ATEN A10 Networks Inc

Demand for security solutions drives 20.7% product revenue growth and 57.4% improvement in net income, enabling growth investments and the return of $7.2 million to shareholders via buybacks and dividend

Company reiterates full-year guidance

A10 Networks (NYSE: ATEN), a leading provider of cybersecurity and infrastructure solutions, today announced financial results for its second quarter and six-month period ended June 30, 2022.

Second Quarter 2022 Financial Summary

• Revenue of $68.0 million, up 14.9% year-over-year.
• Revenue growth led by a 33.7% increase in the Americas year-over-year.
• GAAP gross margin of 80.2%; non-GAAP gross margin of 80.6% as a result of better product mix and continued successful navigation of short-term input cost pressures.
• GAAP net income of $10.4 million, or $0.13 per diluted share, compared with GAAP net income of $6.6 million, or $0.08 per diluted share in the second quarter of 2021.
• Non-GAAP net income of $13.4 million, or $0.17 per diluted share, compared with non-GAAP net income of $10.5 million, or $0.13 per diluted share in the second quarter of 2021.
• Adjusted EBITDA of $18.0 million, representing 26.4% of revenue, in line with stated business model goals.
• Returned $7.2 million to shareholders through the repurchase of approximately 248,000 shares during the quarter for a total of $3.4 million and the issuance of $3.8 million in cash dividends.
• The Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on September 1, 2022 to stockholders of record at the close of business on August 15, 2022.

A reconciliation between GAAP and non-GAAP information is contained in the financial statements below.

“Continued strong demand for our proprietary, security-led solutions, combined with sustained business execution, resulted in 14.9% top-line growth and overall performance that exceeded our ‘Rule of 40’ target,” said Dhrupad Trivedi, President and Chief Executive Officer of A10 Networks. “The increasing threat of cyberattacks, exacerbated by geopolitical events in Europe, Asia and elsewhere, make our security and infrastructure solutions a growing priority even as certain non-security investments are reprioritized due to macroeconomic concerns. We are capturing market share through better technology that helps our customers to achieve their business goals and we continue to invest in strategic growth opportunities. Simultaneously, our proven business model, including gross profit margins exceeding 80% and Adjusted EBITDA margins of 26% enable us to deliver consistent shareholder returns through share repurchases and a quarterly cash dividend.”

“We have been able to successfully navigate supply chain challenges and input cost pressures, as evidenced by our stable gross margins, and we expect these challenges will persist for some time,” continued Trivedi. “We reiterate our full year targets around top line growth of 10 – 12% and expanding EBITDA in the range of 26 – 28% of revenue. Our targeted, strategic investments in technology are enabling us to capture market share, while our diversity of revenue and cybersecurity solutions serve as catalysts for durable growth, even amidst macroeconomic conditions.”

Conference Call

Management will host a call at 1:30 p.m. Pacific time (4:30 p.m. Eastern time) today, August 2, 2022, to discuss these results. Interested parties may access the conference call by dialing (844) 200-6205 (toll-free) or (929) 526-1599 and entering passcode 598873.

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 107391.

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 EBITDA 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 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this release 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 and (iii) global distribution center transition expense. 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 and (iii) global distribution center transition 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 and (iii) global distribution center transition 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 and (vi) global distribution center transition 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 June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Revenue:

 

 

 

 

 

 

 

Products

$

41,475

 

$

34,363

 

 

$

78,520

 

 

$

64,903

 

Services

 

26,498

 

 

24,805

 

 

 

52,125

 

 

 

49,108

 

Total revenue

 

67,973

 

 

59,168

 

 

 

130,645

 

 

 

114,011

 

Cost of revenue:

 

 

 

 

 

 

 

Products

 

9,518

 

 

8,215

 

 

 

18,151

 

 

 

15,301

 

Services

 

3,967

 

 

5,415

 

 

 

8,173

 

 

 

10,828

 

Total cost of revenue

 

13,485

 

 

13,630

 

 

 

26,324

 

 

 

26,129

 

Gross profit

 

54,488

 

 

45,538

 

 

 

104,321

 

 

 

87,882

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

21,773

 

 

19,749

 

 

 

44,555

 

 

 

38,841

 

Research and development

 

14,235

 

 

13,491

 

 

 

27,122

 

 

 

27,472

 

General and administrative

 

5,337

 

 

5,082

 

 

 

11,499

 

 

 

10,329

 

Total operating expenses

 

41,345

 

 

38,322

 

 

 

83,176

 

 

 

76,642

 

Income from operations

 

13,143

 

 

7,216

 

 

 

21,145

 

 

 

11,240

 

Non-operating income (expense), net:

 

 

 

 

 

 

 

Interest income

 

184

 

 

96

 

 

 

304

 

 

 

241

 

Other income (expense), net

 

301

 

 

(208

)

 

 

(332

)

 

 

(1,536

)

Total non-operating income (expense), net

 

485

 

 

(112

)

 

 

(28

)

 

 

(1,295

)

Income before provision for income taxes

 

13,628

 

 

7,104

 

 

 

21,117

 

 

 

9,945

 

Provision for income taxes

 

3,212

 

 

488

 

 

 

4,352

 

 

 

672

 

Net income

$

10,416

 

$

6,616

 

 

$

16,765

 

 

$

9,273

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.14

 

$

0.09

 

 

$

0.22

 

 

$

0.12

 

Diluted

$

0.13

 

$

0.08

 

 

$

0.21

 

 

$

0.12

 

Weighted-average shares used in computing net income per share:

 

 

 

 

 

 

 

Basic

 

75,893

 

 

76,774

 

 

 

76,343

 

 

 

76,745

 

Diluted

 

78,306

 

 

79,316

 

 

 

78,809

 

 

 

79,501

 

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,

 

2022

 

2021

 

2022

 

2021

GAAP net income

$

10,416

 

$

6,616

 

$

16,765

 

$

9,273

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation and related payroll tax

 

2,944

 

 

2,612

 

 

6,625

 

 

7,232

Amortization expense related to acquisition

 

—

 

 

252

 

 

—

 

 

505

Global distribution center transition expense

 

—

 

 

1,036

 

 

—

 

 

2,947

Non-GAAP net income

$

13,360

 

$

10,516

 

$

23,390

 

$

19,957

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.14

 

$

0.09

 

$

0.22

 

$

0.12

Diluted

$

0.13

 

$

0.08

 

$

0.21

 

$

0.12

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation and related payroll tax

 

0.04

 

 

0.04

 

 

0.09

 

 

0.09

Amortization expense related to acquisition

 

—

 

 

0.00

 

 

—

 

 

0.01

Global distribution center transition expense

 

—

 

 

0.01

 

 

—

 

 

0.04

Non-GAAP net income per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.18

 

$

0.14

 

$

0.31

 

$

0.26

Diluted

$

0.17

 

$

0.13

 

$

0.30

 

$

0.25

Weighted-average shares used in computing non-GAAP net income per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

75,893

 

 

76,774

 

 

76,343

 

 

76,745

Diluted

 

78,306

 

 

79,316

 

 

78,809

 

 

79,501

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except par value, on a GAAP Basis)

 

 

June 30, 2022

 

December 31, 2021

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

84,242

 

 

$

78,925

 

Marketable securities

 

82,551

 

 

 

106,117

 

Accounts receivable, net of allowances of $447 and $543, respectively

 

67,908

 

 

 

61,795

 

Inventory

 

21,926

 

 

 

22,462

 

Prepaid expenses and other current assets

 

15,038

 

 

 

14,720

 

Total current assets

 

271,665

 

 

 

284,019

 

Property and equipment, net

 

15,046

 

 

 

10,692

 

Goodwill

 

1,307

 

 

 

1,307

 

Deferred tax assets, net

 

65,557

 

 

 

65,773

 

Other non-current assets

 

30,990

 

 

 

31,294

 

Total assets

$

384,565

 

 

$

393,085

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

 

 

 

Accounts payable

$

5,567

 

 

$

6,852

 

Accrued liabilities

 

36,870

 

 

 

36,101

 

Deferred revenue

 

80,022

 

 

 

73,132

 

Total current liabilities

 

122,459

 

 

 

116,085

 

Deferred revenue, non-current

 

47,848

 

 

 

48,499

 

Other non-current liabilities

 

19,499

 

 

 

19,613

 

Total liabilities

 

189,806

 

 

 

184,197

 

 

 

 

 

Stockholders' equity:

Common stock, $0.00001 par value: 500,000 shares authorized; 85,626 and 84,717 shares issued and 75,962 and 77,423 shares outstanding, respectively

 

1

 

 

 

1

 

Treasury stock, at cost: 9,664 and 7,294 shares, respectively

 

(87,435

)

 

 

(55,677

)

Additional paid-in-capital

 

455,539

 

 

 

446,035

 

Dividends paid

 

(11,543

)

 

 

(3,880

)

Accumulated other comprehensive income

 

(1,206

)

 

 

(229

)

Accumulated deficit

 

(160,597

)

 

 

(177,362

)

Total stockholders' equity

 

194,759

 

 

 

208,888

 

Total liabilities and stockholders' equity

$

384,565

 

 

$

393,085

 

A10 NETWORKS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands, on a GAAP Basis)

 

 

Six Months Ended June 30,

 

2022

 

2021

Cash flows from operating activities:

 

 

 

Net income

$

16,765

 

 

$

9,273

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

3,712

 

 

 

4,753

 

Stock-based compensation

 

6,313

 

 

 

6,891

 

Other non-cash items

 

113

 

 

 

531

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(5,580

)

 

 

882

 

Inventory

 

(31

)

 

 

1,499

 

Prepaid expenses and other assets

 

(2,163

)

 

 

(1,200

)

Accounts payable

 

(1,283

)

 

 

821

 

Accrued liabilities

 

655

 

 

 

(11,642

)

Deferred revenue

 

6,239

 

 

 

7,628

 

Net cash provided by operating activities

 

24,740

 

 

 

19,436

 

Cash flows from investing activities:

 

 

 

Proceeds from sales of marketable securities

 

4,550

 

 

 

2,865

 

Proceeds from maturities of marketable securities

 

39,148

 

 

 

48,586

 

Purchases of marketable securities

 

(21,649

)

 

 

(76,141

)

Purchases of property and equipment

 

(5,021

)

 

 

(2,443

)

Net cash provided by (used in) investing activities

 

17,028

 

 

 

(27,133

)

Cash flows from financing activities:

 

 

 

Proceeds from issuance of common stock under employee equity incentive plans

 

2,970

 

 

 

3,578

 

Repurchase of common stock

 

(31,758

)

 

 

(11,213

)

Payments for dividends

 

(7,663

)

 

 

—

 

Net cash used in financing activities

 

(36,451

)

 

 

(7,635

)

Net increase (decrease) in cash and cash equivalents

 

5,317

 

 

 

(15,332

)

Cash and cash equivalents—beginning of period

 

78,925

 

 

 

83,281

 

Cash and cash equivalents—end of period

$

84,242

 

 

$

67,949

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

Transfers between inventory and property and equipment

$

567

 

 

$

146

 

Purchases of property and equipment included in accounts payable

$

1

 

 

$

11

 

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,

 

2022

 

2021

 

2022

 

2021

GAAP gross profit

$

54,488

 

 

$

45,538

 

 

$

104,321

 

 

$

87,882

 

GAAP gross margin

 

80.2

%

 

 

77.0

%

 

 

79.9

%

 

 

77.1

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation and related payroll tax

 

331

 

 

 

303

 

 

 

759

 

 

 

944

 

Global distribution center transition expense

 

—

 

 

 

252

 

 

 

—

 

 

 

525

 

Non-GAAP gross profit

$

54,819

 

 

$

46,093

 

 

$

105,080

 

 

$

89,351

 

Non-GAAP gross margin

 

80.6

%

 

 

77.9

%

 

 

80.4

%

 

 

78.4

%

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,

 

2022

 

2021

 

2022

 

2021

GAAP total operating expenses

$

41,345

 

 

$

38,322

 

 

$

83,176

 

 

$

76,642

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation and related payroll tax

 

(2,613

)

 

 

(2,309

)

 

 

(5,866

)

 

 

(6,288

)

Amortization expense related to acquisition

 

—

 

 

 

(252

)

 

 

—

 

 

 

(505

)

Global distribution center transition expense

 

—

 

 

 

(784

)

 

 

—

 

 

 

(2,422

)

Non-GAAP total operating expenses

$

38,732

 

 

$

34,977

 

 

$

77,310

 

 

$

67,427

 

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,

 

2022

 

2021

 

2022

 

2021

GAAP income from operations

$

13,143

 

 

$

7,216

 

 

$

21,145

 

 

$

11,240

 

GAAP operating margin

 

19.3

%

 

 

12.2

%

 

 

16.2

%

 

 

9.9

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation and related payroll tax

 

2,944

 

 

 

2,612

 

 

 

6,625

 

 

 

7,232

 

Amortization expense related to acquisition

 

—

 

 

 

252

 

 

 

—

 

 

 

505

 

Global distribution center transition expense

 

—

 

 

 

1,036

 

 

 

—

 

 

 

2,947

 

Non-GAAP operating income

$

16,087

 

 

$

11,116

 

 

$

27,770

 

 

$

21,924

 

Non-GAAP operating margin

 

23.7

%

 

 

18.8

%

 

 

21.3

%

 

 

19.2

%

A10 NETWORKS, INC.

RECONCILIATION OF GAAP NET INCOME TO

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

(unaudited, in thousands)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

GAAP net income

$

10,416

 

 

$

6,616

 

$

16,765

 

$

9,273

Exclude: Interest and other (income) expense, net

 

(485

)

 

 

112

 

 

28

 

 

1,295

Exclude: Depreciation and amortization expense

 

1,868

 

 

 

2,340

 

 

3,712

 

 

4,753

Exclude: Provision for income taxes

 

3,212

 

 

 

488

 

 

4,352

 

 

672

EBITDA

 

15,011

 

 

 

9,556

 

 

24,857

 

 

15,993

Exclude: Stock-based compensation and related payroll tax

 

2,944

 

 

 

2,612

 

 

6,625

 

 

7,232

Exclude: Global distribution center transition expense

 

—

 

 

 

1,036

 

 

—

 

 

2,947

Adjusted EBITDA

$

17,955

 

 

$

13,204

 

$

31,482

 

$

26,172

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220802006014/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

Source: A10 Networks, Inc.