Fourth Quarter Revenue Grew 14% Sequentially, Above Prior
Guidance GAAP Net Income and GAAP EPS Break-even Adjusted EBITDA of
$10 Million, a Company Record Non-GAAP EPS of $0.10 Exceeds Prior
Guidance Expects First Quarter Revenue Growth of 5% YoY at High End
of Range
A10 Networks (NYSE: ATEN), a leading provider of intelligent and
automated cybersecurity solutions, today announced financial
results for its fourth quarter and year ended December 31,
2019.
Fourth Quarter 2019 Financial
Summary
- Revenue of $60.3 million, up 14 percent compared with $52.8
million in third quarter 2019
- GAAP gross margin of 77.7 percent; non-GAAP gross margin of
78.5 percent
- GAAP operating expenses of $46.8 million; non-GAAP operating
expenses of $39.7 million
- GAAP net income of $0.0 million, or $0.00 per basic and diluted
share, compared with GAAP net income of $0.2 million, or $0.00 per
basic and diluted share in third quarter of 2019; non-GAAP net
income of $7.8 million, or $0.10 per basic and diluted share
- Adjusted EBITDA of $10.0 million, compared with $4.0 million in
third quarter 2019
Year 2019 Financial
Summary
- Revenue of $212.6 million, compared with $232.2 million in
2018
- GAAP gross margin of 77.0 percent; non-GAAP gross margin of
77.8 percent
- GAAP operating margin of (8.0) percent; non-GAAP operating
margin of 1.2 percent
- GAAP net loss of $17.8 million, or $0.23 per basic and diluted
share; non-GAAP net income of $2.0 million, or $0.03 per basic and
diluted share
- Ended the year with $129.9 million in cash, cash equivalents
and marketable securities
A reconciliation between GAAP and non-GAAP information is
contained in the financial statements below.
“I am thrilled to join A10 Networks at an exciting time for the
business,” said Dhrupad Trivedi, president and chief executive
officer of A10 Networks. “A10 occupies an attractive area within
networking and security, as companies increasingly focus on
delivering business outcomes while managing operational
complexities from proliferation of IoT, shift to hybrid cloud
environments, and ever-increasing complexity of the cybersecurity
landscape. Service providers around the world also face the same
challenges while getting ready for 5G technology to support many of
these consumption trends. Based on our legacy, A10 is
well-positioned to help our customers address these emerging
themes. We deeply understand their applications and have a strong
talent base to support them through these digital transformations.
We remain committed to driving growth and improving profitability
as demonstrated by our EBITDA performance in the fourth quarter. We
believe our focus and commitment to profitable growth will reward
our shareholders, customers and employees.”
First Quarter 2020 Business Outlook
(+)
For the first quarter of 2020, the company currently
expects:
- Revenue in the range of $51 million to $53 million,
representing 5 percent year-over-year growth at the high end of the
range
- Non-GAAP gross margin in the range of 76 percent to 78
percent
- Non-GAAP operating expenses in the range of $37.5 million to
$38.5 million
- Adjusted EBITDA in the range of $3.7 million to $5 million
- Non-GAAP earnings per share in the range of $0.01 to $0.03
using approximately 81 million 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.
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 fourth quarter 2019 financial results and outlook for
its first quarter 2020. 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 10137756. 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 position to help our customers;
projections for our future operating results; and the strength and
capabilities of our talent base. 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 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. Investors are encouraged to
review the reconciliation of these non-GAAP financial measures to
their most directly comparable GAAP financial measures provided in
the financial statement tables below. 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.
We define non-GAAP net income 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, (iv) restructuring expense, and
related tax, and (v) non-recurring facilities expense. We define
non-GAAP net income per basic and diluted share as our non-GAAP net
income (loss) divided by our basic and diluted weighted-average
shares outstanding. We define non-GAAP gross profit as our GAAP
gross profit excluding stock-based compensation and related payroll
tax. We define non-GAAP gross margin as our non-GAAP gross profit
divided by our GAAP revenue. 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, (iv) restructuring expense, and related tax, and (v)
non-recurring facilities expense. We define non-GAAP operating
margin as our non-GAAP operating income (loss) divided by our GAAP
revenue. We define non-GAAP operating expenses as our GAAP
operating expenses excluding (i) stock-based compensation, and
related tax, (ii) amortization expense related to acquisition,
(iii) non-recurring expenses associated with the litigation
settlement expense and internal investigation, (iv) restructuring
expense, and related tax, and (v) non-recurring facilities expense.
We define Adjusted EBITDA as our GAAP net income (loss) excluding
(i) interest expense, (ii) interest income and other (income)
expense, net, (iii) depreciation and amortization expense, (iv)
provision for income taxes, (v) stock-based compensation and
related payroll tax, (vi) litigation settlement and internal
investigation expense (vii) restructuring expense, and related tax,
and (viii) non-recurring facilities expense.
We have included our non-GAAP net income (loss), non-GAAP gross
profit and gross margin, non-GAAP operating income (loss) 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) is a leading provider of secure
application services and solutions, 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, on a GAAP Basis)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
Revenue:
Products
$
36,853
$
39,044
$
121,920
$
144,682
Services
23,463
22,781
90,708
87,541
Total revenue
60,316
61,825
212,628
232,223
Cost of revenue:
Products
8,301
9,087
29,816
34,066
Services
5,139
4,724
19,065
17,830
Total cost of revenue
13,440
13,811
48,881
51,896
Gross profit
46,876
48,014
163,747
180,327
Operating expenses:
Sales and marketing
22,618
25,983
92,783
103,214
Research and development
15,257
15,283
61,824
65,157
General and administrative
6,393
9,171
23,704
39,635
Restructuring expense
2,530
—
2,530
—
Total operating expenses
46,798
50,437
180,841
208,006
Income (loss) from operations
78
(2,423
)
(17,094
)
(27,679
)
Non-operating income (expense):
Interest expense
(15
)
(30
)
(237
)
(129
)
Interest and other income (expense),
net
522
1,267
919
1,273
Total non-operating income (expense),
net
507
1,237
682
1,144
Income (loss) before income taxes
585
(1,186
)
(16,412
)
(26,535
)
Provision for income taxes
534
422
1,407
1,082
Net income (loss)
$
51
$
(1,608
)
$
(17,819
)
$
(27,617
)
Net income (loss) per share:
Basic
$
—
$
(0.02
)
$
(0.23
)
$
(0.38
)
Diluted
$
—
$
(0.02
)
$
(0.23
)
$
(0.38
)
Weighted-average shares used in computing
net income (loss) per share:
Basic
77,147
73,865
76,080
72,882
Diluted
79,248
73,865
76,080
72,882
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO NON-GAAP NET INCOME
(unaudited, in thousands,
except per share amounts)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
GAAP net income (loss)
$
51
$
(1,608
)
$
(17,819
)
$
(27,617
)
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
4,332
3,983
16,790
17,038
Amortization expense related to
acquisition
253
252
1,012
1,010
Litigation and investigation expense
43
1,465
(1,066
)
10,496
Restructuring expense and related
taxes
2,676
—
2,676
—
Non-recurring facilities expense
425
—
425
—
Non-GAAP net income
$
7,780
$
4,092
$
2,018
$
927
GAAP net income (loss) per share:
Basic
$
—
$
(0.02
)
$
(0.23
)
$
(0.38
)
Diluted
$
—
$
(0.02
)
$
(0.23
)
$
(0.38
)
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
$
0.05
$
0.05
$
0.21
$
0.23
Amortization expense related to
acquisition
$
—
$
—
$
0.01
$
0.01
Litigation and investigation expense
$
—
$
0.02
$
(0.01
)
$
0.14
Restructuring expense and related
taxes
$
0.03
$
—
$
0.03
$
—
Non-recurring facilities expense
$
0.01
$
—
$
0.01
$
—
Non-GAAP net income per share:
Basic
$
0.10
$
0.06
$
0.03
$
0.01
Diluted
$
0.10
$
0.05
$
0.03
$
0.01
Weighted average shares used in computing
non-GAAP net income per share:
Basic
77,147
73,865
76,080
72,882
Diluted
79,248
75,737
78,487
75,222
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited, in thousands,
except per share data, on a GAAP Basis)
December 31,
December 31,
2019
2018
ASSETS
Current assets:
Cash and cash equivalents
45,742
40,621
Marketable securities
84,180
87,754
Accounts receivable, net of allowances of
$52 and $319, respectively
53,566
53,972
Inventory
22,384
17,930
Prepaid expenses and other current
assets
15,067
14,662
Total current assets
220,939
214,939
Property and equipment, net
7,656
7,262
Goodwill
1,307
1,307
Intangible assets
2,305
3,748
Other non-current assets
41,846
8,620
Total assets
$
274,053
$
235,876
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
7,592
8,202
Accrued liabilities
27,756
25,291
Deferred revenue
62,233
63,874
Total current liabilities
97,581
97,367
Deferred revenue, non-current
38,931
34,092
Other non-current liabilities
28,754
534
Total liabilities
165,266
131,993
Stockholders' equity:
Common stock, $0.00001 par value: 500,000
shares authorized; 77,580 and
74,301 shares issued and outstanding,
respectively
1
1
Additional paid-in-capital
398,600
376,272
Accumulated other comprehensive income
(loss)
251
(144
)
Accumulated deficit
(290,065
)
(272,246
)
Total stockholders' equity
108,787
103,883
Total liabilities and stockholders'
equity
$
274,053
$
235,876
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited, in thousands, on a
GAAP Basis)
Twelve Months Ended
December 31,
2019
2018
Cash flows from operating activities:
Net loss
$
(17,819
)
$
(27,617
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
10,028
7,880
Stock-based compensation
16,529
17,038
Other non-cash items
(274
)
144
Changes in operating assets and
liabilities:
Accounts receivable
530
(6,119
)
Inventory
(5,648
)
(1,529
)
Prepaid expenses and other assets
(452
)
(2,434
)
Accounts payable
(621
)
(603
)
Accrued and other liabilities
(5,897
)
3,116
Deferred revenue
3,198
7,331
Other
—
99
Net cash used in operating activities
(426
)
(2,694
)
Cash flows from investing activities:
Proceeds from sales of marketable
securities
32,200
32,720
Proceeds from maturities of marketable
securities
43,525
51,024
Purchases of marketable securities
(71,636
)
(86,823
)
Purchase of investment
—
(1,000
)
Purchases of property and equipment
(4,340
)
(2,797
)
Net cash used in investing activities
(251
)
(6,876
)
Cash flows from financing activities:
Proceeds from issuance of common stock
under employee equity incentive plans
5,798
3,701
Other
—
(77
)
Net cash provided by financing
activities
5,798
3,624
Net increase (decrease) in cash and cash
equivalents
5,121
(5,946
)
Cash and cash equivalents - beginning of
period
40,621
46,567
Cash and cash equivalents - end of
period
$
45,742
$
40,621
A10 NETWORKS, INC.
RECONCILIATION OF GAAP GROSS
PROFIT TO NON-GAAP GROSS PROFIT
(unaudited, in thousands,
except percentages)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
GAAP gross profit
$
46,876
$
48,014
$
163,747
$
180,327
GAAP gross margin
77.7
%
77.7
%
77.0
%
77.7
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
466
325
1,592
1,602
Non-GAAP gross profit
$
47,342
$
48,339
$
165,339
$
181,929
Non-GAAP gross margin
78.5
%
78.2
%
77.8
%
78.3
%
RECONCILIATION OF GAAP TOTAL
OPERATING EXPENSES TO
TO NON-GAAP TOTAL OPERATING
EXPENSES
(unaudited, in
thousands)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2,018
GAAP total operating expenses
$
46,798
$
50,437
$
180,841
$
208,006
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
3,866
3,658
15,197
15,436
Amortization expense related to
acquisition
253
252
1,012
1,010
Litigation and investigation expense
43
1,465
(1,066
)
10,496
Restructuring expense
2,530
—
2,530
—
Non-recurring facilities expense
425
—
425
—
Non-GAAP total operating expenses
$
39,682
$
45,062
$
162,743
$
181,064
RECONCILIATION OF GAAP INCOME
(LOSS) FROM OPERATIONS
TO NON-GAAP OPERATING
INCOME
(unaudited, in thousands,
except percentages)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
GAAP income (loss) from operations
$
78
$
(2,423
)
$
(17,094
)
$
(27,679
)
GAAP operating margin
0.1
%
(3.9
)%
(8.0
)%
(11.9
)%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
4,332
3,983
16,790
17,038
Amortization expense related to
acquisition
253
252
1,012
1,010
Litigation and investigation expense
43
1,465
(1,066
)
10,496
Restructuring expense
2,530
—
2,530
—
Non-recurring facilities expense
425
—
425
—
Non-GAAP operating income
$
7,661
$
3,277
$
2,597
$
865
Non-GAAP operating margin
12.7
%
5.3
%
1.2
%
0.4
%
RECONCILIATION OF GAAP NET
INCOME (LOSS) TO
EBITDA AND ADJUSTED EBITDA
(NON-GAAP)
(unaudited, in
thousands)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2018
2019
2018
GAAP net income (loss)
$
51
$
(1,608
)
$
(17,819
)
$
(27,617
)
Exclude: Interest expense
15
30
237
129
Exclude: Interest income and other
(income) expense, net
(522
)
(1,267
)
(919
)
(1,273
)
Exclude: Depreciation and amortization
expense
2,595
1,860
10,028
7,880
Exclude: Provision for income tax
expense
534
422
1,407
1,082
EBITDA
2,673
(563
)
(7,066
)
(19,799
)
Exclude: Stock-based compensation and
related payroll tax
4,332
3,983
16,790
17,038
Exclude: Litigation settlement and
investigation expense
43
1,465
(1,066
)
10,496
Exclude: Restructuring expense
2,530
—
2,530
—
Exclude: Non-recurring facilities
expense
425
—
425
—
Adjusted EBITDA
$
10,003
$
4,885
$
11,613
$
7,735
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200211005994/en/
Tom Constantino Chief Financial Officer
investors@a10networks.com
A10 Networks (NYSE:ATEN)
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