A10 Networks Reports 7.1% Revenue Growth for Third Quarter of 2020

A10 Networks (NYSE: ATEN), a leading provider of secure application services and solutions, today announced financial results for its third quarter ended September 30, 2020.

Third Quarter 2020 Financial Summary

• Revenue of $56.6 million, up 7.1% year-over-year.
• GAAP gross margin of 76.8%; non-GAAP gross margin of 77.6%.
• GAAP operating expenses of $37.2 million, unchanged sequentially; non-GAAP operating expenses of $33.9 million.
• Record GAAP net income of $6.5 million, or $0.08 per share, compared with GAAP net income of $173,000, or $0.00 per share in the third quarter of 2019; record non-GAAP net income of $10.3 million, or $0.13 per basic and diluted share.
• Record Adjusted EBITDA of $12.5 million, an improvement of $8.5 million compared with $4.0 million in Adjusted EBITDA in the third quarter last year.
• Ended the quarter with $159.1 million in cash, cash equivalents and marketable securities, compared to $129.9 million as of December 31, 2019.

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

“We have successfully positioned A10 for consistent organic growth and increased profitability amidst a challenging economic environment,” said Dhrupad Trivedi, President and Chief Executive Officer of A10 Networks. “Over the past two years, we have streamlined our fixed cost structure by approximately 25% and realigned our leaner sales organization on the highest quality opportunities. In the third quarter, this focus resulted in better than 7% organic growth, more than $6 million year-over-year improvement in net income and an $8.5 million improvement in Adjusted EBITDA. With a strong balance sheet, including more than $159 million of cash and cash equivalents, and no debt, we are on a solid footing and our improved financial profile enables us to prudently fund a significant stock buyback.”

“Networks across the globe are being stressed with unprecedented usage and increasing demand for bandwidth capacity, underscoring the need for critical communications infrastructure combined with the ability to navigate ever-increasing volume and sophistication of cyberattacks,” continued Trivedi. “These tailwinds directly align with our value proposition and increasingly, our customers are looking for solutions that help them manage their existing infrastructure while they continue to migrate parts of their infrastructure to the Cloud. Our global footprint and solutions-based sales approach is resonating.”

Conference Call Information

A10 Networks will host a conference call today at 4:30 p.m. Eastern time / 1:30 p.m. Pacific time for analysts and investors to discuss its third quarter 2020 financial results. Open to the public, interested parties may access the conference call by dialing 1-844-792-3728 or 1-412-317-5105. A live audio webcast of the conference call will be accessible from the “Investor Relations” section of A10 Networks’ 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 call and will run for five business days and may be accessed by dialing 1-877-344-7529 or 1-412-317-0088 and entering the passcode 10147980. A presentation with management’s prepared remarks on its third quarter 2020 financial results and supplemental financial information will be posted to the website following the issuance of the company’s third quarter 2020 results press release after U.S. markets close on Tuesday, October 27, 2020. These materials will be accessible from the “Investor Relations” section of A10 Networks’ website at investors.a10networks.com.

Forward-Looking Statements

This press release contains “forward-looking statements,” including statements regarding organizational efficiencies, market demand and trends, our positioning as to organic growth and profitability and our cash position. 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, including public health requirements in response thereto, on our business and operations, which is evolving and beyond our control, and its impact on the timing of customer orders and product shipments; members of our management team or a significant number of our global employee base becoming ill with COVID-19; changes in government regulations and mandates to address COVID-19 that may adversely impact our ability to continue to operate without disruption; a significant decline in global macroeconomic conditions that have an adverse impact on our business and financial results; challenges to our infrastructure because of the number of employees working from remote locations; business interruptions related to our supply chain; our ability to manage our business and expenses if customers cancel or delay orders; execution risks related to closing key deals and improving our execution; the continued market adoption of our products; our ability to successfully anticipate market needs and opportunities; our timely development of new products and features; our ability to achieve or maintain profitability; any loss or delay of expected purchases by our largest end-customers; our ability to maintain or improve our competitive position; competitive and execution risks related to cloud-based computing trends; our ability to attract and retain new end-customers and our largest end-consumers; our ability to maintain and enhance our brand and reputation, changes demanded by our customers in the deployment and payment model for our products; continued growth in markets relating to network security; the success of any future acquisitions or investments in complementary companies, products, services or technologies; the ability of our sales team to execute well; our ability to shorten our close cycles; the ability of our channel partners to sell our products; variations in product mix or geographic locations of our sales; risks associated with our presence in international markets; weaknesses or deficiencies in our internal control over financial reporting; our ability to timely file periodic reports required to be filed under the Securities Exchange Act of 1934; and other risks that are described in “Risk Factors” in our periodic filings with the Securities and Exchange Commission, including our Form 10-K filed with the Securities and Exchange Commission on March 10, 2020. We do not intend to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures, including non-GAAP net income (loss), non-GAAP net income (loss) per basic and diluted share, non-GAAP gross profit and gross margin, non-GAAP operating income (loss) and operating margin, non-GAAP operating expenses, and Adjusted EBITDA. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies.

A10 Networks considers these non-GAAP financial measures to be important because they provide useful measures of the operating performance of the company, exclusive of unusual events or factors that do not directly affect what we consider to be our core operating performance, and are used by the company's management for that purpose.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

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) non-recurring expenses associated with the litigation settlement and internal investigation expense (recovery), (iv) restructuring expense and related tax, and (v) non-recurring facilities expense. We define non-GAAP net income per basic and diluted share as our non-GAAP net income (loss) divided by our basic and diluted weighted-average shares outstanding. We define non-GAAP gross profit as our GAAP gross profit excluding stock-based compensation and related payroll tax. We define non-GAAP gross margin as our non-GAAP gross profit divided by our GAAP revenue. We define non-GAAP operating income (loss) as our GAAP income (loss) from operations excluding (i) stock-based compensation and related payroll tax, (ii) amortization expense related to acquisition, (iii) non-recurring expenses associated with the litigation settlement and internal investigation expense (recovery), (iv) restructuring expense and related tax, and (v) non-recurring facilities expense. We define non-GAAP operating margin as our non-GAAP operating income (loss) divided by our GAAP revenue. We define non-GAAP operating expenses as our GAAP operating expenses excluding (i) stock-based compensation and related payroll tax, (ii) amortization expense related to acquisition, (iii) non-recurring expenses associated with the litigation settlement and internal investigation expense (recovery), (iv) restructuring expense and related tax, and (v) non-recurring facilities expense. We define Adjusted EBITDA as our GAAP net income (loss) excluding (i) interest expense, (ii) interest income and other (income) expense, net, (iii) depreciation and amortization expense, (iv) provision for income taxes, (v) stock-based compensation and related payroll tax, (vi) litigation settlement and internal investigation expense (recovery), (vii) restructuring expense and related tax, and (viii) non-recurring facilities expense.

We have included our non-GAAP net income (loss), non-GAAP gross profit and gross margin, non-GAAP operating income (loss) and operating margin, non-GAAP operating expenses and Adjusted EBITDA in this press release. Non-GAAP financial measures are presented for supplemental informational purposes only for understanding the company's operating results.

About A10 Networks

A10 Networks (NYSE: ATEN) 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 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.

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