8-K
A10 Networks, Inc. (ATEN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________
FORM 8-K
____________________________________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
November 1, 2022
Date of Report (Date of earliest event reported)
____________________________________________________________________________
A10 NETWORKS, INC.
(Exact name of the registrant as specified in its charter)
____________________________________________________________________________
| Delaware | 001-36343 | 20-1446869 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification Number) |
2300 Orchard Parkway
San Jose, CA 95131
(Address of principal executive offices, including zip code)
(408) 325-8668
(Name and telephone number, including area code, of the person to contact in connection with this report)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
____________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common stock, $0.00001 par value per share | ATEN | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On November 1, 2022, A10 Networks, Inc. (the “Company”) issued a press release regarding financial results for the quarter ended September 30, 2022. A copy of the press release is furnished herewith as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure
On November 1, 2022, the Company posted on its website (www.a10networks.com) slides regarding the financial results for the quarter ended September 30, 2022. A copy of the slides is attached as Exhibit 99.2 and the information in Exhibit 99.2 is incorporated herein by reference.
The information in Item 2.02, Item 7.01, Item 8.01 and Item 9.01 in this Current Report on Form 8-K and the exhibits attached hereto shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. The information in Item 2.02 shall not be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 8.01 Other Events.
On November 1, 2022, the Company announced that its Board of Directors (the “Board”) declared a quarterly dividend. The quarterly dividend, in the amount of $0.06 per share, will be payable, subject to any prior revocation, on December 1, 2022 to stockholders of record on November 15, 2022. Future dividends will be subject to further review and approval by the Board in accordance with applicable law. The Board reserves the right to adjust or withdraw the quarterly dividend in future periods as it reviews A10’s capital allocation strategy from time-to-time.
In addition, the Board authorized a new, $50 million share repurchase program under which the Company may repurchase up to $50 million of its outstanding common stock during the next 12 months. Under the share repurchase program, the Company is authorized to repurchase shares of common stock in the open market, privately negotiated transactions, in block trades or a combination of the foregoing. The Board will review the share repurchase program periodically and may authorize adjustment of its term and size. The Company plans to fund repurchases from its existing cash balance.
Forward Looking Statements
Item 8.01 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, including statements regarding the Company’s dividend program. These forward-looking statements involve risks and uncertainties. These forward-looking statements may be identified by terms such as “will,” “may,” “plans,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding the anticipated amount, duration, methods, timing and other aspects of our dividend program and any anticipated benefits or value resulting from any such dividends. These statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, any unforeseen need for capital which may require us to divert funds we may have otherwise used for the dividend program, which may in turn negatively impact our ability to administer the quarterly dividends. In addition, the timing and amount of future dividends, if any, will be made as management deems appropriate and will depend on a variety of factors including stock price, market conditions, corporate and regulatory requirements (including applicable securities laws and regulations and the rules of The New York Stock Exchange), any additional constraints related to material inside information the Company may possess, and capital availability. More information regarding these and other risks, uncertainties and factors is contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC, and in other reports filed by the Company with the SEC from time to time. You are cautioned not to unduly
rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of the date stated and unless required by law, The Company undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events other than as required by law or regulation.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit | Description |
|---|---|
| 99.1 | Press release datedNovember 1, 2022. |
| 99.2 | Slides of A10 Network, Inc. datedNovember 1, 2022, regarding financial results of thethirdquarter endedSeptember30, 2022. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 1, 2022
| A10 NETWORKS, INC. |
|---|
| By: /s/ Brian Becker |
| Brian Becker |
| Chief Financial Officer (Principal Accounting and Financial Officer) |
Document
EXHIBIT 99.1
A10 Networks Reports Record Quarterly Revenue of $72.1 Million,
up 10.2% Driven by Balanced Product, Customer and Regional Mix
Product revenue growth of 13% and security-led solutions continue to drive growth;
Company re-affirms full-year outlook, raises dividend and announces new $50 million buyback
SAN JOSE, Calif., November 1, 2022 -- A10 Networks (NYSE: ATEN), a leading provider of cybersecurity and infrastructure solutions, today announced financial results for its third quarter and nine-month period ended September 30, 2022.
Third Quarter 2022 Financial Summary
• Revenue of $72.1 million, up 10.2% year-over-year.
• Revenue growth was broad-based, with increases in North America, APJ, EMEA and Latin America, and from both Enterprise and Service Provider customers. Enterprise sales grew 17%, and Service Provider sales grew 6%, demonstrating strong revenue diversification.
• GAAP gross margin of 79.5%; non-GAAP gross margin of 80.2% as a result of better product mix and continued successful navigation of short-term input cost pressures.
• GAAP net income of $12.1 million, or $0.16 per diluted share, compared with GAAP net income (inclusive of a non-recurring $65.4 million income tax benefit related to sustained profitability) of $74.9 million, or $0.94 per diluted share in the third quarter of 2021.
• Non-GAAP net income of $15.9 million, or $0.20 per diluted share, compared with non-GAAP net income of $13.7 million, or $0.17 per diluted share in the third quarter of 2021.
• Adjusted EBITDA of $21.3 million, representing 29.5% of revenue, in line with stated business model goals.
• A10 repurchased approximately 3.7 million shares during the quarter at an average price of $12.77 for a total of $47.5 million and issued $3.8 million in cash dividends.
• The Board of Directors approved a 20% increase in its quarterly cash dividend to $0.06 per share, payable on December 1, 2022 to stockholders of record at the close of business on November 15, 2022.
A reconciliation between GAAP and non-GAAP information is contained in the financial statements below.
“A10 is consistently achieving revenue and EPS targets despite a variety of macro headwinds in all regions,” said Dhrupad Trivedi, President and Chief Executive Officer of A10 Networks. “This demonstrates robust demand for our proprietary security-led solutions, disciplined execution, and a focus on diversification that drives sustainability. We have positioned our business to avoid concentration in any single geography, any specific customer type, or any isolated product offering, and this diversification enables consistent execution despite economic, supply chain, and geopolitical challenges. Customer-centric technical innovation, global commercial execution and focus on driving the business model are bolstering our sustainability and driving continued success.”
“From a profitability standpoint, we maintained gross margins of approximately 80%, and we delivered record non-GAAP operating income and EBITDA margin, reflecting strong execution and an ability to navigate supply chain challenges and input cost pressures,” added Mr. Trivedi. “This performance enabled us to repurchase more than $47.5 million of our stock, in both negotiated and open-market transactions, materially reducing our capitalization. Additionally, ongoing strength in our business positioned us to increase the quarterly dividend by 20% and authorize a new $50 million stock repurchase plan. Simultaneously, we are strategically investing in technology, furthering our ability to capture market share and reinforcing our differentiators and driving durability for our business model despite macroeconomic conditions. We again reiterate our full year targets of top line growth of 10 – 12% and Adjusted EBITDA margins in the range of 26 – 28% of revenue.”
Conference Call
Management will host a call at 1:30 p.m. Pacific time (4:30 p.m. Eastern time) today, November 1, 2022, to discuss these results. Interested parties may access the conference call by dialing (833) 927-1758 (toll-free) or (929) 526-1599 and referencing access code: 059416.
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 030371.
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, (iii) global distribution center transition expense and (iv) 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 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.
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.
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts, on a GAAP Basis)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Revenue: | ||||||||
| Products | $ | 45,104 | $ | 39,815 | $ | 123,624 | $ | 104,718 |
| Services | 26,955 | 25,545 | 79,080 | 74,653 | ||||
| Total revenue | 72,059 | 65,360 | 202,704 | 179,371 | ||||
| Cost of revenue: | ||||||||
| Products | 10,191 | 7,859 | 28,342 | 23,160 | ||||
| Services | 4,574 | 5,335 | 12,747 | 16,163 | ||||
| Total cost of revenue | 14,765 | 13,194 | 41,089 | 39,323 | ||||
| Gross profit | 57,294 | 52,166 | 161,615 | 140,048 | ||||
| Operating expenses: | ||||||||
| Sales and marketing | 21,605 | 21,354 | 66,159 | 60,195 | ||||
| Research and development | 14,360 | 13,578 | 41,483 | 41,050 | ||||
| General and administrative | 5,661 | 6,931 | 17,160 | 17,260 | ||||
| Total operating expenses | 41,626 | 41,863 | 124,802 | 118,505 | ||||
| Income from operations | 15,668 | 10,303 | 36,813 | 21,543 | ||||
| Non-operating income (expense), net: | ||||||||
| Interest income | 432 | 66 | 736 | 306 | ||||
| Other income (expense), net | (871) | (264) | (1,204) | (1,799) | ||||
| Non-operating income (expense), net | (439) | (198) | (468) | (1,493) | ||||
| Income before provision for (benefit from) income taxes | 15,229 | 10,105 | 36,345 | 20,050 | ||||
| Provision for (benefit from) income taxes | 3,116 | (64,781) | 7,467 | (64,109) | ||||
| Net income | $ | 12,113 | $ | 74,886 | $ | 28,878 | $ | 84,159 |
| Net income per share: | ||||||||
| Basic | $ | 0.16 | $ | 0.97 | $ | 0.38 | $ | 1.09 |
| Diluted | $ | 0.16 | $ | 0.94 | $ | 0.37 | $ | 1.05 |
| Weighted-average shares used in computing net income per share: | ||||||||
| Basic | 75,881 | 77,149 | 76,191 | 76,885 | ||||
| Diluted | 77,679 | 79,927 | 78,454 | 79,803 |
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(unaudited, in thousands, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| GAAP net income | $ | 12,113 | $ | 74,886 | $ | 28,878 | $ | 84,159 | ||||
| Non-GAAP items: | ||||||||||||
| Stock-based compensation and related payroll tax | 3,798 | 4,201 | 10,423 | 11,433 | ||||||||
| Amortization expense related to acquisition | — | — | — | 505 | ||||||||
| Global distribution center transition expense | — | (1) | — | 2,946 | ||||||||
| Release of deferred tax asset valuation allowance | — | (65,417) | — | (65,417) | ||||||||
| Total non-GAAP items | 3,798 | (61,217) | 10,423 | (50,533) | ||||||||
| Non-GAAP net income | 15,911 | 13,669 | 39,301 | 33,626 | ||||||||
| Income tax effect of non-GAAP items (1) | (2,831) | (2,952) | (5,876) | (5,876) | ||||||||
| Non-GAAP net income, as adjusted for income tax effect of non-GAAP items (2) | $ | 13,080 | $ | 10,717 | $ | 33,425 | $ | 27,750 | ||||
| GAAP net income per share: | ||||||||||||
| Basic | $ | 0.16 | $ | 0.97 | $ | 0.38 | $ | 1.09 | ||||
| Diluted | $ | 0.16 | $ | 0.94 | $ | 0.37 | $ | 1.05 | ||||
| Non-GAAP items: | ||||||||||||
| Stock-based compensation and related payroll tax | 0.04 | 0.05 | 0.13 | 0.14 | ||||||||
| Amortization expense related to acquisition | — | — | — | 0.01 | ||||||||
| Global distribution center transition expense | — | — | — | 0.04 | ||||||||
| Release of deferred tax asset valuation allowance | — | (0.82) | — | (0.82) | ||||||||
| Total non-GAAP items | 0.04 | (0.77) | 0.13 | (0.63) | ||||||||
| Non-GAAP net income | 0.20 | 0.17 | 0.50 | 0.42 | ||||||||
| Income tax effect of non-GAAP items (1) | (0.03) | (0.04) | (0.07) | (0.07) | ||||||||
| Non-GAAP net income per share, as adjusted for income tax effect of non-GAAP items: (2) | ||||||||||||
| Basic | $ | 0.17 | $ | 0.14 | $ | 0.44 | $ | 0.36 | ||||
| Diluted | $ | 0.17 | $ | 0.13 | $ | 0.43 | $ | 0.35 | ||||
| Weighted average shares used in computing net income per share: | ||||||||||||
| Basic | 75,881 | 77,149 | 76,191 | 76,885 | ||||||||
| Diluted | 77,679 | 79,927 | 78,454 | 79,803 |
(1)For the three and nine months ended September 30, 2022 this represents the tax impact using estimated tax rates of 17.8% and 15.0%, respectively. For the three and nine months ended September 30, 2021 this represents the tax impact using estimated tax rates of 21.6% and 17.5%, respectively.
(2)Net income and earnings per share excluding adjustments are non-GAAP financial measures presented as supplemental financial measures to enable a user of the financial information to understand the impact of these adjustments on reported results. These financial measures should not be considered an alternative to net income, operating income, cash flows provided by operating activities, or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. Our adjusted net income and earnings per share may not be comparable to similarly titled measures of another company because all companies may not calculate adjusted net income and earnings per share in the same manner.
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par value, on a GAAP Basis)
| September 30,<br>2022 | December 31,<br>2021 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 32,131 | $ | 78,925 |
| Marketable securities | 95,642 | 106,117 | ||
| Accounts receivable, net of allowances of $319 and $543, respectively | 73,500 | 61,795 | ||
| Inventory | 21,289 | 22,462 | ||
| Prepaid expenses and other current assets | 15,023 | 14,720 | ||
| Total current assets | 237,585 | 284,019 | ||
| Property and equipment, net | 17,958 | 10,692 | ||
| Goodwill | 1,307 | 1,307 | ||
| Deferred tax assets, net | 65,557 | 65,773 | ||
| Other non-current assets | 30,254 | 31,294 | ||
| Total assets | $ | 352,661 | $ | 393,085 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 6,045 | $ | 6,852 |
| Accrued liabilities | 41,472 | 36,101 | ||
| Deferred revenue | 74,762 | 73,132 | ||
| Total current liabilities | 122,279 | 116,085 | ||
| Deferred revenue, non-current | 51,405 | 48,499 | ||
| Other non-current liabilities | 18,243 | 19,613 | ||
| Total liabilities | 191,927 | 184,197 | ||
| Stockholders' equity: | ||||
| Common stock, $0.00001 par value: 500,000 shares authorized; 86,790 and 84,717 shares issued and 73,406 and 77,423 shares outstanding, respectively | 1 | 1 | ||
| Treasury stock, at cost: 13,384 and 7,294 shares, respectively | (134,934) | (55,677) | ||
| Additional paid-in-capital | 460,884 | 446,035 | ||
| Dividends paid | (15,392) | (3,880) | ||
| Accumulated other comprehensive income | (1,341) | (229) | ||
| Accumulated deficit | (148,484) | (177,362) | ||
| Total stockholders' equity | 160,734 | 208,888 | ||
| Total liabilities and stockholders' equity | $ | 352,661 | $ | 393,085 |
A10 NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands, on a GAAP Basis)
| Nine Months Ended September 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Cash flows from operating activities: | ||||
| Net income | $ | 28,878 | $ | 84,159 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 5,539 | 7,044 | ||
| Stock-based compensation | 9,818 | 10,848 | ||
| Release of deferred tax asset valuation allowance | — | (65,417) | ||
| Other non-cash items | 49 | 786 | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | (11,090) | 4,418 | ||
| Inventory | 530 | 1,438 | ||
| Prepaid expenses and other assets | (2,574) | 1,905 | ||
| Accounts payable | (914) | (1,086) | ||
| Accrued liabilities | 4,001 | (11,309) | ||
| Deferred revenue | 4,536 | 8,417 | ||
| Net cash provided by operating activities | 38,773 | 41,203 | ||
| Cash flows from investing activities: | ||||
| Proceeds from sales of marketable securities | 6,252 | 5,865 | ||
| Proceeds from maturities of marketable securities | 48,248 | 70,870 | ||
| Purchases of marketable securities | (45,699) | (104,732) | ||
| Purchases of property and equipment | (8,261) | (3,387) | ||
| Net cash provided by (used in) investing activities | 540 | (31,384) | ||
| Cash flows from financing activities: | ||||
| Proceeds from issuance of common stock under employee equity incentive plans | 4,662 | 3,750 | ||
| Repurchase of common stock | (79,257) | (11,213) | ||
| Payments for dividends | (11,512) | — | ||
| Net cash used in financing activities | (86,107) | (7,463) | ||
| Net increase (decrease) in cash and cash equivalents | (46,794) | 2,356 | ||
| Cash and cash equivalents—beginning of period | 78,925 | 83,281 | ||
| Cash and cash equivalents—end of period | $ | 32,131 | $ | 85,637 |
| Non-cash investing and financing activities: | ||||
| Transfers between inventory and property and equipment | $ | 642 | $ | 122 |
| Purchases of property and equipment included in accounts payable | $ | 108 | $ | 9 |
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, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| GAAP gross profit | $ | 57,294 | $ | 52,166 | $ | 161,615 | $ | 140,048 | ||||||||
| GAAP gross margin | 79.5 | % | 79.8 | % | 79.7 | % | 78.1 | % | ||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Stock-based compensation and related payroll tax | 489 | 391 | 1,248 | 1,335 | ||||||||||||
| Global distribution center transition expense | — | 13 | — | 538 | ||||||||||||
| Non-GAAP gross profit | $ | 57,783 | $ | 52,570 | $ | 162,863 | $ | 141,921 | ||||||||
| Non-GAAP gross margin | 80.2 | % | 80.4 | % | 80.3 | % | 79.1 | % |
A10 NETWORKS, INC.
RECONCILIATION OF GAAP TOTAL OPERATING EXPENSES
TO NON-GAAP TOTAL OPERATING EXPENSES
(unaudited, in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| GAAP total operating expenses | $ | 41,626 | $ | 41,863 | $ | 124,802 | $ | 118,505 | ||||
| Non-GAAP adjustments: | ||||||||||||
| Stock-based compensation and related payroll tax | (3,309) | (3,810) | (9,175) | (10,098) | ||||||||
| Amortization expense related to acquisition | — | — | — | (505) | ||||||||
| Global distribution center transition expense | — | 14 | — | (2,408) | ||||||||
| Non-GAAP total operating expenses | $ | 38,317 | $ | 38,067 | $ | 115,627 | $ | 105,494 |
A10 NETWORKS, INC.
RECONCILIATION OF GAAP INCOME FROM OPERATIONS
TO NON-GAAP OPERATING INCOME
(unaudited, in thousands, except percentages)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| GAAP income from operations | $ | 15,668 | $ | 10,303 | $ | 36,813 | $ | 21,543 | ||||||||
| GAAP operating margin | 21.7 | % | 15.8 | % | 18.2 | % | 12.0 | % | ||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Stock-based compensation and related payroll tax | 3,798 | 4,201 | 10,423 | 11,433 | ||||||||||||
| Amortization expense related to acquisition | — | — | — | 505 | ||||||||||||
| Global distribution center transition expense | — | (1) | — | 2,946 | ||||||||||||
| Non-GAAP operating income | $ | 19,466 | $ | 14,503 | $ | 47,236 | $ | 36,427 | ||||||||
| Non-GAAP operating margin | 27.0 | % | 22.2 | % | 23.3 | % | 20.3 | % |
A10 NETWORKS, INC.
RECONCILIATION OF GAAP NET INCOME TO
EBITDA AND ADJUSTED EBITDA (NON-GAAP)
(unaudited, in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| GAAP net income | $ | 12,113 | $ | 74,886 | $ | 28,878 | $ | 84,159 | ||||||||
| GAAP net income margin | 16.8 | % | 114.6 | % | 14.2 | % | 46.9 | % | ||||||||
| Exclude: Interest and other (income) expense, net | 439 | 198 | 468 | 1,493 | ||||||||||||
| Exclude: Depreciation and amortization | 1,827 | 2,291 | 5,539 | 7,044 | ||||||||||||
| Exclude: Provision for income taxes | 3,116 | (64,781) | 7,467 | (64,109) | ||||||||||||
| EBITDA | 17,495 | 12,594 | 42,352 | 28,587 | ||||||||||||
| Exclude: Stock-based compensation and related payroll tax | 3,798 | 4,201 | 10,423 | 11,433 | ||||||||||||
| Exclude: Global distribution center transition expense | — | (1) | — | 2,946 | ||||||||||||
| Adjusted EBITDA | $ | 21,293 | $ | 16,794 | $ | 52,775 | $ | 42,966 | ||||||||
| Adjusted EBITDA margin | 29.5 | % | 25.7 | % | 26.0 | % | 24.0 | % |
atenq32022exhibit992
Q3 2022 Financial Results & Commentary November 1, 2022
Cautionary Statements & Disclosures This presentation and the accompanying oral presentation contain “forward-looking” statements that are based on our management’sbeliefs and assumptions, including statements regarding our future financial performance, strategy, routes to market, technical differentiation, positioning, capital allocation strategy, expansion opportunities, growth, profitability, market growth, as well as market and technology trends. Forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause our actual results to differ materially from those anticipated or implied by our forward-looking statements. These factors include, but are not limited to, the impact of the COVID-19 pandemic on our business, on the business of our customers and suppliers, and on the global economy in general, a significant decline in global macroeconomic or political conditions, execution risks related to closing key deals and improving our execution, successfully executing our strategies, market adoption of our products, successfully anticipating market needs and opportunities, timely development of new products and features, achieving or maintaining profitability, loss or delay of expected purchases, our ability to maintain or improve our competitive position; competitive and execution risks related to cloud-based computing trends, attracting and retaining new end-customers, maintaining and enhancing our brand and reputation, changes demanded by our customers in the deployment and payment model for our products, growth in markets relating to network security, the success of any future acquisitions or investments, the success of our partnerships with technology providers, the ability of our sales team to execute well, our ability to shorten our close cycle, the ability of our channel partners to sell our products, variations in product mix or geographic locations of our sales, our presence in international markets, andother factors described in our quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings made with the Securities and Exchange Commission, to which your attention is directed. The forward-looking statements included in this presentation are based on current expectations and beliefs as of November 1, 2022, only. We do not intend to update this information contained in the forward-looking statements, except as required by law. This presentation and the accompanying oral presentation also include certain non-GAAP financial measures including Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP operating margin, Adjusted EBITDA and Non-GAAP EPS. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titles 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 (loss) excluding: (i) stock- based compensation and related payroll tax, (ii) amortization expense related to acquisition, (iii) global distribution center transition 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 (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 (loss) as our GAAP income (loss) 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 (loss) 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 (loss) excluding (i) interest expense (if any), (ii) interest income and other (income) expense, net, (iii) depreciation and amortization expense, (iv) provision (benefit) for income taxes, (v) stock-based compensation and related payroll tax, and global distribution center transition expense. A reconciliation between GAAP and non-GAAP financial measures can be found in the appendix to this document and in the accompany financial results press release.
Agenda ▪ Q3 Overview ▪ Q3 Financial Performance ▪ FY 2022 Outlook
Q3’22: Record Revenue and Non-GAAP Profitability Growth Highlights • Revenue grew 10.2% year-over-year • Enterprise revenue grows 17.3%; Service Provider revenue grows 6.3% • Geographic performance reflects broad-based demand Consistent Profitability • Adjusted EBITDA was a record $21.3 million, or 29.5% of revenue • Non-GAAP Gross margin was 80.2% • Record Non-GAAP EPS of $0.20 Capital Allocation • Continue to return capital to shareholders • 3.7 million shares during the quarter at an average price of $12.77 for a total of $47.5 million • $3.8 million in cash dividends paid during the quarter • Introduced new $50 million share repurchase plan • Declared dividend of $0.06 per share (up from $0.05 in Q2) See Appendix for reconciliation to most comparable GAAP financial measures.
Quarterly Revenue & Non-GAAP Operating Income Operating Income is a Non-GAAP Financial Measure. See Appendix for reconciliation to most comparable GAAP financial measures. $65.4 $70.7 $62.7 $68.0 $72.1 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Revenue, $ Millions $14.5 $17.6 $11.7 $16.1 $19.5 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Non-GAAP Operating Income, $ Millions $65.4 $72.1 Q3'21 Q3'22 Revenue, $ Millions $14.5 $19.5 Q3'21 Q3'22 Non-GAAP Operating Income, $ Millions
62.4% 37.6% Q3’22 $72.1 million Quarterly Revenue by Customer Vertical 64.7% 63.3% 65.0% 65.1% 62.4% 35.3% 36.7% 35.0% 34.9% 37.6% Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Enterprise Service Provider
Quarterly Revenue by Geography 39% 43% 48% 49% 49% 48% 53% 57% 50% 47% 43% 36% 39% 34% 35% 28% 32% 34% 14% 14% 16% 12% 17% 17% 19% 11% 16% Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 $ Millions Americas APJ EMEA 50% 34% 16% Q3’22 $72.1 million
Consistent Value Creation Business Model Revenue Growth Capital Allocation
On track to achieve full-year guidance • 10 - 12% Revenue Growth • 26 - 28% Adjusted EBITDA Full-Year 2022 Outlook
Appendix
Financial Performance Trends Numbers may not sum due to rounding. Please refer to the supplemental financials posted in the “Investor Relations” section of the A10 Networks website at investors.a10networks.com Gross Margin %, Operating Margin %, Adjusted EBITDA and EPS are Non-GAAP Financial Measures. See Appendix for reconciliation to most comparable GAAP financial measures. $ Millions (except EPS) Q1'19 Q2'19 Q3’19 Q4'19 FY 2019 Q1’20 Q2’20 Q3’20 Q4’20 FY 2020 Q1’21 Q2’21 Q3’21 Q4’21 FY 2021 Q1’22 Q2’22 Q3’22 Revenue $50.3 $49.2 $52.8 $60.3 $212.6 $53.8 $52.5 $56.6 $62.7 $225.5 $54.8 $59.2 $65.4 $70.7 $250.0 $62.7 $68.0 $72.1 Non-GAAP Gross Margin % 76.3% 78.0% 78.1% 78.5% 77.8% 78.3% 78.8% 77.6% 79.6% 78.6% 78.9% 77.9% 80.4% 80.7% 79.6% 80.2% 80.6% 80.2% Non-GAAP Operating Margin % (11.8%) (1.9%) 3.5% 12.7% 1.2% 7.6% 13.8% 17.8% 22.1% 15.6% 19.7% 18.8% 22.2% 24.8% 21.6% 18.6% 23.7% 27.0% Adjusted EBITDA (non- GAAP) ($3.7) $1.3 $4.0 $10.0 $11.6 $7.2 $9.8 $12.5 $16.1 $45.6 $13.0 $13.2 $16.8 $19.4 $62.4 $13.5 $18.0 $21.3 Non-GAAP EPS ($0.10) $0.00 $0.02 $0.10 $0.03 $0.05 $0.09 $0.13 $0.18 $0.44 $0.12 $0.13 $0.17 $0.20 $0.63 $0.13 $0.17 $0.20 Ending Cash & Marketable Securities $122.8 $119.3 $122.6 $129.9 $129.9 $142.9 $143.4 $159.1 $158.1 $158.1 $161.0 $166.8 $187.5 $185.0 $185.0 $164.7 $166.8 $127.8
GAAP to Non-GAAP – Gross Margin and EPS Numbers may not sum due to rounding. EPS data is presented on a basic and diluted basis. Please refer to the supplemental f inancials posted the “Investor Relations” section of the A10 Networks website at investors.a10networks.com. % of Revenue except EPS Q1'21 Q2'21 Q3'21 Q4'21 FY 2021 Q1'22 Q2'22 Q3'22 Gross Margin % - GAAP 77.2% 77.0% 79.8% 79.9% 78.6% 79.5% 80.2% 79.5% Stock-based compensation 1.2% 0.5% 0.6% 0.6% 0.7% 0.7% 0.5% 0.7% Global distribution center transition expense 0.5% 0.4% 0.0% 0.2% 0.3% 0.0% 0.0% 0.0% Non-reccuring facilities expense 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Gross Margin % - Non-GAAP 78.9% 77.9% 80.4% 80.7% 79.6% 80.2% 80.6% 80.2% EPS $ - GAAP 0.03$ 0.08$ 0.94$ 0.13$ 1.19$ 0.08$ 0.13$ 0.16$ Stock-based compensation 0.06 0.03 0.05 0.04 0.19 0.05 0.04 0.04 Litigation and Investigation expense (recovery) - - - - - - - - Amortization expense related to acquisition 0.00 0.00 - - 0.01 - - - Global distribution center transition expense 0.03 0.02 (0.00) 0.03 0.06 - - - Restructuring expense, and related tax - - - - - - - - Non-recurring facilities expense - - - - - - - - Release of DTA valuation allowance - - (0.82) - (0.82) - - - EPS $ - Non-GAAP 0.12$ 0.13$ 0.17$ 0.20$ 0.63$ 0.13$ 0.17$ 0.20$
GAAP to Non-GAAP – Operating Income (Loss) Numbers may not sum due to rounding. Please refer to the supplemental financials posted the “Investor Relations” section of the A10 Networks website at investors.a10networks.com. $ Millions Q1'21 Q2'21 Q3'21 Q4'21 FY 2021 Q1'22 Q2'22 Q3'22 Income (loss) from operations $ - GAAP 4.0$ 7.2$ 10.3$ 11.8$ 33.4$ 8.0$ 13.1$ 15.7$ Stock-based compensation 4.6 2.6 4.2 3.6 15.0 3.7 2.9 3.8 Litigation and Investigation expense (recovery) - - - - - - - - Amortization expense related to acquisition 0.3 0.3 - - 0.5 - - - Global distribution center transition expense 1.9 1.0 (0.0) 2.1 5.1 - - - Restructuring expense - - - - - - - - Non-recurring facilities expense - - - - - - - - Income from operations $ - Non-GAAP 10.8$ 11.0$ 14.5$ 17.6$ 54.0$ 11.7$ 16.1$ 19.5$ % of Revenue Income (loss) from operations % - GAAP 7.3 % 12.2 % 15.8 % 16.8 % 13.4 % 12.8 % 19.3 % 21.7 % Stock-based compensation 8.4 % 4.4 % 6.4 % 5.1 % 6.0 % 5.9 % 4.3 % 5.3 % Litigation and Investigation expense (recovery) —% —% —% —% —% —% —% —% Amortization expense related to acquisition 0.5 % 0.4 % —% —% 0.2 % —% —% —% Global distribution center transition expense 3.5 % 1.8 % (0.0)% 3.0 % 2.0 % —% —% —% Restructuring expense —% —% —% —% —% —% —% —% Non-recurring facilities expense —% —% —% —% —% —% —% —% Income from operations % - Non-GAAP 19.7 % 18.8 % 22.2 % 24.8 % 21.6 % 18.6 % 23.7 % 27.0 %
GAAP to Non-GAAP – Adjusted EBITDA Numbers may not sum due to rounding. Please refer to the supplemental financials posted the “Investor Relations” section of the A10 Networks website at investors.a10networks.com. $ Millions Q1'21 Q2'21 Q3'21 Q4'21 FY 2021 Q1'22 Q2'22 Q3'22 GAAP net income (loss) 2.7$ 6.6$ 74.9$ 10.7$ 94.9$ 6.3$ 10.4$ 12.1$ Exclude: Interest expense - - - - - - - - Exclude: Interest income and other (income) expense, net 1.2 0.1 0.2 0.3 1.7 0.5 (0.5) 0.4 Exclude: Depreciation & amortization expense 2.4 2.3 2.3 1.9 8.9 1.8 1.9 1.8 Exclude: Provision (benefit) for income taxes 0.2 0.5 (64.8) 0.9 (63.2) 1.1 3.2 3.1 EBITDA 6.4 9.6 12.6 13.7 42.3 9.8 15.0 17.5 Exclude: Stock-based compensation 4.6 2.6 4.2 3.6 15.0 3.7 2.9 3.8 Exclude: Litigation settlement and investigation expense - - - - - - - - Exclude: Global distribution center transition expense 1.9 1.0 (0.0) 2.1 5.1 - - - Exclude: Restructuring expense - - - - - - - - Exclude: Non-recurring facilities expense - - - - - - - - Adjusted EBITDA - Non-GAAP 13.0$ 13.2$ 16.8$ 19.4$ 62.4$ 13.5$ 18.0$ 21.3$