First Quarter Revenue of $53.8 Million; Company
Meets or Exceeds All Guidance Metrics
A10 Networks (NYSE: ATEN), a leading provider of intelligent and
automated cybersecurity solutions, today announced financial
results for its first quarter ended March 31, 2020.
First Quarter 2020 Financial
Summary
- Revenue of $53.8 million, exceeded high end of guidance and up
7% year-over-year.
- GAAP gross margin of 77.4%; non-GAAP gross margin of 78.3%,
exceeded high end of guidance.
- GAAP operating expenses of $41.8 million; non-GAAP operating
expenses of $38.0 million, at the mid-point of guidance.
- GAAP net loss of $(0.3) million, or $0.00 per basic and diluted
share, compared with GAAP net loss of $(12.3) million, or $(0.16)
per basic and diluted share in the first quarter of 2019; non-GAAP
net income of $4.0 million, or $0.05 per basic and diluted share,
exceeded the high end of guidance.
- Adjusted EBITDA of $7.2 million, exceeded the high end of
guidance and a positive swing of more than $10 million compared
with $(3.7) million in Adjusted EBITDA in the first quarter last
year.
- Ended the quarter with $142.9 million in cash, cash equivalents
and marketable securities, compared to $129.9 million dollars as of
December 31, 2019
A reconciliation between GAAP and non-GAAP information is
contained in the financial statements below.
“The strong first quarter, with revenue and profitability that
exceeded our guidance, demonstrates that we are firmly on the right
path, with an increasingly efficient organization, products that
are increasingly in demand and a globally diversified presence,”
said Dhrupad Trivedi, president and chief executive officer of A10
Networks. “To be sure, the Covid-19 pandemic is impacting our
customers and A10, but in the first quarter we were able to adapt
as the situation unfolded to mitigate most of the negative impact
and deliver results that exceeded guidance. Moving into the second
quarter, accurately forecasting the timing of regional and customer
order patterns within a 90-day window has become challenging. With
approximately $143 million in cash on our balance sheet, including
an increase of $13 million in cash, cash equivalents and marketable
securities at the end of the first quarter, and a stable base of
recurring revenues, we remain well-positioned to weather the
current environment from a position of strength, as we advance
efforts to drive profitability. Our diversified product suite
remains in strong demand, as our service provider customers need to
reinforce their critical communications infrastructure for
unprecedented usage and security as a result of the work-from-home
movement. I remain optimistic and confident about the long-term
prospects for A10 and believe we are well-positioned to navigate
these challenging times.”
“The near-term uncertainty has caused us to temporarily halt our
practice of providing quarterly guidance, but we remain committed
to advancing our goals for growth and profitability,” continued Mr.
Trivedi. “We believe we can achieve our stated goal of eliminating
$10 million in operating expenses on an annual basis, and we expect
second quarter operating expenses to decline sequentially from the
first quarter. In addition, we expect to maintain non-GAAP
profitability in the second quarter as we continue to make progress
on our long-term operating model. As the situation abates and our
visibility improves, we hope to return to providing estimates about
our expected results.”
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 first quarter 2020 financial results and outlook for
its second 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
10142879. 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 an increasingly efficient
organization, an increase in demand for our products, the impact of
Covid-19 on our business and near-term visibility, our position to
weather the current environment, our continued efforts to improve
our profitability, customer trends, our ability to achieve our
stated goal of eliminating $10 million in operating expenses on an
annual basis and our expectation for second quarter operating
expenses to decline sequentially from the first quarter.
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 public
health requirements in response to the outbreak of Covid-19 and the
impact on our business and operations, which is evolving and beyond
our control, and 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 10,
2020. 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 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 March
31,
2020
2019
Revenue:
Products
$
30,736
$
28,230
Services
23,028
22,060
Total revenue
53,764
50,290
Cost of revenue:
Products
6,941
7,516
Services
5,201
4,734
Total cost of revenue
12,142
12,250
Gross profit
41,622
38,040
Operating expenses:
Sales and marketing
20,621
24,483
Research and development
15,315
16,166
General and administrative
5,895
8,358
Total operating expenses
41,831
49,007
Loss from operations
(209)
(10,967)
Non-operating income (expense):
Interest expense
—
(155)
Interest and other income (expense),
net
231
(633)
Total non-operating income (expense),
net
231
(788)
Income (loss) before provision for income
taxes
22
(11,755)
Provision for income taxes
319
517
Net loss
$
(297)
$
(12,272)
Net loss per share:
Basic and diluted
$
(0.00)
$
(0.16)
Weighted-average shares used in computing
net loss per share:
Basic and diluted
78,061
74,809
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET
LOSS TO NON-GAAP NET INCOME (LOSS)
(unaudited, in thousands,
except per share amounts)
Three Months Ended March
31,
2020
2019
GAAP net loss
$
(297)
$
(12,272)
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
3,241
3,896
Amortization expense related to
acquisition
253
253
Litigation and investigation expense
30
876
Non-recurring facilities expense
795
—
Non-GAAP net income (loss)
$
4,022
$
(7,247)
GAAP net loss per share:
Basic
$
(0.00)
$
(0.16)
Diluted
$
(0.00)
$
(0.16)
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
$
0.04
$
0.05
Amortization expense related to
acquisition
$
0.00
$
0.00
Litigation and investigation expense
$
0.00
$
0.01
Non-recurring facilities expense
$
0.01
$
—
Non-GAAP net income (loss) per share:
Basic
$
0.05
$
(0.10)
Diluted
$
0.05
$
(0.10)
Weighted-average shares used in computing
non-GAAP net income (loss) per share:
Basic
78,061
74,809
Diluted
79,747
74,809
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited, in thousands,
except per share amounts, on a GAAP Basis)
March 31, 2020
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
65,633
$
45,742
Marketable securities
77,273
84,180
Accounts receivable, net of allowances of
$267 and $52, respectively
42,862
53,566
Inventory
20,764
22,384
Prepaid expenses and other current
assets
12,518
15,067
Total current assets
219,050
220,939
Property and equipment, net
7,462
7,656
Goodwill
1,307
1,307
Intangible assets
1,944
2,305
Other non-current assets
40,294
41,846
Total assets
$
270,057
$
274,053
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
3,937
$
7,592
Accrued liabilities
24,243
27,756
Deferred revenue
62,718
62,233
Total current liabilities
90,898
97,581
Deferred revenue, non-current
38,560
38,931
Other non-current liabilities
27,347
28,754
Total liabilities
156,805
165,266
Commitments and contingencies
Stockholders' equity:
Common stock, $0.00001 par value: 500,000
shares authorized; 78,710 and 77,580 shares issued and outstanding,
respectively
1
1
Additional paid-in-capital
403,650
398,600
Accumulated other comprehensive income
(loss)
(37)
251
Accumulated deficit
(290,362)
(290,065)
Total stockholders' equity
113,252
108,787
Total liabilities and stockholders'
equity
$
270,057
$
274,053
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited, in thousands, on a
GAAP Basis)
Three Months Ended March
31,
2020
2019
Cash flows from operating activities:
Net loss
$
(297)
$
(12,272)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization
3,311
2,447
Stock-based compensation
3,040
3,896
Other non-cash items
(13)
(246)
Changes in operating assets and
liabilities:
Accounts receivable
10,767
9,285
Inventory
1,472
(3,325)
Prepaid expenses and other assets
2,426
(2,409)
Accounts payable
(3,718)
(492)
Accrued and other liabilities
(4,919)
(3,616)
Deferred revenue
114
603
Other
—
71
Net cash provided by (used in) operating
activities
12,183
(6,058)
Cash flows from investing activities:
Proceeds from sales of marketable
securities
1,914
8,674
Proceeds from maturities of marketable
securities
10,175
4,500
Purchases of marketable securities
(5,518)
(13,859)
Purchases of property and equipment
(868)
(936)
Net cash provided by (used in) investing
activities
5,703
(1,621)
Cash flows from financing activities:
Proceeds from issuance of common stock
under employee equity incentive plans
2,005
1,027
Other
—
(2)
Net cash provided by financing
activities
2,005
1,025
Net increase (decrease) in cash and cash
equivalents
19,891
(6,654)
Cash and cash equivalents - beginning of
period
45,742
40,621
Cash and cash equivalents - end of
period
$
65,633
$
33,967
Non-cash investing and financing
activities:
Inventory transfers to property and
equipment
$
149
$
303
Purchases of property and equipment
included in accounts payable
$
63
$
485
A10 NETWORKS, INC.
RECONCILIATION OF GAAP GROSS
PROFIT TO NON-GAAP GROSS PROFIT
(unaudited, in thousands,
except percentages)
Three Months Ended March
31,
2020
2019
GAAP gross profit
$
41,622
$
38,040
GAAP gross margin
77.4
%
75.6
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
501
325
Non-GAAP gross profit
$
42,123
$
38,365
Non-GAAP gross margin
78.3
%
76.3
%
RECONCILIATION OF GAAP TOTAL
OPERATING EXPENSES TO
TO NON-GAAP TOTAL OPERATING
EXPENSES
(unaudited, in
thousands)
Three Months Ended March
31,
2020
2019
GAAP total operating expenses
$
41,831
$
49,007
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
2,740
3,571
Amortization expense related to
acquisition
253
253
Litigation and investigation expense
30
876
Non-recurring facilities expense
795
—
Non-GAAP total operating expenses
$
38,013
$
44,307
RECONCILIATION OF GAAP LOSS
FROM OPERATIONS
TO NON-GAAP OPERATING INCOME
(LOSS)
(unaudited, in thousands,
except percentages)
Three Months Ended March
31,
2020
2019
GAAP loss from operations
$
(209)
$
(10,967)
GAAP operating margin
(0.4)
%
(21.8)
%
Non-GAAP adjustments:
Stock-based compensation and related
payroll tax
3,241
3,896
Amortization expense related to
acquisition
253
253
Litigation and investigation expense
30
876
Non-recurring facilities expense
795
—
Non-GAAP operating income (loss)
$
4,110
$
(5,942)
Non-GAAP operating margin
7.6
%
(11.8)
%
RECONCILIATION OF GAAP NET
LOSS TO
EBITDA AND ADJUSTED EBITDA
(NON-GAAP)
(unaudited, in
thousands)
Three Months Ended March
31,
2020
2019
GAAP net loss
$
(297)
$
(12,272)
Exclude: Interest expense
—
155
Exclude: Interest and other (income)
expense, net
(231)
633
Exclude: Depreciation and amortization
expense
3,311
2,447
Exclude: Provision for income taxes
319
517
EBITDA
3,102
(8,520)
Exclude: Stock-based compensation and
related payroll tax
3,241
3,896
Exclude: Litigation settlement and
investigation expense
30
876
Exclude: Non-recurring facilities
expense
795
—
Adjusted EBITDA
$
7,168
$
(3,748)
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version on businesswire.com: https://www.businesswire.com/news/home/20200507005880/en/
Investor Contact: Rob Fink FNK IR 646.809.4048
aten@fnkir.com
Tom Constantino Chief Financial Officer
investors@a10networks.com
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