A10 networks reports 14.9% organic growth for q2 2022, driven by growth in proprietary security-led solutions
San jose, calif.--(business wire)--a10 networks (nyse: aten), a leading provider of cybersecurity and infrastructure solutions, today announced financial results for its second quarter and six-month period ended june 30, 2022. second quarter 2022 financial summary revenue of $68.0 million, up 14.9% year-over-year. revenue growth led by a 33.7% increase in the americas year-over-year. gaap gross margin of 80.2%; non-gaap gross margin of 80.6% as a result of better product mix and continued successful navigation of short-term input cost pressures. gaap net income of $10.4 million, or $0.13 per diluted share, compared with gaap net income of $6.6 million, or $0.08 per diluted share in the second quarter of 2021. non-gaap net income of $13.4 million, or $0.17 per diluted share, compared with non-gaap net income of $10.5 million, or $0.13 per diluted share in the second quarter of 2021. adjusted ebitda of $18.0 million, representing 26.4% of revenue, in line with stated business model goals. returned $7.2 million to shareholders through the repurchase of approximately 248,000 shares during the quarter for a total of $3.4 million and the issuance of $3.8 million in cash dividends. the board of directors declared a quarterly cash dividend of $0.05 per share, payable on september 1, 2022 to stockholders of record at the close of business on august 15, 2022. a reconciliation between gaap and non-gaap information is contained in the financial statements below. “continued strong demand for our proprietary, security-led solutions, combined with sustained business execution, resulted in 14.9% top-line growth and overall performance that exceeded our ‘rule of 40’ target,” said dhrupad trivedi, president and chief executive officer of a10 networks. “the increasing threat of cyberattacks, exacerbated by geopolitical events in europe, asia and elsewhere, make our security and infrastructure solutions a growing priority even as certain non-security investments are reprioritized due to macroeconomic concerns. we are capturing market share through better technology that helps our customers to achieve their business goals and we continue to invest in strategic growth opportunities. simultaneously, our proven business model, including gross profit margins exceeding 80% and adjusted ebitda margins of 26% enable us to deliver consistent shareholder returns through share repurchases and a quarterly cash dividend.” “we have been able to successfully navigate supply chain challenges and input cost pressures, as evidenced by our stable gross margins, and we expect these challenges will persist for some time,” continued trivedi. “we reiterate our full year targets around top line growth of 10 – 12% and expanding ebitda in the range of 26 – 28% of revenue. our targeted, strategic investments in technology are enabling us to capture market share, while our diversity of revenue and cybersecurity solutions serve as catalysts for durable growth, even amidst macroeconomic conditions.” conference call management will host a call at 1:30 p.m. pacific time (4:30 p.m. eastern time) today, august 2, 2022, to discuss these results. interested parties may access the conference call by dialing (844) 200-6205 (toll-free) or (929) 526-1599 and entering passcode 598873. 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 107391. 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 and (iii) global distribution center transition expense. 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. a10 networks, inc. condensed consolidated statements of operations (unaudited, in thousands, except per share amounts, on a gaap basis) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 revenue: products $ 41,475 $ 34,363 $ 78,520 $ 64,903 services 26,498 24,805 52,125 49,108 total revenue 67,973 59,168 130,645 114,011 cost of revenue: products 9,518 8,215 18,151 15,301 services 3,967 5,415 8,173 10,828 total cost of revenue 13,485 13,630 26,324 26,129 gross profit 54,488 45,538 104,321 87,882 operating expenses: sales and marketing 21,773 19,749 44,555 38,841 research and development 14,235 13,491 27,122 27,472 general and administrative 5,337 5,082 11,499 10,329 total operating expenses 41,345 38,322 83,176 76,642 income from operations 13,143 7,216 21,145 11,240 non-operating income (expense), net: interest income 184 96 304 241 other income (expense), net 301 (208 ) (332 ) (1,536 ) total non-operating income (expense), net 485 (112 ) (28 ) (1,295 ) income before provision for income taxes 13,628 7,104 21,117 9,945 provision for income taxes 3,212 488 4,352 672 net income $ 10,416 $ 6,616 $ 16,765 $ 9,273 net income per share: basic $ 0.14 $ 0.09 $ 0.22 $ 0.12 diluted $ 0.13 $ 0.08 $ 0.21 $ 0.12 weighted-average shares used in computing net income per share: basic 75,893 76,774 76,343 76,745 diluted 78,306 79,316 78,809 79,501 a10 networks, inc. reconciliation of gaap net income to non-gaap net income (unaudited, in thousands, except per share amounts) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 gaap net income $ 10,416 $ 6,616 $ 16,765 $ 9,273 non-gaap adjustments: stock-based compensation and related payroll tax 2,944 2,612 6,625 7,232 amortization expense related to acquisition — 252 — 505 global distribution center transition expense — 1,036 — 2,947 non-gaap net income $ 13,360 $ 10,516 $ 23,390 $ 19,957 gaap net income per share: basic $ 0.14 $ 0.09 $ 0.22 $ 0.12 diluted $ 0.13 $ 0.08 $ 0.21 $ 0.12 non-gaap adjustments: stock-based compensation and related payroll tax 0.04 0.04 0.09 0.09 amortization expense related to acquisition — 0.00 — 0.01 global distribution center transition expense — 0.01 — 0.04 non-gaap net income per share: basic $ 0.18 $ 0.14 $ 0.31 $ 0.26 diluted $ 0.17 $ 0.13 $ 0.30 $ 0.25 weighted-average shares used in computing non-gaap net income per share: basic 75,893 76,774 76,343 76,745 diluted 78,306 79,316 78,809 79,501 a10 networks, inc. condensed consolidated balance sheets (unaudited, in thousands, except par value, on a gaap basis) june 30, 2022 december 31, 2021 assets current assets: cash and cash equivalents $ 84,242 $ 78,925 marketable securities 82,551 106,117 accounts receivable, net of allowances of $447 and $543, respectively 67,908 61,795 inventory 21,926 22,462 prepaid expenses and other current assets 15,038 14,720 total current assets 271,665 284,019 property and equipment, net 15,046 10,692 goodwill 1,307 1,307 deferred tax assets, net 65,557 65,773 other non-current assets 30,990 31,294 total assets $ 384,565 $ 393,085 liabilities and stockholders’ equity current liabilities: accounts payable $ 5,567 $ 6,852 accrued liabilities 36,870 36,101 deferred revenue 80,022 73,132 total current liabilities 122,459 116,085 deferred revenue, non-current 47,848 48,499 other non-current liabilities 19,499 19,613 total liabilities 189,806 184,197 stockholders' equity: common stock, $0.00001 par value: 500,000 shares authorized; 85,626 and 84,717 shares issued and 75,962 and 77,423 shares outstanding, respectively 1 1 treasury stock, at cost: 9,664 and 7,294 shares, respectively (87,435 ) (55,677 ) additional paid-in-capital 455,539 446,035 dividends paid (11,543 ) (3,880 ) accumulated other comprehensive income (1,206 ) (229 ) accumulated deficit (160,597 ) (177,362 ) total stockholders' equity 194,759 208,888 total liabilities and stockholders' equity $ 384,565 $ 393,085 a10 networks, inc. condensed consolidated statements of cash flows (unaudited, in thousands, on a gaap basis) six months ended june 30, 2022 2021 cash flows from operating activities: net income $ 16,765 $ 9,273 adjustments to reconcile net income to net cash provided by operating activities: depreciation and amortization 3,712 4,753 stock-based compensation 6,313 6,891 other non-cash items 113 531 changes in operating assets and liabilities: accounts receivable (5,580 ) 882 inventory (31 ) 1,499 prepaid expenses and other assets (2,163 ) (1,200 ) accounts payable (1,283 ) 821 accrued liabilities 655 (11,642 ) deferred revenue 6,239 7,628 net cash provided by operating activities 24,740 19,436 cash flows from investing activities: proceeds from sales of marketable securities 4,550 2,865 proceeds from maturities of marketable securities 39,148 48,586 purchases of marketable securities (21,649 ) (76,141 ) purchases of property and equipment (5,021 ) (2,443 ) net cash provided by (used in) investing activities 17,028 (27,133 ) cash flows from financing activities: proceeds from issuance of common stock under employee equity incentive plans 2,970 3,578 repurchase of common stock (31,758 ) (11,213 ) payments for dividends (7,663 ) — net cash used in financing activities (36,451 ) (7,635 ) net increase (decrease) in cash and cash equivalents 5,317 (15,332 ) cash and cash equivalents—beginning of period 78,925 83,281 cash and cash equivalents—end of period $ 84,242 $ 67,949 non-cash investing and financing activities: transfers between inventory and property and equipment $ 567 $ 146 purchases of property and equipment included in accounts payable $ 1 $ 11 a10 networks, inc. reconciliation of gaap gross profit to non-gaap gross profit (unaudited, in thousands, except percentages) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 gaap gross profit $ 54,488 $ 45,538 $ 104,321 $ 87,882 gaap gross margin 80.2 % 77.0 % 79.9 % 77.1 % non-gaap adjustments: stock-based compensation and related payroll tax 331 303 759 944 global distribution center transition expense — 252 — 525 non-gaap gross profit $ 54,819 $ 46,093 $ 105,080 $ 89,351 non-gaap gross margin 80.6 % 77.9 % 80.4 % 78.4 % a10 networks, inc. reconciliation of gaap total operating expenses to non-gaap total operating expenses (unaudited, in thousands) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 gaap total operating expenses $ 41,345 $ 38,322 $ 83,176 $ 76,642 non-gaap adjustments: stock-based compensation and related payroll tax (2,613 ) (2,309 ) (5,866 ) (6,288 ) amortization expense related to acquisition — (252 ) — (505 ) global distribution center transition expense — (784 ) — (2,422 ) non-gaap total operating expenses $ 38,732 $ 34,977 $ 77,310 $ 67,427 a10 networks, inc. reconciliation of gaap income from operations to non-gaap operating income (unaudited, in thousands, except percentages) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 gaap income from operations $ 13,143 $ 7,216 $ 21,145 $ 11,240 gaap operating margin 19.3 % 12.2 % 16.2 % 9.9 % non-gaap adjustments: stock-based compensation and related payroll tax 2,944 2,612 6,625 7,232 amortization expense related to acquisition — 252 — 505 global distribution center transition expense — 1,036 — 2,947 non-gaap operating income $ 16,087 $ 11,116 $ 27,770 $ 21,924 non-gaap operating margin 23.7 % 18.8 % 21.3 % 19.2 % a10 networks, inc. reconciliation of gaap net income to ebitda and adjusted ebitda (non-gaap) (unaudited, in thousands) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 gaap net income $ 10,416 $ 6,616 $ 16,765 $ 9,273 exclude: interest and other (income) expense, net (485 ) 112 28 1,295 exclude: depreciation and amortization expense 1,868 2,340 3,712 4,753 exclude: provision for income taxes 3,212 488 4,352 672 ebitda 15,011 9,556 24,857 15,993 exclude: stock-based compensation and related payroll tax 2,944 2,612 6,625 7,232 exclude: global distribution center transition expense — 1,036 — 2,947 adjusted ebitda $ 17,955 $ 13,204 $ 31,482 $ 26,172
