Third Quarter Revenue Grew 7% Sequentially, Above Midpoint of
Prior Guidance
Expects Fourth Quarter Sequential Revenue Growth of 8% at
Midpoint of Range
A10 Networks (NYSE: ATEN), a leading provider of intelligent and
automated cybersecurity solutions, today announced financial
results for its third quarter ended September 30, 2019.
Third Quarter 2019 Financial
Summary
- Revenue of $52.8 million, up 7 percent compared with $49.2
million in second quarter 2019
- GAAP gross margin of 77.4 percent, non-GAAP gross margin of
78.1 percent
- GAAP operating expenses of $40.7 million, non-GAAP operating
expenses of $39.4 million
- GAAP net income of $0.2 million, or $0.00 per basic and diluted
share, non-GAAP net income of $1.8 million, or $0.02 per basic and
diluted share
- Adjusted EBITDA of $4.0 million, compared with $1.3 million in
second quarter 2019
A reconciliation between GAAP and non-GAAP information is
contained in the financial statements below.
“We delivered results in the third quarter that were in-line to
above our most recent guidance. Our revenue increased 7%
sequentially, and we were pleased with improving demand from our
service provider vertical, which grew 36% versus the prior quarter.
We also saw continued strength in 5G security in South Korea,
Japan, and the Middle East,” said Lee Chen, president and chief
executive officer of A10 Networks. “We are optimistic as we look to
the fourth quarter and beyond, due to improving demand signals from
several key North America accounts, expanded 5G security
infrastructure deployments on the part of service providers across
the globe, an ongoing positive mix shift toward more recurring
maintenance and subscription revenue, and the fact that the company
is laser-focused on making progress to accelerate operating
income.”
Fourth Quarter 2019 Business Outlook
(+)
For the fourth quarter of 2019, the company currently
expects:
- Revenue in the range of $55 million to $59 million,
representing 8 percent sequential growth at the midpoint
- Non-GAAP gross margin in the range of 76 percent to 78
percent
- Non-GAAP operating expenses in the range of $39 million to $40
million, excluding anticipated charges for severance and
restructuring of approximately $2 million
- Adjusted EBITDA in the range of $5.4 million to $8.2
million
- Non-GAAP earnings per share in the range of $0.04 to $0.08
using approximately 80 million basic and diluted shares
(+) Please refer to the note below on forward-looking statements
and the risks involved with such statements as well as the note on
non-GAAP financial measures.
Company Update
Review of strategic alternatives by Strategy Committee of the
Board
The Strategy Committee continues to evaluate opportunities to
maximize shareholder value.
Search Committee of the Board directed at supporting CEO
succession
The Search Committee continues to evaluate CEO candidates. The
Company continues to have the full commitment of current president
and chief executive officer Lee Chen until the CEO role is
transitioned to his successor.
Prepared Materials and Conference Call Information
A10 Networks has made available a presentation with management’s
prepared remarks on its third quarter 2019 financial results. These
materials are accessible from the “Investor Relations” section of
the A10 Networks website at investors.a10networks.com.
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 2019 financial results and outlook for
its fourth quarter 2019. Open to the public, investors may access
the call by dialing +1-844-792-3728 or +1-412-317-5105. A live
audio webcast of the conference call will be accessible from the
“Investor Relations” section of the A10 Networks website at
investors.a10networks.com. The webcast will be archived for a
period of one year. A telephonic replay of the conference call will
be available two hours after the call, will run for five business
days, and may be accessed by dialing +1-877-344-7529 or
+1-412-317-0088 and entering the passcode 101358845. The press
release and supplemental financials will be accessible from the
“Investor Relations” section of the A10 Networks website prior to
the commencement of the conference call.
Forward-Looking Statements
This press release contains “forward-looking statements,”
including statements regarding our pipeline; projections for our
future operating results, optimism for the fourth quarter and
beyond; improving demand signals in North America; accelerating
operating income; an ongoing positive mix shift toward more
recurring maintenance and subscription revenue; our plans to
evaluate strategic alternatives; the timing of completing a search
for a CEO successor and the commitment from Mr. Chen that he will
remain fully committed until a successor is appointed; and our
planned implementation of a reduction in force. 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 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, and our ability to timely file periodic reports required
to be filed under the Securities Exchange Act of 1934.
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 table contain
certain non-GAAP financial measures, including non-GAAP net income
(loss), non-GAAP gross profit, non-GAAP operating income (loss) and
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. We define non-GAAP net income (loss) as our GAAP net
income (loss) excluding: (i) stock-based compensation and related
payroll tax, (ii) amortization expense related to acquisition and
(iii) non-recurring expenses associated with the litigation
settlement expense and internal investigation. We define non-GAAP
gross profit as our GAAP gross profit excluding stock-based
compensation and related payroll tax. We define non-GAAP operating
income (loss) as our GAAP income (loss) from operations excluding
(i) stock-based compensation, and related tax, (ii) amortization
expense related to acquisition and (iii) non-recurring expenses
associated with the litigation settlement expense and internal
investigation. We define EBITDA as our GAAP net income (loss)
excluding (i) interest expense, (ii) interest income and other
(income) expense, net, (iii) depreciation and amortization expense
and (iv) provision for income taxes.
We have included our non-GAAP net income (loss), non-GAAP gross
profit, non-GAAP operating income (loss) and EBITDA in this press
release. Non-GAAP financial measures are presented for supplemental
informational purposes only for understanding the company's
operating results. The non-GAAP financial measures should not be
considered a substitute for financial information presented in
accordance with GAAP, and may be different from non-GAAP financial
measures presented by other companies. Please see the
reconciliation of non-GAAP financial measures to the most directly
comparable GAAP measure attached to this release. A reconciliation
of non-GAAP guidance measures to corresponding GAAP measures on a
forward-looking basis is not available due to high variability and
low visibility with respect to the charges which are excluded from
these non-GAAP measures.
About A10 Networks
A10 Networks (NYSE: ATEN) provides Reliable Security Always™,
with a range of high-performance application networking solutions
that help organizations ensure that their data center applications
and networks remain highly available, accelerated and secure.
Founded in 2004, A10 Networks is based in San Jose, Calif., and
serves customers globally with offices worldwide. For more
information, visit: www.a10networks.com and @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)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Revenue:
Products
$
30,052
$
38,265
$
85,066
$
105,638
Services
22,781
22,237
67,246
64,760
Total revenue
52,833
60,502
152,312
170,398
Cost of revenue:
Products
7,108
8,790
21,515
24,979
Services
4,812
4,224
13,926
13,106
Total cost of revenue
11,920
13,014
35,441
38,085
Gross profit
40,913
47,488
116,871
132,313
Operating expenses:
Sales and marketing
22,056
24,539
70,165
77,231
Research and development
15,784
15,505
46,567
49,874
General and administrative
2,854
9,012
17,311
30,464
Total operating expenses
40,694
49,056
134,043
157,569
Income (loss) from operations
219
(1,568
)
(17,172
)
(25,256
)
Non-operating income (expense):
Interest expense
(30
)
(34
)
(222
)
(99
)
Interest and other income (expense),
net
254
(131
)
397
6
Total non-operating income (expense),
net
224
(165
)
175
(93
)
Income (loss) before provision for income
taxes
443
(1,733
)
(16,997
)
(25,349
)
Provision for income taxes
270
74
873
660
Net income (loss)
$
173
$
(1,807
)
$
(17,870
)
$
(26,009
)
Net income (loss) per share:
Basic
$
—
$
(0.02
)
$
(0.24
)
$
(0.36
)
Diluted
$
—
$
(0.02
)
$
(0.24
)
$
(0.36
)
Weighted-average shares used in computing
net income (loss) per share:
Basic
76,618
72,707
75,611
72,550
Diluted
79,093
72,707
75,611
72,550
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS)
(unaudited, in thousands,
except per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
GAAP net income (loss)
$
173
$
(1,807
)
$
(17,870
)
$
(26,009
)
Stock-based compensation and related
payroll tax
3,513
2,333
12,458
13,055
Amortization expense related to
acquisition
253
253
759
758
Litigation and investigation expense
(2,157
)
1,531
(1,108
)
9,031
Non-GAAP net income (loss)
$
1,782
$
2,310
$
(5,761
)
$
(3,165
)
Non-GAAP net income (loss) per share:
Basic and diluted
$
0.02
$
0.03
$
(0.08
)
$
(0.04
)
Weighted average shares used in computing
non-GAAP net income (loss) per share:
Basic
76,618
72,707
75,611
72,550
Diluted
79,093
74,940
75,611
72,550
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited, in thousands,
except per share data)
September 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
36,067
$
40,621
Marketable securities
86,525
87,754
Accounts receivable, net of allowances of
$52 and $319, respectively
45,397
53,972
Inventory
21,081
17,930
Prepaid expenses and other current
assets
14,509
14,662
Total current assets
203,579
214,939
Property and equipment, net
8,846
7,262
Goodwill
1,307
1,307
Intangible assets
2,666
3,748
Other non-current assets
12,549
8,620
Total assets
$
228,947
$
235,876
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
5,488
$
8,202
Accrued liabilities
20,735
25,291
Deferred revenue
59,603
63,874
Total current liabilities
85,826
97,367
Deferred revenue, non-current
38,470
34,092
Other non-current liabilities
2,483
534
Total liabilities
126,779
131,993
Stockholders' equity:
Common stock, $0.00001 par value: 500,000
shares authorized; 76,744 and 74,301 shares issued and outstanding,
respectively
1
1
Additional paid-in-capital
391,998
376,272
Accumulated other comprehensive income
(loss)
285
(144
)
Accumulated deficit
(290,116
)
(272,246
)
Total stockholders' equity
102,168
103,883
Total liabilities and stockholders'
equity
$
228,947
$
235,876
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited, in
thousands)
Nine Months Ended September
30,
2019
2018
Cash flows from operating activities:
Net loss
$
(17,870
)
$
(26,009
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
7,433
6,020
Stock-based compensation
12,221
13,055
Other non-cash items
(422
)
152
Changes in operating assets and
liabilities:
Accounts receivable
8,735
(3,144
)
Inventory
(4,222
)
1,550
Prepaid expenses and other assets
468
(868
)
Accounts payable
(3,172
)
806
Accrued and other liabilities
(9,183
)
(1,482
)
Deferred revenue
107
4,219
Other
—
183
Net cash used in operating activities
(5,905
)
(5,518
)
Cash flows from investing activities:
Proceeds from sales of marketable
securities
22,189
23,194
Proceeds from maturities of marketable
securities
33,449
41,732
Purchases of marketable securities
(53,852
)
(67,754
)
Purchase of investment
—
(1,000
)
Purchases of property and equipment
(3,939
)
(2,252
)
Net cash used in investing activities
(2,153
)
(6,080
)
Cash flows from financing activities:
Proceeds from issuance of common stock
under employee equity incentive plans
3,505
1,269
Other
(1
)
(76
)
Net cash provided by financing
activities
3,504
1,193
Net decrease in cash and cash
equivalents
(4,554
)
(10,405
)
Cash and cash equivalents - beginning of
period
$
40,621
$
46,567
Cash and cash equivalents - end of
period
$
36,067
$
36,162
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,
2019
2018
2019
2018
GAAP gross profit
$
40,913
$
47,488
$
116,871
$
132,313
GAAP gross margin
77.4
%
78.5
%
76.7
%
77.6
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
334
187
1,126
1,277
Non-GAAP gross profit
$
41,247
$
47,675
$
117,997
$
133,590
Non-GAAP gross margin
78.1
%
78.8
%
77.5
%
78.4
%
RECONCILIATION OF GAAP INCOME
(LOSS) FROM OPERATIONS TO NON-GAAP OPERATING INCOME (LOSS)
(unaudited, in thousands,
except percentages)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
GAAP income (loss) from operations
$
219
$
(1,568
)
$
(17,172
)
$
(25,256
)
GAAP operating margin
0.4
%
(2.6
)%
(11.3
)%
(14.8
)%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
3,513
2,333
12,458
13,055
Amortization expense related to
acquisition
253
253
759
758
Litigation and investigation expense
(2,157
)
1,531
(1,108
)
9,031
Non-GAAP operating income (loss)
$
1,828
$
2,549
$
(5,063
)
$
(2,412
)
Non-GAAP operating margin
3.5
%
4.2
%
(3.3
)%
(1.4
)%
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA (NON-GAAP)
(unaudited, in
thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
GAAP net income (loss)
$
173
$
(1,807
)
$
(17,870
)
$
(26,009
)
Exclude: Interest expense
30
34
222
99
Exclude: Interest income and other
(income) expense, net
(254
)
131
(397
)
(6
)
Exclude: Depreciation and amortization
expense
2,451
1,917
7,433
6,020
Exclude: Provision for income tax
expense
270
74
873
660
EBITDA
2,670
349
(9,739
)
(19,236
)
Exclude: Stock-based compensation and
related payroll tax
3,513
2,333
12,458
13,055
Exclude: Litigation settlement and
investigation expense
(2,157
)
1,531
(1,108
)
9,031
Adjusted EBITDA
$
4,026
$
4,213
$
1,611
$
2,850
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191029006069/en/
Investor Contact: Chris Mammone The Blueshirt Group
investors@a10networks.com
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