A10 networks reports record quarterly revenue of $72.1 million, up 10.2% driven by balanced product, customer and regional mix
San jose, calif.--(business wire)--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. 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, 2022 december 31, 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 %
