Management demonstrates durable and sustainable business model despite macro headwinds

A10 Networks (NYSE: ATEN), a leading provider of cybersecurity and infrastructure solutions, today announced financial results for its first quarter ended March 31, 2023.

First Quarter 2023 Financial Summary

• Revenue of $57.7 million, declined 7.9% year-over-year due to the impact of macro headwinds and project delays.
• GAAP gross margin of 82.3%; non-GAAP gross margin of 83.1% as a result of better product mix and continued successful navigation of short-term input cost pressures.
• GAAP net income of $4.0 million, or $0.05 per diluted share, compared with GAAP net income of $6.3 million, or $0.08 per diluted share in the first quarter of 2022.
• Non-GAAP net income of $9.9 million, or $0.13 per diluted share (non-GAAP EPS), compared with non-GAAP net income of $10.0 million, or $0.13 per diluted share in the first quarter of 2022.
• Adjusted EBITDA of $15.5 million, representing 26.8% of revenue, in line with stated business model goals and compared to adjusted EBITDA as a percent of revenue of 21.6% in the first quarter last year.
• The Board of Directors approved a quarterly cash dividend of $0.06 per share, payable on June 1, 2023 to stockholders of record at the close of business on May 15, 2023.

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

“We delivered profitability that was in-line with our trended financials and revenue towards the high-end of our pre-announced results,” said Dhrupad Trivedi, President and Chief Executive Officer of A10 Networks. “We have taken proactive actions to flex our cost structure to address the headwinds we experienced at the start of the year and to better enable us to achieve our full-year earnings guidance without compromising long-term growth. Demand for our security-led solutions remains robust, but project delays from tier-one North American customers impacted our ability to deliver upon our originally targeted revenue level. Our value proposition remains intact, and orders have been delayed, but not lost to competitors. As a result, and as expected, our first quarter represents what we believe will be the low-point for the year, and we continue to believe we can achieve revenue growth that outpaces the market, and importantly, double-digit growth in 2023 full-year non-GAAP EPS.”

“A10’s strategic diversification, in terms of customer base, geographic presence and product revenue, help offset the macro-economic pockets of weakness,” continued Trivedi. “This quarter demonstrates that we are not immune from recessionary impacts, but we remain confident we can perform better than others in our peer set. Additionally, we grew our recurring revenue, which increased 10% in the first quarter, giving us greater visibility and mitigating the impact of longer sales cycles. With $145 million in cash, no debt, increasing recurring revenue and systemic diversification, we are well-positioned for continued success.”

Conference Call

Management will host a call at 1:30 p.m. Pacific time (4:30 p.m. Eastern time) today, May 4, 2023, to discuss these results. Interested parties may access the conference call by dialing (833) 470-1428 (toll-free) or (404) 975-4839 and referencing access code: 820278.

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 360894.

Forward-Looking Statements

This press release contains “forward-looking statements,” including statements regarding our anticipated future financial results, quarterly dividend payments, strategy, demand, supply chain and order pattern challenges, positioning, growth and revenue and non-GAAP EPS 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 February 27, 2023. 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), we refer to certain non-GAAP financial measures, including non-GAAP net income, non-GAAP net income per basic and diluted share (or non-GAAP EPS), 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) cyber incident remediation expense, (iii) restructuring expense and (iv) income tax effect of excluding non-GAAP items (i) to (iii) listed above. 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, (ii) cyber incident remediation expense and (iii) restructuring 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) cyber incident remediation expense and (iii) restructuring 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) cyber incident remediation expense and (iii) restructuring expense. We define Adjusted EBITDA as our GAAP net income excluding (i) interest and other (income) expense, net, (ii) depreciation and amortization expense, (iii) provision for income taxes, (iv) stock-based compensation and related payroll tax, (v) cyber incident remediation expense and (vi) restructuring expense.

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.

Source: A10 Networks, Inc.

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