Portfolio diversification enabled consistent
and profitable growth, mitigating macro headwinds
A10 Networks (NYSE: ATEN), a leading provider of cybersecurity
and infrastructure solutions, today announced financial results for
its first quarter ended March 31, 2022.
First Quarter 2022 Financial
Summary
- Revenue of $62.7 million, up 14.3% year-over-year.
- Security-led product revenue grew 20.1% year-over-year.
- Revenue growth led by 25.5% increase in the Americas
year-over-year.
- GAAP gross margin of 79.5%; non-GAAP gross margin of 80.2% as a
result of better product mix and successfully navigated short-term
input cost pressures.
- GAAP net income of $6.3 million, or $0.08 per diluted share,
compared with net income of $2.7 million, or $0.03 per diluted
share in the first quarter of 2021.
- Non-GAAP net income of $10.0 million, or $0.13 per diluted
share, compared with non-GAAP net income of $9.4 million, or $0.12
per diluted share in the first quarter of 2021.
- Adjusted EBITDA of $13.5 million, representing 21.6% of
revenue.
- Repurchased 2.1 million shares in the quarter for a total of
$28.3 million.
- The Board of Directors declared a quarterly cash dividend of
$0.05 per share, payable on June 1st, 2022 to stockholders of
record at the close of business on May 16th, 2022.
A reconciliation between GAAP and non-GAAP information is
contained in the financial statements below.
“Our focus on security-led solutions, improved sales execution
in North America, and diversity in terms of customers continues to
drive consistent growth above our targets and strong profit
margins, moving us closer to our Rule of 40 goal,” said Dhrupad
Trivedi, President and Chief Executive Officer of A10 Networks.
“Demand for cybersecurity and infrastructure solutions remains a
catalyst for our growth despite headwinds in Asia, continued supply
chain challenges and typical fluctuations in buying patterns. We
continued our share buyback and dividend program in the quarter,
while also investing in future growth.”
“We believe we are now well-positioned to achieve the high end
of our full year targets around top line growth of 10 – 12% and
expanding EBITDA in the range of 26 – 28%,“ continued Trivedi.
Conference Call
Management will host a call at 1:30 p.m. Pacific time (4:30 p.m.
Eastern time) today, May 3, 2022, to discuss these results.
Interested parties may access the conference call by dialing (844)
200-6205 or (929) 526-1599 and entering passcode 188304.
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 (866)
813-9403 or (929) 458-6194 and entering the passcode 198641.
Forward-Looking
Statements
This press release contains “forward-looking statements,”
including statements regarding our anticipated future financial
results, quarterly dividend payments, drivers of growth, demand,
supply chain challenges, positioning, growth and EBITA
expectations. 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 on our
business and the business of our customers; 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 March 8, 2022.
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 and Exhibit
99.2 contain certain non-GAAP financial measures, including
non-GAAP net income, non-GAAP net income per basic and diluted
share, non-GAAP gross profit and gross margin, non-GAAP operating
income 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 March
31,
2022
2021
Revenue:
Products
$
37,045
$
30,540
Services
25,627
24,303
Total revenue
62,672
54,843
Cost of revenue:
Products
8,633
7,086
Services
4,206
5,413
Total cost of revenue
12,839
12,499
Gross profit
49,833
42,344
Operating expenses:
Sales and marketing
22,782
19,092
Research and development
12,887
13,981
General and administrative
6,162
5,247
Total operating expenses
41,831
38,320
Income from operations
8,002
4,024
Non-operating expense, net:
Interest and other expense, net
(513
)
(1,183
)
Total non-operating expense, net
(513
)
(1,183
)
Income before provision for income
taxes
7,489
2,841
Provision for income taxes
1,400
184
Net income
$
6,349
$
2,657
Net income per share:
Basic
$
0.08
$
0.03
Diluted
$
0.08
$
0.03
Weighted-average shares used in computing
net income per share:
Basic
76,795
76,704
Diluted
79,285
79,636
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET
INCOME TO NON-GAAP NET INCOME
(unaudited, in thousands,
except per share amounts)
Three Months Ended March
31,
2022
2021
GAAP net income
$
6,349
$
2,657
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
3,681
4,620
Amortization expense related to
acquisition
—
253
Global distribution center transition
expense
—
1,911
Non-GAAP net income
$
10,030
$
9,441
GAAP net income per share:
Basic
$
0.08
$
0.03
Diluted
$
0.08
$
0.03
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
0.05
0.06
Amortization expense related to
acquisition
—
—
Global distribution center transition
expense
—
0.03
Non-GAAP net income per share:
Basic
$
0.13
$
0.12
Diluted
$
0.13
$
0.12
Weighted-average shares used in computing
non-GAAP net income per share:
Basic
76,795
76,704
Diluted
79,285
79,636
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited, in thousands,
except par value, on a GAAP Basis)
March 31, 2022
December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
67,758
$
78,925
Marketable securities
96,945
106,117
Accounts receivable, net of allowances of
$708 and $543, respectively
49,282
61,795
Inventory
20,832
22,462
Prepaid expenses and other current
assets
17,416
14,720
Total current assets
252,233
284,019
Property and equipment, net
13,460
10,692
Goodwill
1,307
1,307
Deferred tax assets, net
65,555
65,773
Other non-current assets
29,192
31,294
Total assets
$
361,747
$
393,085
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
4,994
$
6,852
Accrued liabilities
30,213
36,101
Deferred revenue
74,125
73,132
Total current liabilities
109,332
116,085
Deferred revenue, non-current
47,224
48,499
Other non-current liabilities
19,214
19,613
Total liabilities
175,770
184,197
Commitments and contingencies
Stockholders' equity:
Common stock, $0.00001 par value: 500,000
shares authorized; 85,117 and 84,717 shares issued and 75,701 and
77,423 shares outstanding, respectively
1
1
Treasury stock, at cost: 9,416 and 7,294
shares, respectively
(83,999
)
(55,677
)
Additional paid-in-capital
449,742
446,035
Dividends paid
(7,749
)
(3,880
)
Accumulated other comprehensive income
(1,005
)
(229
)
Accumulated deficit
(171,013
)
(177,362
)
Total stockholders' equity
185,977
208,888
Total liabilities and stockholders'
equity
$
361,747
$
393,085
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited, in thousands, on a
GAAP Basis)
Three Months Ended March
31,
2022
2021
Cash flows from operating activities:
Net income
$
6,349
$
2,657
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
1,844
2,413
Stock-based compensation
3,452
4,399
Other non-cash items
287
181
Changes in operating assets and
liabilities:
Accounts receivable
12,535
(315
)
Inventory
1,433
1,086
Prepaid expenses and other assets
(1,568
)
(60
)
Accounts payable
(1,857
)
(501
)
Accrued and other liabilities
(6,287
)
(12,106
)
Deferred revenue
(280
)
4,519
Net cash provided by operating
activities
15,908
2,273
Cash flows from investing activities:
Proceeds from sales of marketable
securities
4,550
1,300
Proceeds from maturities of marketable
securities
17,173
24,140
Purchases of marketable securities
(13,635
)
(36,197
)
Purchases of property and equipment
(3,137
)
(769
)
Net cash provided by (used in) investing
activities
4,951
(11,526
)
Cash flows from financing activities:
Proceeds from issuance of common stock
under employee equity incentive plans
165
1,756
Repurchase of common stock
(28,322
)
(88
)
Payments for dividends
(3,869
)
—
Net cash provided by (used in) financing
activities
(32,026
)
1,668
Net decrease in cash and cash
equivalents
(11,167
)
(7,585
)
Cash and cash equivalents—beginning of
period
$
78,925
$
83,281
Cash and cash equivalents—end of
period
$
67,758
$
75,696
A10 NETWORKS, INC.
RECONCILIATION OF GAAP GROSS
PROFIT TO NON-GAAP GROSS PROFIT
(unaudited, in thousands,
except percentages)
Three Months Ended March
31,
2022
2021
GAAP gross profit
$
49,833
$
42,344
GAAP gross margin
79.5
%
77.2
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
428
641
Global distribution center transition
expense
—
273
Non-GAAP gross profit
$
50,261
$
43,258
Non-GAAP gross margin
80.2
%
78.9
%
A10 NETWORKS, INC.
RECONCILIATION OF GAAP TOTAL
OPERATING EXPENSES
TO NON-GAAP TOTAL OPERATING
EXPENSES
(unaudited, in
thousands)
Three Months Ended March
31,
2022
2021
GAAP total operating expenses
$
41,831
$
38,320
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
(3,681
)
(3,979
)
Amortization expense related to
acquisition
—
(253
)
Global distribution center transition
expense
—
(1,638
)
Non-GAAP total operating expenses
$
38,578
$
32,450
A10 NETWORKS, INC.
RECONCILIATION OF GAAP INCOME
FROM OPERATIONS
TO NON-GAAP OPERATING
INCOME
(unaudited, in thousands,
except percentages)
Three Months Ended March
31,
2022
2021
GAAP income from operations
$
8,002
$
4,024
GAAP operating margin
12.8
%
7.3
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
3,681
4,620
Amortization expense related to
acquisition
—
253
Global distribution center transition
expense
—
1,911
Non-GAAP operating income
$
11,683
$
10,808
Non-GAAP operating margin
18.6
%
19.7
%
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET
INCOME TO
EBITDA AND ADJUSTED EBITDA
(NON-GAAP)
(unaudited, in
thousands)
Three Months Ended March
31,
2022
2021
GAAP net income
$
6,349
$
2,657
Exclude: Interest and other expense,
net
513
1,183
Exclude: Depreciation and amortization
expense
1,844
2,413
Exclude: Provision for income taxes
1,140
184
EBITDA
9,846
6,437
Exclude: Stock-based compensation and
related payroll tax
3,681
4,620
Exclude: Global distribution center
transition expense
—
1,911
Adjusted EBITDA
$
13,527
$
12,968
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220503005964/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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