Growth driven by cybersecurity and portfolio
transformation; Management expects double-digit growth in Q4
A10 Networks (NYSE: ATEN), a leading provider of secure
application services and solutions, today announced financial
results for its third quarter ended September 30, 2021.
Third Quarter 2021 Financial
Summary
- Revenue of $65.4 million, up 15% year-over-year.
- Sales of security products grew 18% year-over-year.
- Improving commercial execution combined with favorable market
conditions drove 47% growth in the Americas year-over-year.
- Deferred revenue of a record $117.1 million, up 15%
year-over-year.
- GAAP gross margin of 79.8%; non-GAAP gross margin of 80.4% as
the company successfully navigated short-term input cost
pressures.
- GAAP net income of $74.9 million (114.6% of revenue), or $0.94
per diluted share, inclusive of a non-recurring tax benefit,
compared with net income of $6.5 million, or $0.08 per diluted
share in the third quarter of 2020.
- Non-GAAP net income of $13.7 million (20.9% of revenue), or
$0.17 per diluted share, compared with non-GAAP net income of $10.3
million, or $0.13 per diluted share in the third quarter of
2020.
- Adjusted EBITDA of $16.8 million, representing 25.7% of
revenues, compared to $12.5 million in the third quarter of
2020.
- Cash and cash equivalents as of September 30, 2021 was $187.5
million, up $20.6 million or 12.4% from the $166.8 million at June
30, 2021.
- Subsequent to the end of the quarter, the Board of Directors
declared a quarterly dividend of $0.05 per share, payable on
December 15, 2021 to stockholders of record on November 12, 2021.
In addition, the Board authorized a new share repurchase program
under which the Company may repurchase up to $100 million of its
outstanding common stock.
A reconciliation between GAAP and non-GAAP information is
contained in the financial statements below.
“We achieved strong top- and bottom-line results as our
security-led solutions are enabling us to capture market share and
driving accelerated growth,” said Dhrupad Trivedi, President and
Chief Executive Officer of A10 Networks. “Long-term deferred
revenue has grown 16% year-over-year, outpacing total revenue
growth. Our diversified model is enabling us to successfully
navigate regional and logistical challenges, as evidenced by our
15% revenue growth and nearly 26% adjusted EBITDA margin validating
the business model transformation. The increasing profitability of
our business required us to release our full tax valuation
allowance, as we now expect to utilize our entire net operating
loss carryforwards in future periods. Our business model positions
us to meaningfully drive growth and continue to improve the
business model. In addition, the strong, sustainable free cash flow
has enabled our Board to return capital to stockholders by
declaring a quarterly cash dividend and significantly expanding our
share repurchase program.”
Fourth Quarter Outlook and Capital
Allocation Strategy
“With a transformed portfolio focused on cybersecurity,
improving market conditions and our relentless focus on execution,
we are outperforming the industry as well as the expectations we
set at the start of the year,” continued Trivedi. “We have solid
visibility and confidence in our ability to accelerate growth
beyond the previous targets of 6-8%, though we are cognizant of
continued supply chain challenges and other global headwinds which
could impact quarter-to-quarter performance.”
Based on current visibility, management expects fourth quarter
revenue to grow approximately 10% year-over-year with the
bottom-line growing at a faster rate than the top-line. Based on
our strategy and market traction for our solutions, we expect this
positive momentum to sustain into 2022. The company will host an
analyst day in Q1 to discuss growth strategy for 2022 and
beyond.
In addition, in light of the significant improvement in
profitability and A10’s strong balance sheet, the Board of
Directors today approved a capital allocation strategy to return
capital to stockholders. As part of this, the Board declared a
quarterly dividend. The first dividend, in the amount of $0.05 per
share, will be payable, subject to any prior revocation, on
December 15, 2021 to stockholders of record on November 12, 2021.
Future dividends will be subject to further review and approval by
the Board in accordance with applicable law. The Board reserves the
right to adjust or withdraw the quarterly dividend in future
periods as it reviews A10’s capital allocation strategy from
time-to-time.
In addition, the Board authorized a new, $100 million share
repurchase program under which the Company may repurchase up to
$100 million of its outstanding common stock during the next 12
months. Under the share repurchase program, the Company is
authorized to repurchase shares of common stock in the open market,
privately negotiated transactions, in block trades or a combination
of the foregoing. The Board will review the share repurchase
program periodically and may authorize adjustment of its term and
size. The Company plans to fund repurchases from its existing cash
balance.
“These actions demonstrate the Board’s confidence in the
Company’s ability to continue to sustainably grow revenues and
profits, and signal the Board’s commitment to return capital to
stockholders in a meaningful way,” concluded Trivedi.
Conference Call
Information
A10 Networks will host a conference call today at 4:30 p.m.
Eastern time / 1:30 p.m. Pacific time for analysts and investors to
discuss its third quarter 2021 financial results. Open to the
public, interested parties may access the conference call by
dialing (844) 792-3728 or (412) 317-5105. 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 business days and may be accessed by dialing (877)
344-7529 or (412) 317-0088 and entering the passcode 10160841.
Forward-Looking
Statements
This press release contains “forward-looking statements,”
including statements regarding our anticipated future financial
results, quarterly dividend payments, our expectation that we
expect to utilize our entire net operating loss carryforwards in
future periods, future growth and continued improvements to our
business model, our visibility of our future operations and
confidence in our ability to accelerate growth beyond previous
targets, and our ability to continue to return capital to
stockholders. 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 the impact of the COVID-19 pandemic, and its
impact on the timing of customer orders and product shipments;
members of our management team or a significant number of our
global employee base becoming ill with COVID-19; changes in
government regulations and mandates to address COVID-19 that may
adversely impact our ability to continue to operate without
disruption; a significant decline in global macroeconomic
conditions that have an adverse impact on our business and
financial results; challenges to our infrastructure because of the
number of employees working from remote locations; 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 March 8, 2021.
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), this press release and the accompanying tables contain
certain non-GAAP financial measures, including non-GAAP net income
(loss), non-GAAP net income (loss) per basic and diluted share,
non-GAAP gross profit and gross margin, non-GAAP operating income
(loss) and operating margin, non-GAAP operating expenses, and
Adjusted EBITDA. 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)
amortization expense related to acquisition, (iii) non-recurring
expenses associated with the litigation settlement and internal
investigation expense, (iv) global distribution center transition
expense, (v) non-recurring facilities expense, and (vi) release of
deferred tax asset valuation allowance. 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, and (ii) global distribution center transition expense. We
define non-GAAP gross margin as our non-GAAP gross profit divided
by our GAAP revenue. We define non-GAAP operating income as our
GAAP income from operations excluding (i) stock-based compensation
and related payroll tax, (ii) amortization expense related to
acquisition, (iii) non-recurring expenses associated with the
litigation settlement and internal investigation expense, (iv)
global distribution center transition expense, and (v)
non-recurring facilities expense. We define non-GAAP operating
margin as our non-GAAP operating income 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) amortization expense related to
acquisition, (iii) non-recurring expenses associated with the
litigation settlement and internal investigation expense, (iv)
global distribution center transition expense, and (v)
non-recurring facilities expense. We define Adjusted EBITDA as our
GAAP net income excluding (i) interest expense (if any), (ii)
interest income and other (income) expense, net, (iii) depreciation
and amortization expense, (iv) benefit from (provision for) income
taxes, (v) stock-based compensation and related payroll tax, (vi)
litigation settlement and internal investigation expense, (vii)
global distribution center transition expense, and (viii)
non-recurring facilities expense.
We have included our non-GAAP net income, non-GAAP gross profit
and gross margin, non-GAAP operating income and operating margin,
non-GAAP operating expenses and Adjusted EBITDA in this press
release. 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 secure application services
and solutions for on-premises, multi-cloud and edge-cloud
environments at hyperscale. Our mission is to enable service
providers and enterprises to deliver business-critical applications
that are secure, available and efficient for multi-cloud
transformation and 5G readiness. We deliver better business
outcomes that support investment protection, new business models
and help future-proof infrastructures, empowering our customers to
provide the most secure and available digital experience. Founded
in 2004, A10 Networks is based in San Jose, Calif. and serves
customers globally. For more information, visit
https://www.a10networks.com/ and follow us @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.
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited, in thousands,
except per share amounts, on a GAAP Basis)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Revenue:
Products
$
39,815
$
32,188
$
104,718
$
92,138
Services
25,545
24,420
74,653
70,734
Total revenue
65,360
56,608
179,371
162,872
Cost of revenue:
Products
7,859
7,610
23,160
21,095
Services
5,335
5,513
16,163
15,592
Total cost of revenue
13,194
13,123
39,323
36,687
Gross profit
52,166
43,485
140,048
126,185
Operating expenses:
Sales and marketing
21,354
18,556
60,195
57,653
Research and development
13,578
13,694
41,050
42,459
General and administrative
6,931
4,994
17,260
16,126
Total operating expenses
41,863
37,244
118,505
116,238
Income from operations
10,303
6,241
21,543
9,947
Non-operating income (expense):
Interest and other income (expense),
net
(198
)
479
(1,493
)
937
Total non-operating income (expense),
net
(198
)
479
(1,493
)
937
Income before income taxes
10,105
6,720
20,050
10,884
Benefit from (provision for) income
taxes
64,781
(256
)
64,109
(909
)
Net income
$
74,886
$
6,464
$
84,159
$
9,975
Net income per share:
Basic
$
0.97
$
0.08
$
1.09
$
0.13
Diluted
$
0.94
$
0.08
$
1.05
$
0.12
Weighted-average shares used in computing
net income per share:
Basic
77,149
78,235
76,885
78,158
Diluted
79,927
80,424
79,803
80,232
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET
INCOME TO NON-GAAP NET INCOME
(unaudited, in thousands,
except per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
GAAP net income
$
74,886
$
6,464
$
84,159
$
9,975
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
4,201
3,554
11,433
9,870
Amortization expense related to
acquisition
—
253
505
759
Litigation and investigation expense
—
—
—
30
Non-recurring facilities expense
—
—
—
795
Global distribution center transition
expense
(1
)
—
2,946
—
Release of deferred tax asset valuation
allowance
(65,417
)
—
(65,417
)
—
Non-GAAP net income
$
13,669
$
10,271
$
33,626
$
21,429
GAAP net income per share:
Basic
$
0.97
$
0.08
$
1.09
$
0.13
Diluted
$
0.94
$
0.08
$
1.05
$
0.12
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
0.05
0.05
0.14
0.13
Amortization expense related to
acquisition
—
—
0.01
0.01
Non-recurring facilities expense
—
—
—
0.01
Global distribution center transition
expense
—
—
0.04
—
Release of deferred tax asset valuation
allowance
(0.82
)
—
(0.82
)
—
Non-GAAP net income per share:
Basic
$
0.18
$
0.13
$
0.44
$
0.27
Diluted
$
0.17
$
0.13
$
0.42
$
0.27
Weighted-average shares used in computing
non-GAAP net income per share:
Basic
$
77,149
$
78,235
$
76,885
$
78,158
Diluted
$
79,927
$
80,424
$
79,803
$
80,232
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited, in thousands, on a
GAAP Basis)
September 30,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents
$
85,637
$
83,281
Marketable securities
101,820
74,851
Accounts receivable, net of allowances of
$540 and $41, respectively
46,784
51,051
Inventory
19,169
20,730
Prepaid expenses and other current
assets
13,910
12,390
Total current assets
267,320
242,303
Property and equipment, net
9,555
7,888
Goodwill
1,307
1,307
Intangible assets, net
33
862
Other non-current assets
96,230
38,451
Total assets
$
374,445
$
290,811
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
3,755
$
4,851
Accrued liabilities
28,968
36,930
Deferred revenue
70,501
65,999
Total current liabilities
103,224
107,780
Deferred revenue, non-current
46,616
42,700
Other non-current liabilities
21,010
24,357
Total liabilities
170,850
174,837
Commitments and contingencies
Stockholders' equity:
Common stock, $0.00001 par value: 500,000
shares authorized; 77,508 and 76,346 shares issued and outstanding,
respectively
1
1
Treasury stock, at cost: 6,825 and 5,578
shares, respectively
(48,623
)
(37,410
)
Additional paid-in-capital
440,305
425,534
Accumulated other comprehensive income
2
98
Accumulated deficit
(188,090
)
(272,249
)
Total stockholders' equity
203,595
115,974
Total liabilities and stockholders'
equity
$
374,445
$
290,811
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited, in thousands, on a
GAAP Basis)
Nine Months Ended
September 30,
2021
2020
Cash flows from operating activities:
Net income
$
84,159
$
9,975
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
7,044
8,773
Stock-based compensation
10,848
9,382
Other non-cash items
(64,631
)
466
Changes in operating assets and
liabilities:
Accounts receivable
4,418
10,777
Inventory
1,438
(810
)
Prepaid expenses and other assets
1,905
3,716
Accounts payable
(1,086
)
(322
)
Accrued and other liabilities
(11,309
)
(4,297
)
Deferred revenue
8,417
861
Net cash provided by operating
activities
41,203
38,521
Cash flows from investing activities:
Proceeds from sales of marketable
securities
5,865
8,330
Proceeds from maturities of marketable
securities
70,870
39,280
Purchases of marketable securities
(104,732
)
(39,695
)
Purchases of property and equipment
(3,387
)
(2,549
)
Net cash provided by (used in) investing
activities
(31,384
)
5,366
Cash flows from financing activities:
Proceeds from issuance of common stock
under employee equity incentive plans
3,750
6,776
Repurchase of common stock
(11,213
)
(13,336
)
Net cash used in financing activities
(7,463
)
(6,560
)
Net increase in cash and cash
equivalents
2,356
37,327
Cash and cash equivalents—beginning of
period
$
83,281
$
45,742
Cash and cash equivalents—end of
period
$
85,637
$
83,069
A10 NETWORKS, INC.
RECONCILIATION OF GAAP GROSS
PROFIT TO NON-GAAP GROSS PROFIT
(unaudited, in thousands,
except percentages)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
GAAP gross profit
$
52,166
$
43,485
$
140,048
$
126,185
GAAP gross margin
79.8
%
76.8
%
78.1
%
77.5
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
391
459
1,335
1,256
Global distribution center transition
expense
13
—
538
—
Non-GAAP gross profit
$
52,570
$
43,944
$
141,921
$
127,441
Non-GAAP gross margin
80.4
%
77.6
%
79.1
%
78.2
%
A10 NETWORKS, INC.
RECONCILIATION OF GAAP TOTAL
OPERATING EXPENSES TO
TO NON-GAAP TOTAL OPERATING
EXPENSES
(unaudited, in
thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
GAAP total operating expenses
$
41,863
$
37,244
$
118,505
$
116,238
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
(3,810
)
(3,095
)
(10,098
)
(8,614
)
Amortization expense related to
acquisition
—
(253
)
(505
)
(759
)
Litigation and investigation expense
—
—
—
(30
)
Non-recurring facilities expense
—
—
—
(795
)
Global distribution center transition
expense
14
—
(2,408
)
—
Non-GAAP total operating expenses
$
38,067
$
33,896
$
105,494
$
106,040
A10 NETWORKS, INC.
RECONCILIATION OF GAAP INCOME
FROM OPERATIONS
TO NON-GAAP OPERATING
INCOME
(unaudited, in thousands,
except percentages)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
GAAP income from operations
$
10,303
$
6,241
$
21,543
$
9,947
GAAP operating margin
15.8
%
11.0
%
12.0
%
6.1
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
4,201
3,554
11,433
9,870
Amortization expense related to
acquisition
—
253
505
759
Litigation and investigation expense
—
—
—
30
Non-recurring facilities expense
—
—
—
795
Global distribution center transition
expense
(1
)
—
2,946
—
Non-GAAP operating income
$
14,503
$
10,048
$
36,427
$
21,401
Non-GAAP operating margin
22.2
%
17.8
%
20.3
%
13.1
%
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET
INCOME TO
EBITDA AND ADJUSTED EBITDA
(NON-GAAP)
(unaudited, in
thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
GAAP net income
$
74,886
$
6,464
$
84,159
$
9,975
Exclude: Interest and other (income)
expense, net
198
(479
)
1,493
(937
)
Exclude: Depreciation and amortization
expense
2,291
2,676
7,044
8,772
Exclude: Provision for (benefit from)
income taxes
(64,781
)
256
(64,109
)
909
EBITDA
12,594
8,917
28,587
18,719
Exclude: Stock-based compensation and
related payroll tax
4,201
3,554
11,433
9,870
Exclude: Litigation and investigation
expense
—
—
—
30
Exclude: Non-recurring facilities
expense
—
—
—
795
Exclude: Global distribution center
transition expense
(1
)
—
2,946
—
Adjusted EBITDA
$
16,794
$
12,471
$
42,966
$
29,414
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211028006082/en/
Investor Contact: Rob Fink FNK IR 646.809.4048
aten@fnkir.com
Brian Becker Chief Financial Officer
investors@a10networks.com
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