
$
0.35
$
0.33
Diluted
$
0.18
$
0.19
$
0.34
$
0.32
Weighted average shares used in computing
net income per share:
Basic
74,366
74,017
74,401
74,009
Diluted
75,497
75,428
75,432
75,512
Net income and earnings per share excluding adjustments are
non-GAAP financial measures presented as supplemental financial
measures to enable a user of the financial information to
understand the impact of these adjustments on reported results.
These financial measures should not be considered an alternative to
net income, operating income, cash flows provided by operating
activities, or any other measure of financial performance or
liquidity presented in accordance with U.S. GAAP. Our adjusted net
income and earnings per share may not be comparable to similarly
titled measures of another company because companies may not all
calculate adjusted net income and earnings per share in the same
manner.
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited, in thousands,
except par value, on a GAAP Basis)
June 30, 2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
77,457
$
97,244
Marketable securities
99,682
62,056
Accounts receivable, net of allowances of
$676 and $405, respectively
57,395
74,307
Inventory
25,212
23,522
Prepaid expenses and other current
assets
15,301
14,695
Total current assets
275,047
271,824
Property and equipment, net
34,012
29,876
Goodwill
1,307
1,307
Deferred tax assets, net
62,327
62,725
Other non-current assets
24,477
24,077
Total assets
$
397,170
$
389,809
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
5,642
$
7,024
Accrued liabilities
27,398
21,388
Deferred revenue
81,993
82,657
Total current liabilities
115,033
111,069
Deferred revenue, non-current
57,963
58,677
Other non-current liabilities
9,817
12,187
Total liabilities
182,813
181,933
Stockholders' equity:
Common stock, $0.00001 par value: 500,000
shares authorized; 89,580 and 89,003 shares issued and 73,860 and
74,359 shares outstanding, respectively
1
1
Treasury stock, at cost: 15,720 and 14,644
shares, respectively
(165,785
)
(150,909
)
Additional paid-in-capital
497,520
486,958
Dividends paid
(46,562
)
(37,619
)
Accumulated other comprehensive income
(loss)
465
(71
)
Accumulated deficit
(71,282
)
(90,484
)
Total stockholders' equity
214,357
207,876
Total liabilities and stockholders'
equity
$
397,170
$
389,809
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited, in thousands, on a
GAAP Basis)
Six Months Ended June
30,
2024
2023
Cash flows from operating activities:
Net income
$
19,202
$
15,584
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
5,507
4,307
Stock-based compensation
8,105
7,214
Other non-cash items
(403
)
(270
)
Changes in operating assets and
liabilities:
Accounts receivable
16,695
3,698
Inventory
(3,318
)
(1,705
)
Prepaid expenses and other assets
(541
)
3,827
Accounts payable
(2,859
)
(1,460
)
Accrued liabilities
3,640
(17,094
)
Deferred revenue
(1,378
)
4,621
Net cash provided by operating
activities
44,650
18,722
Cash flows from investing activities:
Proceeds from sales of marketable
securities
22,536
42,252
Proceeds from maturities of marketable
securities
47,699
44,532
Purchases of marketable securities
(106,293
)
(44,680
)
Capital expenditures
(6,414
)
(5,065
)
Net cash provided by (used in) investing
activities
(42,472
)
37,039
Cash flows from financing activities:
Proceeds from issuance of common stock
under employee equity incentive plans
1,854
2,559
Repurchase of common stock
(14,876
)
(6,230
)
Payments for dividends
(8,943
)
(8,880
)
Net cash used in financing activities
(21,965
)
(12,551
)
Net increase (decrease) in cash and cash
equivalents
(19,787
)
43,210
Cash and cash equivalents—beginning of
period
97,244
67,971
Cash and cash equivalents—end of
period
$
77,457
$
111,181
Non-cash investing and financing
activities:
Transfers between inventory and property
and equipment
$
1,628
$
959
Purchases of property and equipment
included in accounts payable
$
1,477
$
1,134
A10 NETWORKS, INC.
RECONCILIATION OF GAAP GROSS
PROFIT TO NON-GAAP GROSS PROFIT
(unaudited, in thousands,
except percentages)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP gross profit
$
48,058
$
52,354
$
97,289
$
99,829
GAAP gross margin
80.0
%
79.5
%
80.6
%
80.8
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
563
417
1,034
861
Restructuring expense
—
—
—
42
Cyber incident remediation expense
—
—
—
3
Non-GAAP gross profit
$
48,621
$
52,771
$
98,323
$
100,735
Non-GAAP gross margin
80.9
%
80.2
%
81.4
%
81.6
%
A10 NETWORKS, INC.
RECONCILIATION OF GAAP TOTAL
OPERATING EXPENSES
TO NON-GAAP TOTAL OPERATING
EXPENSES
(unaudited, in
thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP total operating expenses
$
40,142
$
40,088
$
82,160
$
81,396
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
(3,746
)
(3,110
)
(7,264
)
(6,636
)
Restructuring expense
—
—
—
(1,819
)
Cyber incident remediation recovery
(expense)
—
621
—
(729
)
One-time tax planning expense
(400
)
—
(400
)
—
One-time legal expense
(71
)
—
(71
)
—
Non-GAAP total operating expenses
$
35,925
$
37,599
$
74,425
$
72,212
A10 NETWORKS, INC.
RECONCILIATION OF GAAP INCOME
FROM OPERATIONS
TO NON-GAAP OPERATING
INCOME
(unaudited, in thousands,
except percentages)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP income from operations
$
7,916
$
12,266
$
15,129
$
18,433
GAAP operating margin
13.2
%
18.6
%
12.5
%
14.9
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
4,309
3,527
8,298
7,497
Restructuring expense
—
—
—
1,861
Cyber incident remediation expense
(recovery)
—
(621
)
—
732
One-time tax planning expense
400
—
400
—
One-time legal expense
71
—
71
—
Non-GAAP operating income
$
12,696
$
15,172
$
23,898
$
28,523
Non-GAAP operating margin
21.1
%
23.1
%
19.8
%
23.1
%
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET
INCOME TO
EBITDA AND ADJUSTED EBITDA
(NON-GAAP)
(unaudited, in thousands,
except percentages)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
GAAP net income
$
9,476
$
11,626
$
19,202
$
15,584
GAAP net income margin
15.8
%
17.7
%
15.9
%
12.6
%
Exclude: Interest and other (income)
expense, net
(3,067
)
(2,546
)
(7,074
)
(1,301
)
Exclude: Depreciation and amortization
2,815
2,202
5,507
4,308
Exclude: Provision for income taxes
1,507
3,186
3,001
4,150
EBITDA
10,731
14,468
20,636
22,741
Exclude: Stock-based compensation and
related payroll tax
4,309
3,527
8,298
7,497
Exclude: Restructuring expense
—
—
—
1,861
Exclude: Cyber incident remediation
expense
—
(621
)
—
732
Exclude: One-time tax planning expense
400
—
400
—
Exclude: One-time legal expense
71
—
71
—
Adjusted EBITDA
$
15,511
$
17,374
$
29,405
$
32,831
Adjusted EBITDA margin
25.8
%
26.4
%
24.3
%
26.6
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240730915062/en/
Investor Contact: Rob Fink / Tom Baumann FNK IR
646.809.4048 / 646.349.6641 aten@fnkir.com
Brian Becker Chief Financial Officer
investors@a10networks.com
A10 Networks (NYSE:ATEN)
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A10 Networks (NYSE:ATEN)
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